Is buying gold a good investment?

zain · 6 Jan 2011 at 14:55

People only buy gold as a preceived safe investment, the world has always accepted Gold regardless of economy, government or currency value hence the worldwide demand.

You could kick yourself for not buying back in 2004-06 but then again it could have gone the other way, you could have got robbed, etc

There is a limited supply of gold and I think if it gets any worse people will find more value in manufactured goods, electronics, etc. That's when its all truly ******.

I wouldn't invest but I'm not much of a gambler/high risk opportunist.

The Halk · 6 Jan 2011 at 14:57

aardvark said:
i have been buying gold since 2006 - its not in a bubble and no where near the top.

if you believe that the financial crisis will be over soon and that there will be little inflation, no more QE and rising interest rates, then gold is a bad idea.
if you believe the opposite, gold has no where to go but up - its not the price of gold thats going up, its the value of your currency going down.

Robbie G said:
Hear me now. Gold prices are about to go through the floor.

Neither of you have any way of knowing.

What to remember is that gold only has value when people value it. It's unlike copper where there's a functional use for it. The industrial use of gold is very very minimal.

Nobody really knows when the gold bubble will burst, or indeed if it is a bubble.

I think it's a bubble, but I accept I could be wrong. I've explained why in great detail above, and nobody has even mentioned it.

I think gold will have a crisis of confidence. The price will drop, people will worry and sell, the price will drop, people will worry and sell. It could be a very very rapid thing, as I believe the vast majority of gold holdings now are not long term.

The Halk · 6 Jan 2011 at 14:58

Morba said:
On the site i was using the instruction went through as the price when you made the instruction, even if there is a wait period for it to be actioned.

I'd be very careful of their T&C then. If they really do allow that then if gold farts out they may not deliver on that promise, as they may not be able to. They're setting themselves up for an enormous risk.

mmj_uk · 6 Jan 2011 at 15:00

I picked up a coin a few years ago at just over £600.

People at the time were saying pretty much what they are now, that it wouldn't go any higher and was just a bubble and yet it's over £900 an ounce now, thats 50% increase in the space of a few years... not to mention that it's been constantly rising for about a decade.

Given where our economy is going (inflation) it might be a good idea to invest a small percentage of your savings in gold but I wouldn't put all your eggs in one basket.

Participant · 6 Jan 2011 at 15:00

The Halk said:
Neither of you have any way of knowing.

What to remember is that gold only has value when people value it. It's unlike copper where there's a functional use for it. The industrial use of gold is very very minimal.

Nobody really knows when the gold bubble will burst, or indeed if it is a bubble.

I think it's a bubble, but I accept I could be wrong. I've explained why in great detail above, and nobody has even mentioned it.

I think gold will have a crisis of confidence. The price will drop, people will worry and sell, the price will drop, people will worry and sell. It could be a very very rapid thing, as I believe the vast majority of gold holdings now are not long term.

One of us might end up looking clever though

.

Mate you just ended up doing exactly what we did except we get a 'you have no way of knowing' yet you're crowing for more recognition?!

Django x2 · 6 Jan 2011 at 15:02

That's why you always ask for the price again before placing the instruction. Simple dealing etiquette

Morba · 6 Jan 2011 at 15:02

Bunka said:
Who says that the market is going to plummet 50% in the space of a day?

The Halk said:
I do.

Umm

The Halk said:
Neither of you have any way of knowing.

Ahhh, but you do...

The Halk · 6 Jan 2011 at 15:04

That's a fair point Morba. I should have said "I do" to the possibility that the market could plummet by 50%.

I'm not saying it will, I'm saying it can.

Bunka · 6 Jan 2011 at 15:08

The Halk said:
That's a fair point Morba. I should have said "I do" to the possibility that the market could plummet by 50%.

I'm not saying it will, I'm saying it can.

I'm not saying it wont, but it's unlikely. I think a couple of days of media induced panic would cause a hefty drop, that in turn, would continue to lower the price over a few months.

tigerstyle · 6 Jan 2011 at 15:10

How come gold didn't drop then recover like platinum has? Is it because it's just actual real gold backing currency and they're all pegged too rather than 'precious metals' perhaps platinum is going to be a better 3 year earner?

From my point of view, and another poster said, it could be anything gold, platinum, steel, it's just the air of cool and the status gold has I guess

kwerk · 6 Jan 2011 at 15:10

Even Tesco is buying gold now (to sell it to people like the op).

https://www.tescogoldexchange.com/

tigerstyle · 6 Jan 2011 at 15:11

Bunka said:
media induced panic

Thats the kicker isn't it. All the people who have invested in gold specifically, and the knee jerk reaction that will go with a market fall/crash/dive even, hold on for the roller coaster ride!

The Halk · 6 Jan 2011 at 15:11

Bunka said:
I'm not saying it wont, but it's unlikely. I think a couple of days of media induced panic would cause a hefty drop, that would continue to lower the price over a few months.

I think there's a huge amount of gold in the hands of volatile investors, who when they sense the time is right to sell, will sell. If the price drops by 20%, I suspect the vast majority of people will try to sell, and that'll crash it.

If you agree with me that it's fairly possible the price will sink down to 400 again, even if thaht does take months... and if you agree with me on the more conservative side of potential losses, say 25%, for Joe Public between peak and being able to sell then the potential for loss compared to the potential for gain doesn't make it a good investment.

What I hope everybody sees is that it simply isn't a safe haven hedge against volatilty.

Morba · 6 Jan 2011 at 15:15

As it drops get ready to get buying as you are selling!

Bunka · 6 Jan 2011 at 15:18

The Halk said:
I think there's a huge amount of gold in the hands of volatile investors, who when they sense the time is right to sell, will sell. If the price drops by 20%, I suspect the vast majority of people will try to sell, and that'll crash it.

If you agree with me that it's fairly possible the price will sink down to 400 again, even if thaht does take months... and if you agree with me on the more conservative side of potential losses, say 25%, for Joe Public between peak and being able to sell then the potential for loss compared to the potential for gain doesn't make it a good investment.

What I hope everybody sees is that it simply isn't a safe haven hedge against volatilty.

I do completely agree with you that it's not a 'safe' market to invest in, but, providing you've got some financial sense about you, and show a consistent interest in the market it's a relatively transparent commodity to invest in.

I have more faith investing in something tangible and widely reported, rather than dropping a few thousand on stocks in a company that shares similar yields. To me the gold market seems to be easier to read than a company that could announce massive job cuts due to economic issues.

The Halk · 6 Jan 2011 at 15:21

Bunka said:
I do completely agree with you that it's not a 'safe' market to invest in, but, providing you've got some financial sense about you, and show a consistent interest in the market it's a relatively transparent commodity to invest in.

I have more faith investing in something tangible and widely reported, rather than dropping a few thousand on stocks in a company that shares similar yields. To me it seems to be easier to read than a company that could announce massive job cuts due to economic issues.

If anyone wants my advice about investing...

You're best off having a small portfolio of about 8-12 companies. Don't pick more than 2 in any one sector. Try not to have too many that are specific to one country. Try to be as diverse as you can.

Stretch · 6 Jan 2011 at 15:24

My father always said if you wanted to invest in gold you'd be much better off buying shares in a good mine. Due to their high fixed costs any increase in the value of gold on the open market is going to result in a relatively higher share price/dividend increase. Gold to a gold mine is virtually free once their fixed costs are covered.

Participant · 6 Jan 2011 at 15:27

Stretch said:
My father always said if you wanted to invest in gold you'd be much better off buying shares in a good mine. Due to their high fixed costs any increase in the value of gold on the open market is going to result in a relatively higher share price/dividend increase. Gold to a gold mine is virtually free once their fixed costs are covered.

I'd imagine a gold mine has massive variable and semi-variable costs too though.

Fuel
Labour
Machinery
Shaft maintenance (snigger)
Tools

All of those go up the more you mine. But yes granted the sunk costs will dwarf the variable ones.

Interesting point.

The Halk · 6 Jan 2011 at 15:31

Well, on the gold mine shares... it really depends on speculation. If people expect the gold mine to do well, and that expectation changes then the price drops.

Bunka · 6 Jan 2011 at 15:34

Stretch said:
My father always said if you wanted to invest in gold you'd be much better off buying shares in a good mine. Due to their high fixed costs any increase in the value of gold on the open market is going to result in a relatively higher share price/dividend increase. Gold to a gold mine is virtually free once their fixed costs are covered.

Fair point, however a key point you've missed is, what happens if they run out of gold to mine? It's quite easy for a mine to shut down because they've tapped all possible output.

Is buying gold a good investment?

Wise Guy