…against real money:
I’d be willing to take that bet, although not with real money.
The economy continues to power on. Black Friday sales: up. Cyber Monday sales: up. Pre-thanksgiving sales: up. (Yes, credit card balances, up). I suspect the December period will be up.
The Fed will hold fast, wishing they could raise one more time, but it’s been enough already, so they will sit tight. Thinking they will move in the opposite direction (absent obvious and huge macroeconomic event) within a couple months seriously misjudges this Fed, which reacts late in every case.
Well I wouldn’t call gold real money but Bitcoin is doing much better than gold. If you want real money you should be in bitcoin.
We two are here to help.
Gold hits a [nominal] record high.
Fixed that for them.
The real rate of return of gold is still lousy over the last 10+ years and negative since the all time high:
Gold historically is pretty bad as an investment, but can work fine as a trade. Buy low, sell high.
So, if history is any guide goldbugs should be selling like mad right now.
Yep, the bullion banks smashed down the price of paper gold.
With regard to the price I would be delighted if gold fell to $500 an ounce. That would mean that the economy was OK and all my other investments were doing very well.
If gold is such a bad buy I wonder why these guys are buying so much:
Gold is a waster, it just sits there all day doing nothing! Capital goes to work every day, 24/7/365! To boot gold expects security at great expense.
It’s risen from $35 an ounce when the USA defaulted on the Bretton Woods agreement. Excel tells that this is 8% pa compound growth since then.
Gold has no counterparty risk, unlike cash, shares and securities that the financial system has first call on.
That’s cherry picking! Bretton Woods with never happen again. To find the real return on gold calculate the Internal Rate of Return (IRR) of all your purchases and sales. The Excel function is XIRR
Because unlike gold, the dollar is coming off of a 20+ year high when compared to many developed currencies. It would be silly to continue to buy the dollar when it is that expensive.
That’s why I say gold works fine as a trade. All you have to do is pick your entry and exit points correctly. After adjusting for inflation from its 1980 peak, Excel tells me gold has a CAGR of -2.3%.
43 years is a long time to be underwater.
All those central banks must be making a terrible mistake
You are not asking the correct question. Why are those banks doing this? What is their reason? And why would you assume that it would therefore be suitable for you as well?
Investment is all personal. Your reasons to pick an investment over another, not someone else’s reason.
I was in the process of stating the exact same thing then you beat me to it.
In the 3rd quarter, roughly 25% of all central bank purchases were from China. Not every CB was a net purchaser.
China of course is buying so much gold because they don’t want a strong dollar (which would be the alternative to their gold purchases). They are trying to protect their own currency and even if they take a loss on gold, it may be worth it.
I doubt they are buying gold (if in fact they are net buyers) for investment purposes. That’s not what central banks do. The reasons are almost certainly for hedging. Again, gold can work fine as a trade if you are smart enough to time your entry and exit points successfully.
I didn’t buy gold because central banks were buying it.
I started buying gold before central banks went on a buying spree. Most was purchased between 2014 - 2018. My first sovereign cost under £1,000. They now sell for £1,650 (I know that I couldn’t get this). In the UK this gain is tax free. Just using spot price I’m up about 30% tax free. I’m happy with this especially for the other benefits of little counterparty risk and it’s out of the grasp of the financial institutions that may have first call on my cash, shares and securities.
It balances out my savings/investments nicely.
I bought gold (and other precious/expensive metals) for manufacturing purposes. I think gold was at $250/oz when I bought it in 2001. Used all of two ounces (LOL). But, that is what was needed. Mgmt might have been a bit upset I bought two ounces (and not one ounce), but when the price of gold shot up, they saved a bundle.
But how are currencies to potatoes?
I set the microwave pre-programmed to #1 and my potato comes out nice, hot, and ready to smother in butter. Can you do that with other supposed “currencies”?