> Gold is a piss poor investment.

Relative to what? The USD?

http://pricedingold.com/us-dollar/

Real estate?

http://pragcap.com/real-estate-gold-ratio-falls-to-30-year-l...

Gold is an asset that holds its purchasing power pretty well. It is what it is. It is not however a "piss poor" investment.

I just noticed something: your links are "lying with statistics". Everyone knows that if you want to "prove" that Gold is a good investment, just start your graphs at 1970s.

After all, Gold reached a glorious bubble of inflation-adjusted $2200+ / ounce in 1970s, and has fallen since then. (yes, even with today's inflated prices, Gold is no where near its inflation-adjusted high).

Lets take a more reasonable graph of Gold, ehh? Something longer term... and see what happens to your trend.

http://www.macrotrends.org/1437/gold-to-s-p-500-ratio

Gold's trend is downward compared to the majority of the market. Each valley is lower, and each peak is lower than the last (with exception of stagflation period in the 70s)

I am saying gold is better than commodities. I'm saying gold is not a "piss poor" investment, as it holds its buying power quite well. That is the function of a conservative investment.

The S&P 500 (which you can easily buy with Vanguard Mutual Funds or SPY ETFs) has approximately the same volatility index as Gold right now.

http://finance.yahoo.com/q?s=^VIX http://finance.yahoo.com/q?s=^GVZ

VIX for the S&P 500 is 13.58, while Gold VIX is 13.13. Stocks are both holding their buying power as well as Gold, and still offering better returns right now.

Gold's "stability" is a myth. It is no more stable than any other investment. Bonds offer a conservative, stable investment platform. Gold does not.

Gold is a commodity.

USD is a worse investment, and it seems like Real Estate is not much better than Gold :-p

Stocks as investment:

http://www.macrotrends.org/1378/dow-to-gold-ratio-100-year-h...

And of course, ycombinator. You know... the angel fund / venture capitalist firm that runs this website? We're all here because of investors investing into technology. They do so because they believe they can ultimately make money with technology investments. At least, more so than Gold, Real Estate, or even Stocks.

Indeed. And a 4% deflation rate would not seem to deflate their appetite for 100x gains.

we dont know why they are investing, or maybe you do. i wpyldnt be aurprised if they did invest in gold real estate and stocks simply for diversification

You know, comparing a commodity against a currency isn't very sensible. I don't know many (sensible) people who say "I'm just going to keep a load of dollar bills under my bed" when it comes to investing (which is what your first link compares to gold).

There is really little difference between a commodity and a currency other than how the supply is constrained. It is perfectly sensible to compare them.

The price of gold is so ridiculously inflated right now that it's insane to invest in it. For people back in 2000, it was a great idea, but now the price is high. The most basic rule of investing is buy low, sell high. It sounds like a stupid catch phrase, but even people like Warren Buffet have said that it's true.

You might be able to make a little bit of money, but unless the global economy collapses entirely, I doubt we'll see another major increase. Gold actually has gone down in value before, so it could easily happen again again.

Why would you compare gold to one mediocre and one bad investment? It seems that few people here understand opportunity costs.

> Gold is a piss poor investment.

Do you know something that the Chinese, Germans and Russians don't ?

"Central Banks Bought Most Gold in Nearly 50 Years"

http://www.cnbc.com/id/100458951

"The Russian central bank will continue to buy gold as it seeks to diversify its foreign reserves away from paper assets it views as risky"

http://www.reuters.com/article/2013/01/24/russia-cbank-idUSL...

"The startling news that Germany is repatriating its gold reserves from the United States and France has got precious metals speculators worried that this is the first major sign that trust between central banks across the globe could be deteriorating."

http://www.forbes.com/sites/robertlenzner/2013/01/19/the-ger...

"How Much Gold Does China Really Have?... China is the world’s leading gold producer and also the world’s leading gold importer. And surprisingly their official gold holdings haven’t risen an ounce in over three years."

http://www.moneymorning.com.au/20130211/how-much-gold-does-c...

Did you read your articles?

Germans are bringing gold back into their own country, as opposed to holding it in other exchanges. They have neither increased nor decreased their supply.

China and India are world-class consumers of gold for jewelry, as expected of the world's most populous countries with a rising middle class. Gold is also used in microelectronic components. Chinese Banks on the other hand, have not increased their holdings according to your link. IE: China is not investing into Gold. They're using it.

As for Russian and Iraqi Central Banks buying up Gold between 2012 and today... well... they've already lost 10% on their investment as Gold has dropped in value between last year and today. I mean, if you wanna follow the example of Russian and Iraqi banks, you're welcome to do so. But I don't think anyone considers them a paragon of the investing world.

Er, yes, I can read:

Why are Germany repatriating their gold? Why do they want it in their own hands? Why go through all that trouble instead of just selling? Why would they want to keep holding onto a "piss poor investment"?

Regarding China, the article's author believes that China has been accumulating gold. The last known official figure is from 2009 and since then imports continue to rise, which in the authors opinion, have been destined for the Central Bank.

As for Russia, they have been accumulating gold for a few years now, and it's right there in the article. "It owned 400 tonnes of gold at end of 2006... At the end of last year, the central bank held nearly 950 tonnes of gold".

If you want to dismiss gold as a "piss poor investment" that's fine, but not everyone shares your view or your investment objectives.

>Why are Germany repatriating their gold? Why do they want it in their own hands?

Kraut here. Quite easy to explain, really.

The tabloids and some politicians made up a story along the lines that none of our politicians or central bankers has ever had access to the gold stash in the US and that probably this stash no longer exists.

So as to calm down people, the German central bank has declared they will repatriate 700 tons of gold (out of ~2000t stored in the US, UK, and France).

Fair enough :-)

I still disagree with you of course, but that is what the free market is for. Good luck with your investments.

Central banks and average people have vastly different goals. Also, large investment banks don't seem to keep their immense wealth in gold.

Large investment banks don't really exist anymore :-)

http://www.guardian.co.uk/business/2008/sep/22/wallstreet.mo...

"Morgan Stanley and Goldman Sachs, the last two investment banks left standing, will become traditional bank holding companies, marking the end of an era for Wall Street.

The Federal Reserve's surprise announcement, which came at 2.30am London time, places the banks under the supervision the bank regulators and gives them easier access to credit to help them ride out the financial crisis."

This point is utterly irrelevant to jonkee's point. For all intents and purposes MS and GS are large investment banks.

>Gold is a piss poor investment

This is a foolish statement no matter what the subject:

>dotcom stocks are a piss-poor investment >railroads area piss-poor investment >Apple is a piss-poor investment

All of these are true and false at some point. You can't make blanket statements like that. There are times when Gold as a store of value makes more sense than a central-bank inflated currency. There are times when the opposite is true.

What is certainly true is that Gold is a very good long-term store of value, and the prices of Gold relative to other things, such as a loaf of bread, a barrel of oil, a parcel of land are quite stable over a long period of time.

People often make the mistake of comparing Gold against fiat currencies and decide that Gold may be going up or down in value. What they don't do is look at Gold vs other things, which typically are rising in price just as fast as Gold.

Certainly one thing is for certain, putting your savings into a fiat currency is a very bad long term plan.

"What is certainly true is that Gold is a very good long-term store of value, and the prices of Gold relative to other things, such as a loaf of bread, a barrel of oil, a parcel of land are quite stable over a long period of time."

Wanna take a bet on that?

http://www.macrotrends.org/1340/gold-vs-the-cpi-historical-c...

Gold is out there, sometimes swinging by 1,700% over a decade... while the CPI doesn't change any more than ~100% / decade.

Dollars (and investments measured in dollars: ie Inflation-protected Bonds like TIPS) retain their value better than Gold, while providing a more stable platform. A 10-year note at even 2% offers you 21% growth over 10 years... much better than the long "valleys" that Gold investments suffered across the last century. (And with historic rates sometimes hitting 14.56%, it was possible for 10-year notes to hit 370% growth over 10 years).

Gold doesn't grow in value in the long term. And as shown in Gold Volatility Index, Gold is also a very unstable investment historically.

In fact, Gold's volatility today is the same as the S&P 500 Index.

http://finance.yahoo.com/q?s=^VIX http://finance.yahoo.com/q?s=^GVZ

So it is just as volatile as stocks... while offering poor gains historically. Neither the conservative nor aggressive investor would want this kind of investment. That makes gold a "piss poor" investment in my books.

Pretty much every big economy is trying to inflate away its debts. The Bank of England recently revised their inflation target upwards. Now Japan's central bank is talking about doing the same thing. As far as the US goes: I've got two words for you: quantitative easing.

Meanwhile, most consumer price indices don't include the things which increase in price the most, like fuel and food. So the inflation numbers you're seeing are already artificially low.

In this kind of environment, it seems pretty likely that gold has further to climb.

Also, most stocks these days don't give dividends, which makes them pretty much equivalent to gold from an investor's perspective. Greater fool and all that.

Investing in just one thing is dumb, of course. But not investing in commodities and gold at all seems equally dumb.

Get your facts straight. Have you ever read a CPI report? Do you even know how the CPI is calculated? Here's the list of CPI weights.

ftp://ftp.bls.gov/pub/special.requests/cpi/cpiri2010.txt

Food: 14.792% Housing: 41.460% Fuel: 5.079% Energy (included inside of "housing category"): 5.096%

If you're curious, you can further subdivide that into milk and eggs. But the list becomes way too unwieldy at that point. The averages are then computed using a geometric mean.

Also, Bond bankers are willing to accept a loss on TIPS, because a fair number of them are betting the opposite of inflation: the potential of deflation between 2008 and 2012.

http://www.nber.org/papers/w14701 http://www.frbatlanta.org/research/inflationproject/dp/

When big banks were buying up US Treasuries constantly because they're worried about deflation... to the point where some bonds are offering a negative return... the switch of Monetary Policy that favors inflation is the obvious move. Notice: Gold Dropped in value since last year, while big investors continue to run towards the safety of US Treasuries... pushing yields to absolute lows. Why? Because during 2012, the major banks and investors were worried about deflation risk.

Buying commodities and gold when there is considerable deflation risk is dumb.

According to wikipedia: "The core CPI index excludes goods with high price volatility, such as food and energy. This measure of core inflation systematically excludes food and energy prices because, historically, they have been highly volatile and non-systemic. More specifically, food and energy prices are widely thought to be subject to large changes that often fail to persist and do not represent relative price changes."

The Core CPI is used to calculate "Core Inflation," which is the main thing that the Federal Reserve tries to monitor. See http://en.wikipedia.org/wiki/Core_inflation. So although there are alternative CPIs which do include food and energy prices, they are not as important to the people making monetary policy in the United States.

I'm not really sure what you're trying to show with that graph of deflation probabilities. If I'm reading it right, the probability of deflation through 2017 is currently 0%. Since the year is currently 2013, the "probability of deflation between 2008 and 2012" is also 0%, since I just lived through those years, and... it didn't happen.

The reason why people were buying treasury bonds in 2008-2012 is because the rest of the economy was imploding and they wanted a safe port in the storm. I lived through those years and so did you. You ought to know this already.

I don't really know what else to say. If you think it's a good idea to buy a bunch of treasury bonds with super-low interest rates in 2013, knock yourself out! I think anyone with an ounce of sense can see that our government is going to inflate away its debts over the next few years. In the meantime, you'll be helping to keep USGov in the black, so... thanks, I guess.

So... what does "Core CPI" have to do with anything? I have never used that value in my argument, and have instead preferred CPI-U and CPI-W. These CPI are used for Social Security, Minimum Wage calculations, and so forth.

You're creating the ultimate strawman. You're ignoring the statistics I've presented (statistics using "real" CPI which include food values), and then criticizing statistics that I'm not using. Why don't you read my argument?

Second, even including food prices / energy prices, there were periods of deflation through 2008. Yes, I lived through those periods, do you know what happened to bond investments during that time? I got something like a 20% gain during that period of deflation while the rest of the market crashed.

Anyway, this is the free market. You can continue to invest into Gold if you think its best! We'll both know the answer in a year, so there's no real need to argue about it.

What does this have to do with anything? Let's ask wikipedia.

The Federal Reserve's policy of ignoring food and energy prices when making interest rate decisions is often confused with the Bureau of Labor Statistics' measurement of the CPI. The BLS publishes both a headline CPI which counts food and energy prices, and also a CPI for All Items Less Food and Energy, or "Core" CPI. None of the prominent legislated uses of the CPI excludes food and energy.[9] However, with regard to calculating inflation, the Federal Reserve no longer uses the CPI, preferring to use core PCE instead.

So the people making the monetary policy decisions are ignoring food and energy prices, and hence, in my opinion, underestimating inflation.

Anyway, as someone else said in this thread, everything is a good investment at some period in time. The question is whether we are in that period of time.

Gold is a good investment to mitigate against "tail risk" -- and so is BitCoin (although now because it is growing, it's good for taking an extreme log position is / hoarding).

So you'll see it spike in value right before panics, and slowly lose value after things stabilize.

Of course, gold or any commodity is a worse investment than a stock market index over time.

You are severely miscategorizing real estate. Look at what happened in the 2000s bubble. Property was flipping with no value adds, and even with added wear and tear.

Buying desert property today and selling it for profit in 10 years when the city next door expands-- that is not wealth creation.

Actually, it is. Speculators help in price discovery, and that is a real service.