Gold is frequently said to be an important part of a portfolio because it hedges against equity crashes or protects a portfolio from rising inflation. We see whether these hold true historically and what has driven the price of gold in the past.
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21 Comments
Mr Dalio seems to advise quite strongly of having gold in the portfolio.
Having researched this subject at great length I have come to the following conclusion. If you have total faith in the Governments of the G7 & other developed economies as well as faith in FIAT currency, then don't bother with Gold in your investment portfolio. If you have some doubt in their reliability to keep on delivering on their promises, then set-aside some of your investments as an insurance in Gold. From what I have read 10% appears to be a fair amount. Ultimately the best investment is in good quality agricultural land that can be used to produce food, but you can't hide it or move it, so if things get really bad a rouge government can take it from you. Then you start to think of Gold again. The fact that people have invested in Gold for over 5,000 years tells you something.
When I add 15% gold to my portfolio using portfoliocharts.com which runs the returns all the way back to the 1970's the standard deviation falls and the % of money lost over time falls too.
This is with a diversified portfolio of 15% gold, 10% long term bonds, 50% total stock market, 20% REITs, 5 commodities. I don't view gold as an investment but rather a form to preserve wealth any price gains above inflation is just a bonus.
The storage aspect for gold is only an issue if you plan to hold a significant amount of it. Most people hold gold in the form of jewelry in their household already insured by their home contents insurance which is normally an existing cost to home owners so that's something to think about. I prefer to buy physical bullion as they can often accure a collectors premium if you buy what's popular and if you buy legal tender coins from the royal mint it's free from capital gains tax.
Since this video was made gold has gone up 19% whereas the S&P500 is up 7.63%.
As long as gold is rare, it will hold it's value.
People should have watched this before piling into gold today! Great video as usual.
Care to revisit this analysis, post Covid-19 meltdown? As Dalio has pointed out, many make the mistake of only looking at events that have played out in the their own lifetime, but some cycles are on a longer time-frame. Your analysis is on point in terms of gold as an investment, but that is not what it's purpose is, or has been, for several centuries. It is a store of wealth, which is why 99% of central banks, and billionaires, have rows of gold bar pyramids in vaults… If this downturn does turn into a depression, and with interest rates at 0, the only way out is, apparently, is to print even more money. What are we on now- QE 4…? I feel O.K. with having missed out on those paper profits by keeping a hedge of gold and cash. In fact, I am exited because equities are finally looking like good value after years of central bank fuelled hot air…
I really like your video's Ramin, although in today's world I am heavily into precious metals. I have watched/listened to many economic videos on YouTube over the years and listened to many different analysts who I admit have definitely made me a Gold convert eg Jim Rickards, Jim Rogers, Lynette Zang, Peter Schiff, Richard Kiyosaki, Frank Guistra, Max Keiser, Mike Maloney, Ray Dalio etc etc. You will notice by their names that most are doomsday predictors of the current system. From listening to them I am now living a simple life. I own my home and have enough food, toiletries, cash, Gold/Silver Bullion to last me quite a while. Completely out of Stocks/Shares/ISA/Pension etc and just sitting tight. Looking at Gold over long term. In 1920 1oz Gold was $20 and average house was $3,500 (x175). In 2020 1oz is $1,700. If you multiply that by 175 it would still pretty much buy you an average house today. So Gold definitely holds its purchasing power over the long term. We'll see what happens in the period ahead. All best.
given the fact that central banks are now on QE infinity, would you change your position on Gold? I personally do not see the Fed or any central bank in the world raising interest rates any time soon. I feel Gold & Silver are a good insurance against fiat in these trying times.
If not Gold than What ?
Where are you going to store it? Vault, sounds costly. ETF, doesn’t that have a recurring fee? The more I look into it the more costly it looks
Only a fool pays to store gold. Never ever relinquish control to any entity. As well,the value of paper is losing its power. Be it stocks,bonds or currency. Hyperinflation guarantees that the value of gold goes up. This information is obsolete. Look at the stock market,it’s fake
oh.. how wrong is this guy.. oh.. oh.. gold is now $2050/oz..
With our true National Debt, including unfunded liabilities at over $200 trillion! Also a housing market crash soon to happen! What is coming is a currency change. Just like what happened in Venezuela back some 19 or so years ago. When they changed the currency and devalued it 70% in one day! This is why gold becomes increasingly desired. It has been money long before our dollar was here and it will be money long after the dollar is gone!
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10:02 so how much is the British government paying you to try to convince people that gold is not a good 10 year investment? You don't have to pay for storage as you can have it in your own home.
I'm very late to this video but the comment @2:50 isn't strictly accurate. Discounting at the risk-free rate will tell you the value of those future cashflows under the most optimistic possible assumptions. The fair value of the stock will in practice be lower, because market participants will tend to discount those cashflows using a much higher rate that includes the so-called equity risk premium. I'm 100% sure that Ramin knows this, but it's the sort of thing that used to confused me until I read enough books and a lightbulb finally came on.
Thanks for the recommendation.
As an amateur I can see that gold is cheaper when their is economic stability. It is higher when there is instability. Good time to buy gold when the economy is strong and stable. Good time to sell at times of recession. Gold can be volatile. I can see that but over the long term it holds its value. Paying to store gold? It must be a lot. A kilo costs £40k. A smaller amount wouldnt be too hard to store at home either in a safe or 'under the mattress'. Gold has a spot price as a raw material. If it's a coin or jewellery it will have a premium on top of that.
Yields from shares are not always guaranteed nor is the share price. S&P (inc. dividend) going up 10% a year. I would be very happy with that but again no guarantee of getting the 10% or anything.
These folks suggesting not to buy gold always compare to a up market. Lets compare to a down market 2008. Stock prices crashed on average by more than 50% while gold rose from $600 to $2000 in 2011. It doesn't take a genius to figure out which you'd rather have; stocks can have losses; lose money ;go broke . Gold has intrinsic value; its the best electrical conductor and doesn't corrode or oxidize; making it critical to electronics; dentistry; other medical uses and jewelry because not only is it beautiful but it is hard to find and doesn't react to your body chemistry or cause allergic reactions. If the world economy collapses gold maintains trade value while stocks are worthless. Does it cost a lot to store? Only if your super rich and hold a ton. You can wear it on your finger, neck or like a viking on your arm. These clowns show up trying to dissuade people from buying gold – just before you really want it – why – they are probably buying it themselves anticipating a down turn.
All gold-bugs basically have the same argument: "when the fiat currency collapses u be sorry you don't have goooooooooold"
They imagine that in a zombie apocalypse and/or Mad Max scenario, gold will win the day.
Except it won't. If that were to happen (let's leave aside the detail that it won't) then the cans of baked beans you keep in your prepper-bunker will be worth more per kilo than gold.
What a bunch of clowns.
Ramin, can we access these charts by subscribing somewhere?