investing in gold

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  • #599455
    bombmaniac
    Participant

    id like to start investing in gold. not a lot…maybe 200 a month…but i have no experience whatsoever. all i know about gold is that its shiny and that it’s value rises in an inverse relation to the dollar, and that the dollar has been falling in value. ive been following gold prices for years, and i finally have money to put in. so where do i go…what do i do…and stuff

    #814310
    shmoel
    Member

    Gold does NOT necessarily follow the inverse of the dollar. Gold is speculation.

    #814311
    gavra_at_work
    Participant

    so where do i go…what do i do…and stuff

    If all you want to do is invest, use an ETF, like GLD.

    #814312
    Sam2
    Participant

    Ask Al Gore.

    #814313
    ZachKessin
    Member

    Here is a question, why would you buy something as it is at an *ALL TIME HIGH*? Now is a good time to sell gold, not buy it.

    Remember to make money, Buy low, sell High.

    #814314
    bombmaniac
    Participant

    rofl

    shmoel: thats the trend its been following for the past 5 years (which is how long ive been following it)

    #814315
    yovel
    Member

    maybe it’s too late to invest in gold, beccause it’s so high

    #814316
    shmoel
    Member

    Bomb: 5 years is a joke. In the next 5 the trend could easiliy reverse.

    #814317

    First, the disclaimer:

    Next, the opinion:

    Gold has more than quintupled in price over the last ten years, more than doubled over the last two years, and that kind of advancement is, IMO, unsustainable. At some point, people will start putting their money back into securities and other areas that are deemed too risky nowadays, and gold prices will drop dramatically.

    #814318
    bombmaniac
    Participant

    how would i go about putting money down on this…i know the principles behind it all but i dont know how to actually do any of this

    #814319
    gavra_at_work
    Participant

    First, the disclaimer:

    Next, the opinion:

    Gold has more than quintupled in price over the last ten years, more than doubled over the last two years, and that kind of advancement is, IMO, unsustainable. At some point, people will start putting their money back into securities and other areas that are deemed too risky nowadays, and gold prices will drop dramatically.

    I agree with ICOT, with one Caveat (and the same disclaimer).

    The only reason why gold has increased is due to perceived risk. Chances are, the risk will go down, and gold may follow. However, as perceived risk goes up, gold may go up as well.

    #814320
    zahavasdad
    Participant

    The Higher the price of Gold, the more of it there is

    Your grandmother left you a beautiful gold candlesticks, Its been in your family for generations.

    When gold is $500 an oz and its worth $2000 you keep it, when Gold is $2000 an oz, its now worth $8000 , Forget about the family airloom, Most people will get it melted down.

    #814321
    bombmaniac
    Participant

    “Bomb: 5 years is a joke. In the next 5 the trend could easiliy reverse.”

    i didnt say that thats all i looked at. ive been following it personally over 5 years…i wasnt old enough to follow it past that but i have looked at the data and i think its worth it.

    and i know that theres a distinct difference between commodities and businesses which is why commodities interest me so much. its not a “get rich quick” market and it requires long term investments. or long-ish term investments with only medium returns. investing in a company like google is nice, but especially in teh technology market anything can happen. someone can make a new produt and the company stock tanks in one day. thats far less likely in commodities especially precious metals.

    also gold is an interesting commodity becuase it is so versatile and has so many uses. as the tech industry grows the demand for gold increases because printed circuits use gold as conductors because of its minimal resistance and lack of oxidation over time. and thats just one use aside from jewelry and being an overall safe commodity. its also pretty recession proof because it retains its value even if demand goes down (obviously prices will fall a bit bu they wont tank) also gold is in universal demand equally and not controlled by any one entity which is nice (as opposed to corporations or oil for example)

    anyway…yeah,. it may be expensive but from what i can tell its a very safe investment.

    back to my question…what do i do

    #814322
    adorable
    Participant

    you’re gonna have to ask people who sell gold and that stuff.

    #814323
    shmoel
    Member

    You can easily lose your shirt investing in gold. It could tumble in price very quickly.

    #814324
    adorable
    Participant

    can i have your maaser when u get rich?

    #814325
    squeak
    Participant

    What ICOT and GAW have said is extremely reasonable (as usual). Gold is normally thought of as an inflation hedge, and it doesn’t make a good “investment”. The same amount of gold that was created at the beginning of time is the amount of gold on earth today – it does not oxidize and it is not manufactured (can be through nuclear means, but that’s not done). The amount of gold available for buying and selling is something pretty hard to change – when the price of gold is high enough, people will sell their jewelry and mining companies will find it worthwhile to dig gold out of the earth at lower gold to ore ratios, but all that has a barely noticeable impact to the supply.

    If you are worried about currency devaluation, as many people are when they think about all the money being printed at the Treasury department, then trading your currency for gold can make sense. After all, why let your dollars sit in a bank account and lose their buying power every time the money supply is increased? It is a much better idea to keep your savings in gold which hardly changes in supply. The gold will still be equally precious when you need to turn it into buying power. You might get more dollars or less when you sell it, but it’s a pretty good chance that the buying power hasn’t changed. You might or might not want an ETF for this purpose, as some people will advise only having physical gold serves this purpose.

    However, the buying power of gold can change if there is a speculative bubble one way or the other. Some might say that the current price of gold is high because it is overspeculated. Others say that the price is currently low because it is undervalued. Gold definitely gets a lot of attention these days, but there is really no one who knows what the current price or the recent trend means. The price of gold could shoot up tomorrow, or it could crash and burn like it did in the 80s. Either way, speculating is risky. So unless you are taking on this risk as a hedge, or as part of a diversified portfolio, you are essentially gambling.

    By the way, diamonds make better semi-conductors than gold, so arguing that gold is useful for that reason only makes sense as long as the price of gold stays lower than these commercial grade diamonds. Gold is a poisonous metal, extremely heavy, and not easy to use as currency except in large amounts. I don’t want to have any (though I own a small amount as part of a diversified portfolio).

    #814326
    littleapple
    Member

    I strongly suggest all investors to check your investments daily and be ready to get out quickly in the event of a sudden loss exceeding your tolerance level. Many, many in the last few years turned away briefly and when they turned back they found to their horror 30, 50, 80 % losses. Learn from this mistake and don’t invest if you will not stay engaged and ready to pull out.

    #814327
    bombmaniac
    Participant

    well the problem with diamond is that its inherently worth very little. the price is regulated by one specific interest which holds a monopoly over the diamond market as a whole. thats not ideal. i dont mind leaving the money in there for a while and the money is essentially disposable. its this or atlantic city…except that atlantic city is way more risky and this takes a lot longer 😛

    essentially what this is going to be is (one way of putting it is exchanging currency for gold) a way of backing my savings. im not looking to strike it rich. gold looks like a nice way of A) maintaining the value of what i put in over a long term and B) probably give me a nice return on the investment. not the biggest…but more than i can get in a CD or a money market et al. mutual funds are off the table for me because they depend on too many variables.

    as far as diversity goes…i dont have enough money to diversify yet 😛 i may eventually branch out but right now i think this is a good place to start.

    i also dont have enough for physical gold or bullion, but i do have enough for shares in gold or bullion (ETF essentially.) perhaps if i have enough $$$ down the line i may change that…but for now ETF it is. (GLD specifically. its what ive been looking at for a while already.)

    soliekyea…i made an ameritrade account. im not starting yet because i still wanna do some more research but i think this is the way im going.

    and shmoel: heres the thing. gold can indeed tumble in price but it always self regulates. its not finite. if a corporation tanks then its gone. people who invested lets say in worldcom got screwed because once it went down it stayed down. gold and precious metals in general (although some are WAY more volatile than others) dont have that issue.

    #814328
    TheGoq
    Participant

    You should consider yourself lucky that u don’t think $200 a month is a lot of money.

    #814329
    squeak
    Participant

    bomb- wrong type of diamonds. Good luck with your investment, I hope it does what you hope for.

    If you don’t have enough funds, you can buy an ETF or a mutual fund that holds diversified risk.

    #814330
    bombmaniac
    Participant

    its not that…i work 2 jobs and have no expenses and ive been spending on garbage….so i figure i may as well use it for something productive

    #814331
    popa_bar_abba
    Participant

    Gold has been going up, and is hyperinflated.

    One thing to keep in mind, is that the returns now are not nearly what they were a couple years ago.

    See, Gold today is about 1800. If you bought it at 1500, you made 300. But, that is only a return of 20%.

    On the other hand, if you had bought Gold at 1000 and sold at 1300, same 300, but 30%.

    #814332
    truthsharer
    Member

    I sold some gold recently and had a nice chat with the dealer. One of the reasons why gold is going up is the fear factor. People are willing to pay money to have some tangible asset in their hand in case the world goes crazy. That is why when you do sell gold, you get more for sovereigns than plain gold jewelry.

    I would not buy gold in this economy right now, I would sell though.

    #814333
    squeak
    Participant

    bomb- in that case, your investment is unquestionably wise. I can guarantee you a better return investing in gold than spending it on garbage 🙂 ?

    #814334
    bombmaniac
    Participant

    “I would not buy gold in this economy right now, I would sell though.”

    which would be a nice reason to buy now if i was willing to wait 😛

    gold IS hyperinflated but i see nothing that tells me that the reason behind the fear is going to go away over the next year

    #814335
    Peacemaker
    Member

    You plan on selling in the next year what you will now buy? Otherwise your point is irrelevant.

    #814336
    bombmaniac
    Participant

    english please?

    #814337

    bombmaniac-

    I recommend that you go to site usagold.com, and check out real-time gold prices, historical gold prices, and recent price trends.

    Here are my main issues with your plan:

    1) Be aware of the risks involved, including volatility. Over the last four weeks, gold has fluctuated from $1,700 to more than $1,900 an ounce.

    2) Look at historical performance of gold and other precious metals.

    Historically, diverse indexed funds have performed well.

    Whichever way you decide to go, hatzlocha raba.

    #814338

    Eight days ago (September 18, 2011) when this thread started, gold was $1,828 an ounce.

    Today (September 26, 2011), gold is $1,591 an ounce.

    Had you invested $200 that day, your investment would now be worth $174.07, a net loss of about 13%.

    #814339
    real-brisker
    Member

    ICOT – Silver took an even steeper decline. it was from $43 an oz, to as low as $27 last night. thats $15 down which is 1/3 its value.

    #814340

    well the problem with diamond is that its inherently worth very little. the price is regulated by one specific interest which holds a monopoly over the diamond market as a whole.

    —-

    Nope. Leviev broke that monopoly about 15 years ago. Now others (almost all of whom are frum) buy direct from Russia and own mines in Africa as well.

    Cocaine is the best investment with heroin a close second. Contact your local branch of the Lucchese or Gambino crime family, or buy direct from Colombia and risk your life rather than turning 20-25% over to the mob.

    #814341
    Abba bar Aristotle
    Participant

    Someone told me the the hedge funds are selling off their holdings in gold because they believe that gold is going to go down significantly.

    #814342
    squeak
    Participant

    Which means nothing except that there might be that many fewer hedge funds in a few weeks or months.

    #814343

    real-brisker-

    That’s really something.

    I hope people in the eyeglass business (who need to stock gold and silver frames), jewelers, and other professions that require an at-hand supply of gold and silver aren’t being hurt by these wild price swings.

    #814344
    real-brisker
    Member

    ICOT – Do you think now will be a good time to invest, or it can drop even more??

    #814345
    am yisrael chai
    Participant

    Thinkin’ of the song ??? ?? ???? ??? ????? ??? ???? (if I coulda figured out how to add the musical notes from this laptop, I would have!)

    #814346

    The haimishe silver stores are hurt by this. When I was in NY, my friend, who is well-off BH, married off his first daughter and then a year later, it was time for his second daughter’s chassune.

    Knowing that they did not need cash, I bought the first chosson and kallah a silver kiddush dispenser from a mutual friend’s silver shop, a well-known 13th Avenue store. When I went back to get a similar gift for the second chosson and kallah, the best price I could get was about 200 dollars more for a similar piece that really wasn’t as nice or as heavy. I had to give the second sister and her chosson cash/gift certificates instead.

    I wanted a particular cup for myself that was on sale at Hatzorfim when I was in EY just before the first chassune, but I passed on it figuring I’d buy it from my friend in NY. I forgot all about it for months and by the time I remembered, prices had gone so wild that the cup was way out of budget for me.

    #814347

    real-brisker

    To repeat my initial disclaimer, I am most definitely NOT someone who should be relied upon for financial advice.

    That said, my best guess is:

    -in the short term (the next six months to a year) the price will bounce around between $1,400 and $2,050 an ounce.

    -in the long term (3+ years) gold will retreat to $750 – $900 an ounce.

    am yisrael chai

    Here are a few notes for your cut-n-paste convenience:

    ?? ??

    600 Kilo Bear

    Hello!

    I hope you are doing well, far from our shores IIRC.

    Have a kesiva vachasima tova and a gut gebentched yor.

    #814348

    bsd thanks ICOT – a gut gebensched yohr!

    #814349
    squeak
    Participant

    Icot- do you think oil prices are a bubble too? Will a barrel go back to 30-40? I dont think it will. Not for the same reason, I also dont think gold will go back to those pre-stimulus prices. What you are describing would be the result of a very painful deflationary period.

    #814350
    GumBall
    Member

    ?? ?? IM GETING SO ANNOYED!! HOW DO U DO BOLD??

    #814351

    squeak-

    do you think oil prices are a bubble too?

    What you are describing would be the result of a very painful deflationary period.

    =====================================

    I feel a bit like a student disagreeing with the teacher and giving his reasons, knowing all the while that the teacher is aware of the arguments the student will bring, has already considered and discarded them, and will now explain why they are invalid.

    Nonetheless, the above are my thoughts on this topic.

    #814352
    real-brisker
    Member

    ICOT – What makes you think that golds value will decline in 3 years?

    #814353

    real-brisker-

    What makes you think that golds value will decline in 3 years?

    I think it will decline in significantly less than three years. In three years I think it will be about half of what it is now.

    I think and hope the economy will pick up and/or people will look for money-making investments and opportunities rather than just a safe shelter in tough times.

    Gold has been around for a long time, and it has never shot up in value and stayed up permanently – it’s always fallen back down. While a great deal of money can be made by correctly predicting a rise in gold’s price, historically it’s been one of the worst long-term investments you can make.

    #814354
    squeak
    Participant

    I feel a bit like a student disagreeing with the teacher and giving his reasons, knowing all the while that the teacher is aware of the arguments the student will bring, has already considered and discarded them, and will now explain why they are invalid.

    Nonetheless, the above are my thoughts on this topic.

    I appreciate your kind words, but you are too humble. I find your advice here very worthwhile. If mine is also seen as helpful, then that only makes this a better discussion, since we have opposing viewpoints.

    I disagree. If you look back at 2007-2008 you will see what was possibly the greatest amount of speculation in any market ever. Michael Master’s testimony convinced – if not proved – to members of Congress that the $120/bb price tag was the result of speculation. The sheer number of uncovered contracts at the time made obvious the scale of the speculators’ influence in the market. As a result, they sought to enact reforms that prevented speculation. Gold has seen nothing quite like it.

    I don’t wish. Cheap oil is not healthy and it’s not sustainable. If we artificially kept the price down somehow, what do you think would happen when (stagnant) supplies didn’t meet (growing) demand? You’d have China, India, and the US fighting for their share. The higher price encourages us to seek better (oil free) technology and limits the demand from poorer countries.

    What you are describing would be the result of a very painful deflationary period.

    The point is that people are not willing to shift their holdings. It’s financial suicide to park your money in any vehicle right now, as it’s been since 2000. Meanwhile the government has been printing money to pay for various stimulus programs. That causes inflation, which drives people with savings to park their money somewhere inflation proof- i.e. gold, because it’s supply doesn’t change. The logic being that even though I’m not going to gain anything, at least I don’t lose. The value of gold hasn’t gone up so much as the value of the dollar it is priced in has shrunk around it. The only way for the value of gold to come down now is if dollars start disappearing and the value of the dollar goes up – i.e. deflation. A permanent change to the money supply means a permanent change to the price at which gold will find support.

    Stagflation is a sad commentary on the work ethic of our society. If our people were willing to work the way our ancestors who built the country did, such a state would not be possible. But that’s a whole other discussion.

    #814355

    squeak-

    Thank you for the encouragement and the kind words. I stand by my earlier assessment of our knowledge levels, but that hasn’t stopped me before and won’t stop me now ?

    squeak: do you think oil prices are a bubble too?

    squeak:I disagree. If you look back at 2007-2008 you will see what was possibly the greatest amount of speculation in any market ever. Michael Master’s testimony convinced – if not proved – to members of Congress that the $120/bb price tag was the result of speculation. The sheer number of uncovered contracts at the time made obvious the scale of the speculators’ influence in the market. As a result, they sought to enact reforms that prevented speculation. Gold has seen nothing quite like it.

    squeak: I don’t wish. Cheap oil is not healthy and it’s not sustainable. If we artificially kept the price down somehow, what do you think would happen when (stagnant) supplies didn’t meet (growing) demand? You’d have China, India, and the US fighting for their share. The higher price encourages us to seek better (oil free) technology and limits the demand from poorer countries.

    squeak: What you are describing would be the result of a very painful deflationary period.

    squeak: The point is that people are not willing to shift their holdings. It’s financial suicide to park your money in any vehicle right now, as it’s been since 2000. Meanwhile the government has been printing money to pay for various stimulus programs. That causes inflation, which drives people with savings to park their money somewhere inflation proof- i.e. gold, because it’s supply doesn’t change. The logic being that even though I’m not going to gain anything, at least I don’t lose. The value of gold hasn’t gone up so much as the value of the dollar it is priced in has shrunk around it. The only way for the value of gold to come down now is if dollars start disappearing and the value of the dollar goes up – i.e. deflation. A permanent change to the money supply means a permanent change to the price at which gold will find support.

    Stagflation is a sad commentary on the work ethic of our society. If our people were willing to work the way our ancestors who built the country did, such a state would not be possible. But that’s a whole other discussion.

    #814356
    squeak
    Participant

    ICOT, your make some very good points. Most of what we disagree on is opinion, and both opinions can be valid. I’d just like to respond to a few things:

    1. I absolutely agree that Masters’ proposed solution would have been a terrible idea. That does not take away from the elegance with which he described the problem – a tremendous feat.

    2. I am not aware of what you mean by the “current run up” in the oil market. To the best of my knowledge, the last run up was the one that took us to $120. After that bubble burst, the price dropped like a rock to the 30-40 range, but that was partially rubber band effect (snap the other way) and partially the fact that it was 2008 and no one had any money to take advantage of the arbitrage opportunity. Since that point, the price has more or less settled in the mid $80 range, with a relatively low standard deviation.

    3. You wish for $30-40 oil prices without artificial means. In other words, you are hoping to drive out 50% of the buyers from the market. That means that you don’t want China, India, and other oil “newcomers” to have access to oil. I think of that as a selfish wish. [If you will say that your wish is not to remove buyers but to double supply, I will say unequivocally that this is a pipe dream. Production cannot be increased by anywhere near the amount you’d need, and even if massive amounts of oil were discovered today it would take years to reach the market- by which time demand will likely have overtaken it.]

    4. I agree with you that the right way to create a disincentive is to raise the price through taxes and not through paying the suppliers more. This is not what is happening – the high price is the result of market forces and not disincentive actions. I am merely pointing out the silver lining when I say that it drives us to other technologies. If I believed in tax disincentives I could move to a country that has them (UK, Israel, EU, etc).

    5. Your prediction of future gold prices is something I need to think more about. I think pretty much everyone agrees that there is a bubble in the gold market, but the question is how big is the bubble. You seem to think that 100% of the gains result from the bubble, while I think that the bubble is but one factor coming on the shoulder of price gains due to valid economic factors. It’s hard to deny that investors have permanently changed their thinking when it comes to currency and sovereign debt. It is also hard to deny the effect of inflation on a commodity that is not inflatable. My most liberal guess is that 50% of the gains in gold are from hype and fear – but if you put a microphone in my face I’d say my best estimate is 25-35%. But you could be right, as time will tell.

    6. I don’t have any blame theories for the recessions. When I say that I blame stagflation on our work ethic, I mean something entirely different. In less comfortable times, people who had less did with less and dug their heels in. Many people, forced by poverty or other hardship, did things that no comfortable person would. Countless small businesses were created that way. It’s like playing the dice game craps- you might win or lose on the first roll, but if you roll the point you keep on rolling until you get something.

    Now we live all in comfort- there are programs to fall back on in hard times, staples are cheap and easy to get, communication and transportation is taken for granted. We have giant efficient companies that make innovation and competition difficult and unnecessary. As a result, in bad times we are playing musical chairs – once you’re out you are eliminated from the game. You won’t find any laid off Vice Presidents looking for “unsuitable” replacement work because they don’t have to. The result is less competition in business, a tougher labor market, and more concentration of capital (rich get richer and everyone else gets poorer).

    #814357

    squeak-

    1. squeak: I absolutely agree that Masters’ proposed solution would have been a terrible idea. That does not take away from the elegance with which he described the problem – a tremendous feat.

    icot: IMO he explained his point of view more convincingly than those who attempted to rebut him did. Just to be clear, a quick read-thru of his testimony vs. the points of those who disagree and/or think he has an ax to grind by no means finalizes who is most correct in my mind.

    2. squeak: I am not aware of what you mean by the “current run up” in the oil market. To the best of my knowledge, the last run up was the one that took us to $120. After that bubble burst, the price dropped like a rock to the 30-40 range, but that was partially rubber band effect (snap the other way) and partially the fact that it was 2008 and no one had any money to take advantage of the arbitrage opportunity. Since that point, the price has more or less settled in the mid $80 range, with a relatively low standard deviation.

    3. squeak: You wish for $30-40 oil prices without artificial means. In other words, you are hoping to drive out 50% of the buyers from the market. That means that you don’t want China, India, and other oil “newcomers” to have access to oil. I think of that as a selfish wish. [If you will say that your wish is not to remove buyers but to double supply, I will say unequivocally that this is a pipe dream. Production cannot be increased by anywhere near the amount you’d need, and even if massive amounts of oil were discovered today it would take years to reach the market- by which time demand will likely have overtaken it.]

    4. squeak: I agree with you that the right way to create a disincentive is to raise the price through taxes and not through paying the suppliers more. This is not what is happening – the high price is the result of market forces and not disincentive actions. I am merely pointing out the silver lining when I say that it drives us to other technologies. If I believed in tax disincentives I could move to a country that has them (UK, Israel, EU, etc).

    5. squeak: Your prediction of future gold prices is something I need to think more about. I think pretty much everyone agrees that there is a bubble in the gold market, but the question is how big is the bubble. You seem to think that 100% of the gains result from the bubble, while I think that the bubble is but one factor coming on the shoulder of price gains due to valid economic factors. It’s hard to deny that investors have permanently changed their thinking when it comes to currency and sovereign debt. It is also hard to deny the effect of inflation on a commodity that is not inflatable. My most liberal guess is that 50% of the gains in gold are from hype and fear – but if you put a microphone in my face I’d say my best estimate is 25-35%. But you could be right, as time will tell.

    6. squeak: I don’t have any blame theories for the recessions. When I say that I blame stagflation on our work ethic, I mean something entirely different. In less comfortable times, people who had less did with less and dug their heels in. Many people, forced by poverty or other hardship, did things that no comfortable person would. Countless small businesses were created that way. It’s like playing the dice game craps- you might win or lose on the first roll, but if you roll the point you keep on rolling until you get something.

    Now we live all in comfort- there are programs to fall back on in hard times, staples are cheap and easy to get, communication and transportation is taken for granted. We have giant efficient companies that make innovation and competition difficult and unnecessary. As a result, in bad times we are playing musical chairs – once you’re out you are eliminated from the game. You won’t find any laid off Vice Presidents looking for “unsuitable” replacement work because they don’t have to. The result is less competition in business, a tougher labor market, and more concentration of capital (rich get richer and everyone else gets poorer).


    Thanks for taking the time to read and respond.

    The financial world is something I know relatively little about, and I appreciate the chance to speak with someone who is more familiar with it.

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