Steeler

Some international banks are beginning to shift their US Dollar holdings into gold as a hedge against potential collapse, as the dollar has been falling steadily for the past few years. In the short term, it is a way to prevent their assets from temporarily losing value. In the long term it may produce a small gold bubble.

/layman's analysis - do not invest based on what I say.

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RandomGuy

In a worst case scenario investment, I'd recommend this form of gold :


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CingularDuality

Thank you for that correction! In this case, semantics certainly matters!

And something with a value that is constant is exactly what I'm looking for. Currency loses value every day due to inflation, but it's designed to be the easiest thing in the world to trade with. Milk and cookies might be a great gauge for a constant value, but they're not easy to use for trade. Gold and silver coins seem to be the perfect compromise.

Oh, and Random, I've already got something better than that. It might not have the bling, but that's why I started this thread!

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Boot

Scratch has it right. Recall that until modern times most currencies were tied to the gold standard. At that time, a $1 bill was worth $1 in gold. Since we're not on the gold standard anymore, the correct statement is: The US Dollar is at its lowest point in years.

I, too, am looking more at gold. Basically, I'm fed up with the overhead associated with mutual funds, who take a percentage every year; and I'm fed up with the advice of the 'financial advisors' who shill every mutual fund their home office says to shill.

Why gold? Because there is nothing that is more convertable into value than gold. I don't think I need to explain any more than that.

I won't be cashing out of things to buy gold, but have some funds set aside and plan to buy gold at the next market adjustment. There is some risk in waiting ... but I tend to think inflation is more stable and the world economy pretty strong. Yadda yadda yadda and I end up thinking the US dollar is a bit low due to panicked libertarian types creating demand. I'm actually tempted to invest in gold mines just now... then time the bubble burst and sell the mine stocks to buy actual gold. It begs investigation...

Anyway, I think it would be excessive to transfer all ones savings to gold given the current market, but having some gold does make sense. But if you're going to do it, spring for a good fireproof safe or safety deposit box. The days of burying it in the yard are long gone...

EDIT: Should have added ... beware these companies that advertise heavily. I have a family member who bought some gold coins that turned out to be fakes. He had to sue and is 2 years into trying to get his money back. Do a thorough check, BBB and/or Dun & Bradstreet, before you buy.

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CingularDuality

Except, right now, currency...

OK, this is the part where I'm lost. What do I have to watch to try to ensure that I'm buying gold at the right time? Just the price of gold? Also the value of the US dollar? What all are you going to be looking at to make your decision?

Right. Being fairly ignorant of the market, I was simply planning on buying a tenth of an ounce every month from now on. Just a little savings plan that I can stash in my little fire proof box (not a safe, but I need to get one...) under my bed.

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PanzerHans

I've been trading on the exchange for a few years and have been following Gold lately.
A few links that will give you a bit of information:
http://www.gold-eagle.com/editorials...tin042206.html
http://www.gold-eagle.com/editorials_05/aden042806.html
http://www.globalresearch.ca/index.p...articleId=2027
http://www.safehaven.com/article-5098.htm
http://goldinfo.net/ronpaul1.html

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CingularDuality

Those first two links were Greek to me. The third one is full of crap on topics that I know about, so I'm not willing to trust it. The last two were somewhat interesting. I think the most important thing I learned was from the last one:
Thanks for the links!

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ScratchMonkey

First, "It's value". Arghhhhh! Free shot at Scratch for the inappropriate apostrophe.

A problem with gold is that it tends to get bid up and down as the most popular inflation hedge. If it were the currency then people would just have it, and there'd be nothing to bid up and down. (For practical reasons, you would still carry paper IOU's.)

The current Federal Reserve Note is also an IOU, but it's not tied to a commodity. Instead, it's a promise of future taxation to cover the represented debt.

Most people think of the FRN as the money, so everything else is represented in terms of it. But it's like using a yardstick that has a constantly-changing length, and being told that under Federal Authority it's the official standard of length.

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beep

If you want to put some money in this area, I'd suggest (generically) a gold-based mutual fund rather than the actual metal.

Variation: If you like the idea of commodities in general (gold, oil, metals, chemicals, etc.) you can find mutual funds that are focused on commodities.

The advantage of funds...easy to buy and sell, professional managers.

The disadvantage of funds...management fees, commissions.

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leejo

I'm with Mateo: gold is overpriced. Remember, buy low, sell high. If the dollar has been beaten down, that might be a better investment now if you believe that over time the dollar will recover. If you don't, that Rock River AR-15 may be the right investment.

But whether or not gold is a good investment for you depends on what you're hoping to accomplish and the timeframe you set for accomplishing your goals. In other words, what are you saving/investing for?

Here's a typical set of goals:

Item/Amount/Timeframe
Rainy day/6 months' salary/ASAP
Child's education/$250,000/18 years
House downpayment/$50,000/5 years
Retirememnt/$2.5million/25 years

I don't carry credit card debt, but if you do then you need to balance having some cash around with the crushing interest you're paying on credit card debt. For me, I'm willing to pay a little high-interest while saving up a few months' cushion, then pay down the credit card debt, then save up the other 6 months.

Anyway, unless and until you have that 6 months' pay saved up, I'd focus on that and credit card debt. Bear in mind that the 6-month's pay should be an extremely low-risk account with lots of cash in it. Personally, I wouldn't be putting gold into that fund right now, as I believe that there is a high risk of the price going down substantially in the next 18 months or so.

Once done with that, whether or not gold or anything else looks good depends on how that investment fits into your financial goals.

I don't know if that makes sense, but it helped me understand where to put my money.

All of this ignores work-funded investment accounts like 401(k)s, which you should max out, at least to the point at which you're getting the maximum match, if your employer matches.

Iceberg

Cing, you need to make like all the rapper do... Invest in gold teeth!

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Tempus

I am not a metals investor, but I am an active investor in other areas.

To me right now, gold is being run up by speculators, just as oil is, and real estate has been for the past 4 years. There is a TON of liquidity in the market right now due to the extremely low global interest rates that have been around since the market collapse of 2000 and 9/11. However, interest rates are rising worldwide, and that means the liquidity will start to dry up. This means fewer speculators, which will mean asset bubbles of all kinds will be popped.

I know all the arguments about "It's different this time." China's and India's growth, the dollar's decline, global instability, blah blah blah. But that has more to do with oil than gold. The language regarding gold right now is the same crap I heard when the NASDAQ was at 4000 going to 5000. EVERYONE was touting it as a can't miss. Same thing with real estate leading up to last year. Well, 6 years later, the NASDAQ is just getting up to 2500, and the real estate bubble is just beginning its collapse.

Gold may continue going up short term, but there are safer bets out there long term.

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shroompicker

Gold is terrible. Specifically, it's very liquid, and stays solidly grounded in value over time, neither going up nor down.

Why do you think they pay money for the radio ads? Somebody's making money on it, and it likely won't be you.

Though the dollar price of gold went up quickly over the last two years, that's more because of a sinking dollar. The price of foreign currency, gas, and US land has gone up as well, and in the next couple of years employee pay will go up to make up for it.

Never depend on nuministic value of anything for an investment. Nuministic value represents pure emotion turned into dollars. You just like the thing, so you're willing to pay for it. That's as much of an investment as a classic car. If you like it that much and you have the money, hey go ahead and buy the coins as a toy.

During Katrina, people were bartering stuff and their own bodies (service) for food, nobody cared about gold.

If you have twenty or forty grand burning a hole in your pocket, look at bare land in your state. Find a spot that will be commercial, within twenty miles of dense industrial and as close as possible to ultra-luxury homes, in the next ten years. If you're played enough Sim City, you should be able to spot those out. Then just sit on it, in five years you may kill half of your mortgage, the other half of which you should have finished with double-payments.

Think of this when you think of investments. What will get me to financial freedom, where I have no debt? Then how do I get myself to the point where I'm just collecting monthly payments from stuff I own, and just living on that? When you think this way, you stop messing around with the crap really quick. Steady, strong growth is the way to go, where you focus every dollar you make from your job to getting yourself out of the hole.

Oh ya, speaking of holes, you have no credit card debt or student loans, right? You can't even think about investing or buying toys until you kill those first.

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shroompicker

I agree with leejo and Tempus. Let me get more agressive with leejo's words:

1. Make minimum payments on all your bills. Squeeze your budget until you've accumulated $1,000 cash. This is your beginner emergency fund.

If you have more than 1/4 of your monthly take-home pay in mortgage payments or 1/2 of your family's total yearly take-home in cars, you'll likely find it's impossible even to get this far. (e.g. $60,000/yr, $1000 mort, $25,000 in cars). You will likely have to sell stuff off until you're in a position to get ahead.

2. Pay off your debts, smallest to largest. "Snowball" the payments.

If you're working on this second Baby Step and some emergency arises which forces you to spend any part of your emergency fund, immediately stop this step and return to Baby Step #1 until you've refunded your emergency fund in full.

3. Create a full-fledged emergency fund containing 3 to 6 months' worth of expenses.

With no car payments or plasma TV payments, it's EASY to get here. Then when the air conditioner needs to be completely replaced, it's no big deal. You just pay, and replenish the fund. Prom dresses, college tuition, and land investments are not emergencies. Cancer is, stop all extra mortgage payments and retirement fund payments and pile up cash.

4. Fully fund 15% into pre-tax retirement plans and Roth IRA.

Don't start this until 1-3 are done.

5. College funding for your kids.

When your kid is born, $100/week into a mutual fund will get them into Harvard for cash.

6. Pay off your home early.

If you're like me, you have no step 5. Just go here then!

7. Build wealth (mutual funds / real estate) and give to charity.

Gee, you're making the same amount of pay as someone with the mortgage and car payments and plasma TV payments, but you have no plasma TV payments or car payments or mortgage. Duh.



Simple stuff, it's just hard to actually do. Kinda like working out.

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Rincewind

I didn's see this link here so I though I'd add it:

http://nma.org/statistics/gold/gold_investing.asp

It's a basic overview, nothing too in depth.

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