Gold as an Investment


There is gold in them their hills.
Believe me, there may be, but I could never find it.
And we are not talking metaphors here either.
I had a great detector, and found loads of nails and bits of wire.
Which sort of segues to todays investment topic.
Is gold a better investment than real estate ?
Now I found one poll done in the US which I believe is more than relevant to Australia.
It was done in 2014 and found that people earning over $75K rated real estate over gold.
And rated savings the lowest.
Whilst interestingly enough, people earning less than $30K rated gold highest as well as money in savings accounts high.
See the screen shot below.

gold and poor peoplesource

The wealthy prefer real estate investment over gold investment.
Now their are two sides to the gold question.
Physically owning the gold is great in a Mad max era scenario.
It sort of reflects a hedge against order.
Its a pessimistic investment of sorts.
But in that sort of extreme meltdown, the only things we believe that will have true value are water, shelter, food and safety.
And the “hedge against inflation” argument is easily debunked simply by comparing movements in gold prices to inflation rates.
A true hedge would increase in value as inflation pressures increased.

That has not been the case.
Gold has, on a number of occasions, fallen (severely) in value while inflation rose.
Now you wanted to invest in gold still ?
Okay, you might have invested in some form of Exchange traded Fund (ETF).
A gold ETF may hold various gold assets, including stocks in mining companies as well as gold reserves.

Investments in Exchange-Traded Funds have soared in popularity since the turn of the century.Total capital invested in ETFs has soared from several hundred million dollars in 2003 to over $2 trillion today with an astonishing $15 trillion projected by 2023.
But at not time do you actually physically own the gold.

The Shareholders don’t own title to the metal itself but instead we are effectively entrusting our wealth to banks that serve as the primary custodians for the ETF’s bullion.
Can anyone say Lehman Brothers, MF Global, IndyMac etc etc.
Yes, they all went belly up.
When real estate is “cheap” and gold is “expensive” relative to their long-term averages,and each other, then it is real estate that is likely to powerfully outperform gold as an investment and inflation hedge over the long term, all else being equal.
But both investments oscillate up and down with very little correlation with each other.
Or, both real estate and gold are each tangible assets and can be powerful inflation hedges, they just don’t tend to move together in real terms.

oubces of gold needed