Gold Prices Set To Smash Record As Wall Street Shuns The Dollar

[ansible]

Source: forbes

The recent Covid-19 pandemic has pushed the price of gold to a hair’s whisker of its record high reached almost a decade ago. Investors should expect the rally to continue beyond that level, at least in the medium term, experts say. “We continue to be bullish on gold, believe that gold will make a new all- time high in US$, and that gold will make new all-time highs in all currencies,” states a recent report from Wolfe Research.

The price of gold recently traded around $1,893 a troy ounce, putting it within easy reach of its all-time high of around $1,920 reached in 2011 in the wake of the financial crisis. So far this year investors in the SPDR Gold Shares GLD +0.9% (GLD) exchange-traded fund, which holds bars of solid bullion, has rallied 24%. That far exceeds the 0.34% increase in the SPDR S&P 500 (SPY) ETF which tracks the S&P 500. Both figures are from Yahoo and exclude dividends for the S&P 500 fund.

The rally, and the likely further surge, comes as investors are increasingly worried about the purchasing power of the U.S. dollar. The pandemic prompted the U.S. government to borrow vast sums of money to prop up its economy while businesses were ordered to close, and employees were furloughed.

But all that borrowing comes at a cost. Either the U.S. will need to raise taxes in the future or the government will need to print money to induce inflation. Either way, it makes holding dollar-denominated assets less attractive than real assets such as gold. While gold prices have swung up and down over the past few years, over much longer periods, the metal has tended to maintain its purchasing power, which is why some investors like to own it as a kind of insurance policy against the wealth-withering ravages of inflation.



Read more: https://www.forbes.com/sites/simonconstable/2020/07/24/gold-prices-set-to-smash-record-as-the-wall-street-shuns-the-dollar/#1bd988201689

[soothsayer]

1. Hmm, this helps Drumpf's pick for the federal reserve lady who loves the gold standard?

Idk

[progree]

2. Just be aware that gold is a highly volatile investment. (Some people think it is a "safe" hedge

Last edited Fri Jul 24, 2020, 10:16 PM - Edit history (3)

against inflation. It is not).

https://www.macrotrends.net/1333/historical-gold-prices-100-year-chart

And even if you cherry pick a period of stellar returns for gold, it's performance in such a best-period-for-gold is about the same as the long-term average for the S&P 500. E.g. in the graph with inflation checkbox unchecked so we're dealing with plain ol' greenbacks:

4/2001 $260
7/2020 $1882

That looks super, right? A 7.24-fold increase in a little more than 19 years, wow! Gold gold gold is good good good if you pick the right starting point.

But that amounts to a 10.83% / year annualized return, about the same as the S&P 500 over the long-term including reinvested dividends. And without the storage costs and fees.

[former9thward]

6. There are no storage costs and fees when you buy a gold ETF like GLD.

Is it my entire investment portfolio? No. But it should be part of an investment portfolio. I have done quite well with it.

[progree]

7. It's part of the ETF's operating expense. And I disagree that its a good investment though

one can always get in and out at the right times and do great. Or conversely... But in the long term, to barely beat inflation...

I see GLD has a 0.40% Expense Ratio. A lot more than a large stock index fund, either the mutual or ETF variety. But better than say most active mutual funds. 0.40% is not bad.

https://finance.yahoo.com/quote/GLD?p=GLD&.tsrc=fin-srch

[Mosby]

19. Moat 401Ks don't earn anywhere near 10 percent a year.

[progree]

20. I'm talking about an S&P 500 or Total Markets index over the long term

like since 1926 or e.g. the Vanguard S&P 500 index fund since its August 31, 1976 inception 10.94% average annualized return (search for "Life of Fund" on the page) https://www.thestreet.com/quote/VFINX.html

For shorter periods, yes, sometimes worse, sometimes better. For subsets like MOAT, sometimes better, sometimes worse.

For long term results, I use S&P 500 as a proxy for the total U.S. equity market because there weren't total market indexes or funds back more than 30 years or so. But the S&P 500 represents 75% to 80% of the total U.S. equity market and in the times they've both existed, they've been almost identical - actually the total U.S. market has done a little better because smaller caps tend to do better than large caps over the long run.

Another one to look at for long term results.
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html

From the start of 1928 to the end of 2019, $100 in the S&P 500 increased to $502,417 over 92 years. That's a 9.71% average annualized return.

And some 401k's come with rather large fees, which greatly harm long-term results. That's not the fault of the underlying equity investment.

I have no fees in my IRA or regular accounts, for example, and in the case of index mutual funds or ETF funds, expense ratios are well less than 0.1%/year.

[MichMan]

3. So the people who invested in gold 10 yrs ago are just now breaking even

after a decade of negative returns

[ansible]

4. It's not so much gold increasing in value

It's the dollar that's losing value against it

[progree]

5. The dollar hasn't lost value against gold in the past 10 years that MichMan used as an example

and that was after a decade of positive returns for the dollar relative to gold.

Anyway, historically the dollar is losing value against every kind of investment -- stocks, bonds, T-Bills, whatever, when reinvested dividends and interest are factored in. But we usually talk about the return of the investment, always understood that when the returns are positive, the investment is worth more dollars than before. The flip side of course is that the dollar becomes worth less than the investment. Just 2 ways of looking at the same thing.

[BigmanPigman]

8. Everyone should always keep some gold in

their overall investing portfolio. My dad always advised me to play it smart and safe...not too greedy is the way we go. I may have missed a lot of gains but I also kept a lot more than my shirt when everyone else was freaking out and losing it all.

[progree]

9. Gold doesn't look smart and safe to me.

https://www.macrotrends.net/1333/historical-gold-prices-100-year-chart

An S&P 500 index fund or Total Market index fund does a lot better with less volatility.

[BigmanPigman]

10. If you look at that chart half are above 50 and half are below it, overall.

That is safe/steady to me. It has to be in it for the long run, and not a lot, you spread your investments out (different baskets).

[progree]

11. I must be looking at a different chart. What's the "50"? And any investment is half the time

over "X" and half the time under some "X", for a certain value of "X", and for a certain period of time.

Not even keeping up with inflation over 40 years ... 1980 to present. And an 83% drop in the purchasing power of an ounce of gold in between peak to trough (from January 1980 to April 2001).

https://www.macrotrends.net/1333/historical-gold-prices-100-year-chart

[BigmanPigman]

12. That chart looks different than the first one posted

that tracked silver and gold. That one looked like 90° angles until 1970, then it had sharp angles instead. That chart looked more 50/50 to me.

[progree]

13. I'm not following. Can you post the link to the "50/50" chart? And please explain the 50/50?

And what chart was "the first one posted?" I've only posted this one (about 4 different times):

https://www.macrotrends.net/1333/historical-gold-prices-100-year-chart

and the GLD page which by default has the 1 day chart on the right-hand side (I posted this for the expense ratio of the GLD, not the chart)

https://finance.yahoo.com/quote/GLD?p=GLD&.tsrc=fin-srch

The OP and the Forbes article it links to has no chart that I can see.

Also, I don't see any chart in this thread "that tracked silver and gold."

Thanks.

[BigmanPigman]

17. I looked at the link and see the image but don't know how to

copy it so I can only share a link (I hope it works). It says "silver to gold ratio". That is the chart that popped up on the link when I clicked on it originally. The left side looks like the outline of a major city's skyline.
https://www.macrotrends.net/1441/gold-to-silver-ratio

[progree]

18. I am at a complete loss as to how the gold-to-silver ratio over time shows that gold

is a good investment, or "safe". Any more than say the pork bellies to cattle ratio says anything about either as an investment.

But it is a very interesting chart. Thanks

I'll just repeat your link as a way of remembering it for my notes --

https://www.macrotrends.net/1441/gold-to-silver-ratio

[roamer65]

14. Smells like a dollar crisis to me.

If it walks like a duck and quacks like a duck, it must be a duck.

[progree]

15. Tansy Gold has been posting the dollar chart in her daily Stock Market Watch thread

Last edited Sat Jul 25, 2020, 08:07 PM - Edit history (3)

in the Economy Group https://www.democraticunderground.com/?com=forum&id=1116

Here's the latest graph. Note it's for the last 6 months



Quack quack quack.

Edited to add: Dollar index chart for as long a period as one might want (it goes back to 1986). The 5 year might be of most interest as it encompasses July 2015 to July 2020 (last 1.5 years of Obama, first 3.5 years of Trump)

https://www.marketwatch.com/investing/index/DXY/charts

When Obama left office and Trump took office, the U.S. Dollar Index was at 101.17 (1/19/17 close)
It closed 7/24/20 at 94.35, down 6.7% under Trump.

[roamer65]

16. THIS.

[Xolodno]

21. Not this shit again.

Won't be long before we get the "buy gold" bullshit....such as....

1. The Dollar is worthless....no shit, its fiat currency. It's been worthless since Nixon took us off the gold standard...and for good reason.

2. Its yours and always will hold value....yeah, but, there was a time when the US confiscated most of it.

And I love this one, and I hear it often from friends that say...

3. "But what if the country collapses!"....then you sure as hell don't want gold. It's a shitty store of value, bulky, difficult to store and hard as hell to hide that you have it. You start flashing that shit around, you just made yourself a target. If you really do have that fear, do what the Nazi's did....flee with gemstones hemmed into their clothes. Large store of value, easy to hide, cash one in once in a great while and you won't attract to much attention.

As for investment portfolio. If its surging....its too late. You missed the boat. Remember, buy low, sell high. When its low, sure make it a larger portion of your portfolio, but when it hits your target rate, sell most of it....and don't buy until it stabilizes.