Massive opportunity developing in gold stocks

[rb]

Then can someone show me a chart of equities index to inflation vs Gold indexed to inflation?

 

upload images

 

upload

 

Blue = DJIA

Red(?) = SP500

Gold = Gold

Silver = Silver

 

I said I was going to leave this alone but the fact that you shared a graph of the price return of the Dow Jones and S&P as a comparison to Gold and Silver just blew my mind. The correct chart to share would be total return since as an owner of a company you benefit from dividends and buybacks. Also, my point was that people who say Gold is a hedge against inflation are wrong and as you will see below if you go back to 1980 and adjust for inflation Gold has a negative return!  The following is the CAGR of Gold and DJAI Total return with dividends reinvested from dates shown to Present (11/25/2020) adjusted for inflation.

 

BOLD = Gold return

 

01/01/2010 = 3.45% 10.85%

01/01/2005 = 7.89%  7.33%*

01/01/2000 = 7.43% 5.08%*

01/01/1995= 4.25% 8.49%

01/01/1990 = 2.88% 8.26%

01/01/1985 = 2.73% 9.41%

01/01/1980= -0.18% 9.12%

You probably should ding gold with storage costs as well - the thing carries a negative dividend.

[rb]

What I've never understood, is why gold? There's so many other things that accomplish the same thing. For instance, why not diamonds?

 

Gold is an element and therefore fungible and investable at scale (central banks and large institutions can trade gold and, absent chicanery, know precisely what they’re buying / selling), not so with diamonds (or art or air cooled 911’s or whatever)

 

I do not know this for sure but I’d expect the above ground gold supply to be far less volatile than diamonds (ie I think there are big diamond discoveries that can be large relative to existing supply). This has happened with gold several times in history, but is probably less likely to happen today than with diamonds; someone more knowledgeable  than I can opine)

I think diamonds are a really bad example here. That's due to many issues: price control by cartel, ability to crate them by industrial process, huge difference between retail and wholesale value, small and tightly controlled wholesale market which is very hard to get into and that's just off the top of my head. Basically the only thing diamonds are good for is if you need to take off quickly you can shove them up your ass and go through an airport metal detector then take a large loss on redemption.

 

The thing with gold like pupil said is that it's fairly liquid and has transparent pricing.

[ERICOPOLY]

What I've never understood, is why gold? There's so many other things that accomplish the same thing. For instance, why not diamonds?

 

Gold is an element and therefore fungible and investable at scale (central banks and large institutions can trade gold and, absent chicanery, know precisely what they’re buying / selling), not so with diamonds (or art or air cooled 911’s or whatever)

 

I do not know this for sure but I’d expect the above ground gold supply to be far less volatile than diamonds (ie I think there are big diamond discoveries that can be large relative to existing supply). This has happened with gold several times in history, but is probably less likely to happen today than with diamonds; someone more knowledgeable  than I can opine)

I think diamonds are a really bad example here. That's due to many issues: price control by cartel, ability to crate them by industrial process, huge difference between retail and wholesale value, small and tightly controlled wholesale market which is very hard to get into and that's just off the top of my head. Basically the only thing diamonds are good for is if you need to take off quickly you can shove them up your ass and go through an airport metal detector then take a large loss on redemption.

 

The thing with gold like pupil said is that it's fairly liquid and has transparent pricing.

 

How do the markets for platinum and gold compare on those qualitative terms of liquidity and transparency?

[ERICOPOLY]

Further, why is gold a suitable money when rising real production would be rewarded with deflation?

 

It's not ideal money if a country relies on deficit spending to fund the government expenses. 

 

Think about earning $1000 worth of gold (or any fixed base currency).  Ten years from now deflation results in increased purchasing power because you can buy more with your $1000 of gold if you saved it.  Inflation, on the other hand, is a tax.

 

I see the obvious personal advantage to hoarding gold if it rises in real terms in response to rising economic output.  However, that violates the legend that it is stable in terms of purchasing power, and I can see social unrest if one can earn true real returns by simply holding money instead of investing it.

[Spekulatius]

Gold is highly useful for jewelry (malable), has a nice color, does not corrode and can be used to build excellent infrared mirrors (I use it just for that a bit in thin film form at work).

 

The supply of gold will increase less than the supply of fiat money, they why I would bet that over long periods of time, it will keep it’s value better than cash.

 

Diamond is a crappy investment because it needs an expensive  and subjective classification system (not a fungible good) and the demand is procyclical and at least used to be controlled by the De Beers cartel. In addition, it is not possible to create artificial diamond that exceed objectively the quality of natural formed diamond.

[ERICOPOLY]

You probably should ding gold with storage costs as well - the thing carries a negative dividend.

 

Platinum has a higher density.  In theory that should equate to lower storage costs.

[JRM]

"The supply of gold will increase less than the supply of fiat money, they why I would bet that over long periods of time, it will keep it’s value better than cash."

 

That's a pretty bold statement given the track record of the United States Federal Reserve.  I guess Joe Biden, Janet Yellen, and Jerome Powell can all work together get our national spending and money printing in check. 

 

[Gregmal]

Eric is kind of getting at my point. Diamonds was an off the cuff remark, but what about platinum, palladium or others? Frankly Ive always thought gold was a greater fool kind of thing, nothing wrong with that..but it is what it is. I just think its a remnant of uncivilized societies and as we get more advanced, its relevance as a store of value decreases.The premise is largely archaic and involves someone else thinking the same way you do. It also seems to me that the gold bug type is older, which future generations will carry the sentiment?

 

There are plenty of assets or items that overtime store value. Why is this unique relative to the alternatives?

[rb]

What I've never understood, is why gold? There's so many other things that accomplish the same thing. For instance, why not diamonds?

 

Gold is an element and therefore fungible and investable at scale (central banks and large institutions can trade gold and, absent chicanery, know precisely what they’re buying / selling), not so with diamonds (or art or air cooled 911’s or whatever)

 

I do not know this for sure but I’d expect the above ground gold supply to be far less volatile than diamonds (ie I think there are big diamond discoveries that can be large relative to existing supply). This has happened with gold several times in history, but is probably less likely to happen today than with diamonds; someone more knowledgeable  than I can opine)

I think diamonds are a really bad example here. That's due to many issues: price control by cartel, ability to crate them by industrial process, huge difference between retail and wholesale value, small and tightly controlled wholesale market which is very hard to get into and that's just off the top of my head. Basically the only thing diamonds are good for is if you need to take off quickly you can shove them up your ass and go through an airport metal detector then take a large loss on redemption.

 

The thing with gold like pupil said is that it's fairly liquid and has transparent pricing.

 

How do the markets for platinum and gold compare on those qualitative terms of liquidity and transparency?

Poorly.

 

Gold is really liquid. You can walk into any neighborhood jeweler and sell them an ounce of gold at a small discount to market. I wouldn't even know where to go to sell an ounce of platinum.

 

I don't know what the rate is in the US, but in Canada these sell your gold/we buy your jewelry types charge a 5% discount to the market price of the gold. That is crazy cheap when you consider that jewelry gold is of lower quality and has to be smelted/purified to turn it into financial gold. Or maybe they just use it to make new jewelry, i don't know. Either way it's not bad.

[ERICOPOLY]

Gold jewelry was preferred over platinum back in the day.  Great trivia to feed your beloved when you want to spring the question but don't want to foot the bill for platinum.  I take no responsibility for how that works out for you.

 

Platinum was used for and is more suitable for intricate filigree work and so there are a lot of antique filigree jewels in platinum, but today people pay a big premium for some very plain platinum settings simply because SHE is expecting platinum.

[JRM]

Eric is kind of getting at my point. Diamonds was an off the cuff remark, but what about platinum, palladium or others? Frankly Ive always thought gold was a greater fool kind of thing, nothing wrong with that..but it is what it is. I just think its a remnant of uncivilized societies and as we get more advanced, its relevance as a store of value decreases.The premise is largely archaic and involves someone else thinking the same way you do. It also seems to me that the gold bug type is older, which future generations will carry the sentiment?

 

There are plenty of assets or items that overtime store value. Why is this unique relative to the alternatives?

 

There are certainly a lot of people who believe gold is a pet rock including our fed reserve chairman and treasury secretary in waiting.

 

Why do you think the US government has any gold at fort knox?  Some people say they should sell off the reserve because gold is worthless.  Despite how much they would probably like to do that, the gold is one of the few liquid assets on the U.S balance sheet (an asset held by central banks around the world), and the trust in the dollar would be crushed in they sold off all of the gold.  So even though the U.S. dollar is not backed by gold, in a way trust in the dollar is partly maintained by our gold reserve; that and our military.

[rb]

Eric is kind of getting at my point. Diamonds was an off the cuff remark, but what about platinum, palladium or others? Frankly Ive always thought gold was a greater fool kind of thing, nothing wrong with that..but it is what it is. I just think its a remnant of uncivilized societies and as we get more advanced, its relevance as a store of value decreases.The premise is largely archaic and involves someone else thinking the same way you do. It also seems to me that the gold bug type is older, which future generations will carry the sentiment?

 

There are plenty of assets or items that overtime store value. Why is this unique relative to the alternatives?

I agree with pretty much all you said. You could say that gold is the best of the greater fool items due to its properties which make it liquid, easy to store/transport, and the fact that there's plenty of it (that probably circles back to liquidity). Platinum and palladium are nowhere near as liquid as gold.

 

You can make the argument that there are better stores of value but those come with various negatives depending on the eye of the beholder. For example one can easily make the argument that from a store of value standpoint agricultural land is superior. But to the gold bug who's always ranting about the incoming "guvmant" invasion that land is crap whereas he can take his goldbar and run into the woods at any time.

[ERICOPOLY]

What I've never understood, is why gold? There's so many other things that accomplish the same thing. For instance, why not diamonds?

 

Gold is an element and therefore fungible and investable at scale (central banks and large institutions can trade gold and, absent chicanery, know precisely what they’re buying / selling), not so with diamonds (or art or air cooled 911’s or whatever)

 

I do not know this for sure but I’d expect the above ground gold supply to be far less volatile than diamonds (ie I think there are big diamond discoveries that can be large relative to existing supply). This has happened with gold several times in history, but is probably less likely to happen today than with diamonds; someone more knowledgeable  than I can opine)

I think diamonds are a really bad example here. That's due to many issues: price control by cartel, ability to crate them by industrial process, huge difference between retail and wholesale value, small and tightly controlled wholesale market which is very hard to get into and that's just off the top of my head. Basically the only thing diamonds are good for is if you need to take off quickly you can shove them up your ass and go through an airport metal detector then take a large loss on redemption.

 

The thing with gold like pupil said is that it's fairly liquid and has transparent pricing.

 

How do the markets for platinum and gold compare on those qualitative terms of liquidity and transparency?

Poorly.

 

Gold is really liquid. You can walk into any neighborhood jeweler and sell them an ounce of gold at a small discount to market. I wouldn't even know where to go to sell an ounce of platinum.

 

I don't know what the rate is in the US, but in Canada these sell your gold/we buy your jewelry types charge a 5% discount to the market price of the gold. That is crazy cheap when you consider that jewelry gold is of lower quality and has to be smelted/purified to turn it into financial gold. Or maybe they just use it to make new jewelry, i don't know. Either way it's not bad.

 

I imagine if Atlanta has a place, other cities do to:

https://www.rkcojewelers.com/advice-on-how-to-sell-gold-silver/

 

But I see far more "we buy gold" signs in what feels like every mall.

 

However, I was thinking (for our purposes) of just people like us buying a platinum or gold ETF.  There is enough liquidity there?

[ERICOPOLY]

Platinum jewelry (unlike gold jewelry) also tends to be almost entirely pure (950/1000).

[rb]

Eric is kind of getting at my point. Diamonds was an off the cuff remark, but what about platinum, palladium or others? Frankly Ive always thought gold was a greater fool kind of thing, nothing wrong with that..but it is what it is. I just think its a remnant of uncivilized societies and as we get more advanced, its relevance as a store of value decreases.The premise is largely archaic and involves someone else thinking the same way you do. It also seems to me that the gold bug type is older, which future generations will carry the sentiment?

 

There are plenty of assets or items that overtime store value. Why is this unique relative to the alternatives?

 

There are certainly a lot of people who believe gold is a pet rock including our fed reserve chairman and treasury secretary in waiting.

 

Why do you think the US government has any gold at fort knox?  Some people say they should sell off the reserve because gold is worthless.  Despite how much they would probably like to do that, the gold is one of the few liquid assets on the U.S balance sheet (an asset held by central banks around the world), and the trust in the dollar would be crushed in they sold off all of the gold.  So even though the U.S. dollar is not backed by gold, in a way trust in the dollar is partly maintained by our gold reserve; that and our military.

LOL! you think that the US gold reserve which is worth around 0.5T give or take is what provides confidence in a county with 20T GDP and a currency with 19T of supply?

 

You may remember that in times of crisis like when shit was hitting the fan back in march nobody wanted gold and everyone wanted US dollars.

[John Hjorth]

I'm always amazed, when something like this happens on the CoBF Board Index, section Recent Posts.

[JRM]

Eric is kind of getting at my point. Diamonds was an off the cuff remark, but what about platinum, palladium or others? Frankly Ive always thought gold was a greater fool kind of thing, nothing wrong with that..but it is what it is. I just think its a remnant of uncivilized societies and as we get more advanced, its relevance as a store of value decreases.The premise is largely archaic and involves someone else thinking the same way you do. It also seems to me that the gold bug type is older, which future generations will carry the sentiment?

 

There are plenty of assets or items that overtime store value. Why is this unique relative to the alternatives?

 

There are certainly a lot of people who believe gold is a pet rock including our fed reserve chairman and treasury secretary in waiting.

 

Why do you think the US government has any gold at fort knox?  Some people say they should sell off the reserve because gold is worthless.  Despite how much they would probably like to do that, the gold is one of the few liquid assets on the U.S balance sheet (an asset held by central banks around the world), and the trust in the dollar would be crushed in they sold off all of the gold.  So even though the U.S. dollar is not backed by gold, in a way trust in the dollar is partly maintained by our gold reserve; that and our military.

LOL! you think that the US gold reserve which is worth around 0.5T give or take is what provides confidence in a county with 20T GDP and a currency with 19T of supply?

 

You may remember that in times of crisis like when shit was hitting the fan back in march nobody wanted gold and everyone wanted US dollars.

 

Haha.  I'm well aware of how gold has traded for the last 50+ years. 

[ERICOPOLY]

You may remember that in times of crisis like when shit was hitting the fan back in march nobody wanted gold and everyone wanted US dollars.

 

That flight to USD also happened in the GFC panic.

[rb]

What I've never understood, is why gold? There's so many other things that accomplish the same thing. For instance, why not diamonds?

 

Gold is an element and therefore fungible and investable at scale (central banks and large institutions can trade gold and, absent chicanery, know precisely what they’re buying / selling), not so with diamonds (or art or air cooled 911’s or whatever)

 

I do not know this for sure but I’d expect the above ground gold supply to be far less volatile than diamonds (ie I think there are big diamond discoveries that can be large relative to existing supply). This has happened with gold several times in history, but is probably less likely to happen today than with diamonds; someone more knowledgeable  than I can opine)

I think diamonds are a really bad example here. That's due to many issues: price control by cartel, ability to crate them by industrial process, huge difference between retail and wholesale value, small and tightly controlled wholesale market which is very hard to get into and that's just off the top of my head. Basically the only thing diamonds are good for is if you need to take off quickly you can shove them up your ass and go through an airport metal detector then take a large loss on redemption.

 

The thing with gold like pupil said is that it's fairly liquid and has transparent pricing.

 

How do the markets for platinum and gold compare on those qualitative terms of liquidity and transparency?

Poorly.

 

Gold is really liquid. You can walk into any neighborhood jeweler and sell them an ounce of gold at a small discount to market. I wouldn't even know where to go to sell an ounce of platinum.

 

I don't know what the rate is in the US, but in Canada these sell your gold/we buy your jewelry types charge a 5% discount to the market price of the gold. That is crazy cheap when you consider that jewelry gold is of lower quality and has to be smelted/purified to turn it into financial gold. Or maybe they just use it to make new jewelry, i don't know. Either way it's not bad.

 

I imagine if Atlanta has a place, other cities do to:

https://www.rkcojewelers.com/advice-on-how-to-sell-gold-silver/

 

But I see far more "we buy gold" signs in what feels like every mall.

 

However, I was thinking (for our purposes) of just people like us buying a platinum or gold ETF.  There is enough liquidity there?

Well the physical liquidity for platinum is lower than gold. But I would say that for our purposes of buying a gold or platinum etf there's ample liquidity. 1 Because we don't have that much money and 2. Because there is liquidity provided by financial intermediaries marker makes/ETF sponsor. That being said I'm weary of ETFs for physical commodity as these usually hold derivative and not the physical and things can go wrong. See the USO incident earlier this year.

 

As for jewelry as far as I know platinum is cheaper than gold. Maybe that's why it's more popular these days  ¯\_(ツ)_/¯

[rb]

You may remember that in times of crisis like when shit was hitting the fan back in march nobody wanted gold and everyone wanted US dollars.

 

That flight to USD also happened in the GFC panic.

Yeah. That's why I don't buy the whole gold is a good disaster asset theory. It doesn't really stand up against empirical evidence.

[JRM]

You may remember that in times of crisis like when shit was hitting the fan back in march nobody wanted gold and everyone wanted US dollars.

 

That flight to USD also happened in the GFC panic.

Yeah. That's why I don't buy the whole gold is a good disaster asset theory. It doesn't really stand up against empirical evidence.

 

At the end of the day only you can decide if you believe gold is money and/or has any value relative to fiat currencies, just like Bitcoin, just like US dollars. 

 

Instead of trying to make up theories about gold and then dis-proving them, listen to Lacy Hunt and Andy Schectman interviews and discredit what they say.

 

[rb]

Can I go to the store and buy a beer with it?

[JRM]

Can I go to the store and buy a beer with it?

 

No, and you can't eat it either.

 

Technically, you could spend gold eagles (legal us currency) to buy a beer, but that would be pretty stupid.

[rb]

well then it's not money

[ERICOPOLY]

As for jewelry as far as I know platinum is cheaper than gold. Maybe that's why it's more popular these days  ¯\_(ツ)_/¯

 

People are shelling out more for the platinum settings.

 

Plat $890:

https://www.bluenile.com/build-your-own-ring/petite-solitaire-ring-platinum_19010

 

18k gold $750:

https://www.bluenile.com/build-your-own-ring/petite-solitiare-ring-18k-yellow-gold_44709