Gold in your Investment Portfolio

[josjes]

To my great regret gold has only come to my attention when it reached US$750 last October. Since then I have jumped on the boat and started gradually building up position in gold, until now I have 10% of my investment portfolio allocated into Gold (physical/unallocated Perth Mint certificate). And I plan to add more.

I am interested to know whether :

1. other people in this forum have gold in their investment portfolio and
2. if yes what percentage ? Whether you plan to increase your gold holding ?
3. if no, why you are not interested in gold ?

When I started buying gold last November, friends, relatives, Financial Planner, accountant are mostly sceptical and indifference at best. Now, the reactions seem to be improving, people start taking notice and asking questions on how, why to invest, whether it's too late to buy gold etc etc.

I am sure many people in this forum know the gold bull run, but knowing and taking action is different thing.

BTW, I did a bit of research on Gold vs All Ord performance over the last 3, 5, 10 years. The start and end of period obviously can make quite a different.

Investing in an indexed-ASX shares give you steady dividend of about 3-4% pa vs Gold with zilt/nothing.

However with shares you have to pay CGT when you sell them vs Gold with no CGT.

Gold VS All Ord
Mar 98-Mar08, 220% vs 202%
Mar 00-Mar08, 220% vs 177%
Mar 03-Mar08, 182% vs 193%
Mar 05-Mar08, 182% vs 136%
Mar 07-Mar08, 123% vs -7%

Below a historical chart of Gold in AUS$ from 1983.

 

[Nyden]

Yes, but your figures show near perfect entry / exit times for Gold ... only really possible with hindsight.

The ASX has had many good entry periods throughout the years, & has offered steady / fantastic growth. Growth being the key word there. Gold, on the other hand; has had the occasional major spike / huge fall.

If you were a true long-term gold bug ... & had been holding since the mid-80s, for instance ... heh, you'd have probably lost money over all this time, not made (after inflation) ... if your entry point was somewhere around 600, that is. The point is, gold is volatile, very; & therefore, it's very risky.

Now, the ASX on the other hand ... has not had a major fall that it hasn't recovered in a matter of a few years ... no matter which year you entered it, if you stuck with it ... you would have made!


Index funds not only pay fantastic dividends, but they also appreciate in value ...
So, your calculations are wrong. The All ords have gone up 200%, but that doesn't factor in the 4% dividends each year, over 10 years ... that's 40% without even compounding / dividend reinvestment.


Perhaps I'm missing something, but from what I understand, you do need to pay tax on gold profit? Why wouldn't you? I was under the impression anything you bought / sold with a profit (without being a business) was subject to capital gains tax? Could be completely wrong though!

http://law.ato.gov.au/atolaw/view.h...=99991231235958&recnum=3&tot=184&pn=ALL:::ALL
Gold nuggets are CGT assets, so I'm quite certain that bullion, & the likes would be as well ...

 

[explod]

Gold as an investment has its cycle and a good investor will get to know those cycles well. I used to have a financial cycle clock on the wall above my computer, seek one out and get to know it well.

Above it is mentioned that if you got into gold in the 80s you would probably not have gained. However if you had got in in the early 70's at the price of $35 an ounce and held you would be up more than 2000% today. For those that lost after the fall from the 80's as many profited by getting out at the right time.

I remember as a youngster on the farm from my Father I learnt there were right and wrong times to sell sheep and cattle. Supply and demand make the cycles. Many traditional investment vehicles are looking a bit doubtful and money seems to be losing value so gold is in demand.

To answer the thrust of the thread, I have 40% of my investment portfolio in physical gold and silver which I have stored in a bank vault. Have been set with that for 3 years and have no need to add to the position. I am confident that I will know well in avance when the cycle is ending and it is time to sell.

An investor and analyst on cycles, William Gann is well worth reading up on. He was early to mid 20th Century but the basic principles never change.

 

[Nyden]

Hmm, just realized I never actually answered any of your questions! : I shall answer question 3 ...


I personally don't really have any gold exposure at the moment, but; it perhaps should be part of a balanced portfolio ... I'm just entirely in cash at the moment, waiting for the dust to settle.

Why? Well, I've stated my views on this many times; & it's my belief that if you can't eat it, use it for warmth, run a car on it, or cure disease with it, it serves no purpose. Has no ability to generate income, & people don't need to buy it; that right there is the key reason for me.

In addition; I apologize for my ill-structured posts, but I have the flu ... & am quite dazed.

 

[Bill M]

I am interested to know whether :

1. other people in this forum have gold in their investment portfolio and
2. if yes what percentage ? Whether you plan to increase your gold holding ?
3. if no, why you are not interested in gold ?

1. None what so ever
2. N/A
3. Because gold doesn't pay me dividends and over the years it has really been a really poor investment. I can go to Thailand tomorrow and buy 24 carat in any gold shop very cheap, much cheaper than Australia. If I really want gold I will buy in in Asia not here and at much better prices. I could be wrong but gold does nothing for me or my finances, I will stick with my industrial shares, cheers.

 

[MRC & Co]

Why? Well, I've stated my views on this many times; & it's my belief that if you can't eat it, use it for warmth, run a car on it, or cure disease with it, it serves no purpose.

Then buy wheat, oil, or corn if you like to sleep a lot Or perhaps invest in biotch........

On Nydens point, you did pick some good years to compare gold (though, they are also decent years on the index). However, these good years could well roll on into the future.

Also, Bill makes a good point, has the index been adjusted for dividends? Or simply capital gains?

 

[Nyden]

Then by wheat, oil, or corn if you like to sleep a lot Or perhaps invest in biotch........

So, your argument is that gold is volatile / to be bad for sleep? Yet another reason not to hold it! I value my health, & yes, my sleep / desire for minimal stress more than anything gold can offer.

Well, let's see - from what I understand ... each of those 3 commodities are doing quite well lately, aren't they? Seems to just add strength to my argument. Biotech is also pegged to be hot in the future, as is energy (warmth!)...

 

[MRC & Co]

William Gann is well worth reading up on. He was early to mid 20th Century but the basic principles never change.

Explod,

Whilst I have never studied Gann myself. Wasn't he more of a salesman than a successful trader? As stated by his son himself, who said his dad left them a mere 100,000k as opposed to millions. He said his Dad was more of a marketing guru than a trader...........

Perhaps even though so, his principles may have been correct, but are there many current, professionals using Ganns techniques? (disclaimer: I have no idea on the Gann techniques, can only state what I have read).

 

[MRC & Co]

So, your argument is that gold is volatile / to be bad for sleep? Yet another reason not to hold it! I value my health, & yes, my sleep / desire for minimal stress more than anything gold can offer.

Well, let's see - from what I understand ... each of those 3 commodities are doing quite well lately, aren't they? Seems to just add strength to my argument. Biotech is also pegged to be hot in the future, as is energy (warmth!)...

No, I have no idea on the historical volatility of gold (I do not trade the futures currently myself, but will do soon).

My arguement is that corn is not volatile, hence, you will be able to sleep well.

Wheat has not done well lately, at least the wheat chart I have been looking at. The different versions of wheat, though I understand there are various grades and trade on different exchanges, confuse a futures novice such as myself

 

[So_Cynical]

I have 80% approx of my portfolio in gold stocks...with hindsight that was a mistake as market sentiment
determines share price, so my Gold stocks haven't done as well as ASX :GOLD or ZAUWBA warrants.

I find it totally Bizarre that people can look at the gold price chart and then
decide...its not for me etc...it don't pay dividends...lol

as for the entry comments....look at the chart...any entry 1999 to 2007
was a good entry.

 

[MRC & Co]

and then
decide...its not for me etc...it don't pay dividends...lol

as for the entry comments....look at the chart...any entry 1999 to 2007
was a good entry.

That is a short period in comparison to the many years of an individual investor.

Dividends make a HUGE difference to compounding rates of return, which most "investors" are after.

 

[projack]

Why? Well, I've stated my views on this many times; & it's my belief that if you can't eat it, use it for warmth, run a car on it, or cure disease with it, it serves no purpose.

Come on mate. What about picking up girls on the beach.

 

[MRC & Co]

Just another note on GOLD, which by my avatar you can tell I am long-term bullish. I do not hold ANY gold stocks myself, at least at the moment.

Another note that worries me, is that gold does well when the US dollar declines. Which means the POG rises, however, the POG in AUD does not rise to quiet the same value. Furthermore, gold equities fall when the equity market fall (generally), whilst this is generally the time gold does well, no? Leaving Australian gold investors in some kind of a catch 22.........and to the conclusion that "perhaps" gold futures or bullion are a better vehicle for gold investment.

Gold is perhaps a better investment vehicle for US investors.

Sorry, had a few :alcohol:, so this may not be coherent.................but then again, it may be.........

 

[MRC & Co]

Come on mate. What about picking up girls on the beach.

ROLFMAO!!!!!!!!!!!!!!!!!!!!!

 

[Nyden]

No, I have no idea on the historical volatility of gold (I do not trade the futures currently myself, but will do soon).

My arguement is that corn is not volatile, hence, you will be able to sleep well.

Wheat has not done well lately, at least the wheat chart I have been looking at. The different versions of wheat, though I understand there are various grades and trade on different exchanges, confuse a futures novice such as myself

Well, to be honest; I wouldn't have it any other way. Nothing to me is more important than being able to sleep well at night, forget the troubles of the day ... & drift off into restful sleep. Money isn't worth losing years off of your life due to stress, or putting yourself under strain, & not enjoying day to day living! I'd rather die penniless, & have enjoyed life ... than die a sleepless billionaire :

When you start losing sleep over the market / losses, that's when you've become a gambler, & not an investor with confidence. It's at this point that you should be in nothing but cash

 

[josjes]

Yes, but your figures show near perfect entry / exit times for Gold ... only really possible with hindsight.

The ASX has had many good entry periods throughout the years, & has offered steady / fantastic growth. Growth being the key word there. Gold, on the other hand; has had the occasional major spike / huge fall.
Perhaps I'm missing something, but from what I understand, you do need to pay tax on gold profit? Why wouldn't you? I was under the impression anything you bought / sold with a profit (without being a business) was subject to capital gains tax? Could be completely wrong though!

http://law.ato.gov.au/atolaw/view.h...=99991231235958&recnum=3&tot=184&pn=ALL:::ALL
Gold nuggets are CGT assets, so I'm quite certain that bullion, & the likes would be as well ...

You can see that shares outperform gold in the 1990's when there is low inflation, and high growth. But clearly Market is cyclical, things change, the period since 2001 is period of high inflation, where gold outperform shares (if you invest in USA market), and gold perform on-par if you are in Australia (as a commodity country).
Things will change again when we have low inflation and the commodity boom is over, by then Gold will be going under. But I don't see this commodity boom is over soon in one or two years time. In the mean time why fight the trend ??

Regarding 'CYCLE', not only gold has its own cycle, but so does share market. Study the shares performance from early century till now then you'll see it has had shocking performance every 8 years or so (at least 30-40% down).

Judging from the response of this thread, Gold since ancient China/Egypt has and will always incite passion .

Nyden:

I have rang the Tax Office to personally enquire about it. I have a verbal answer from them that gold bullion is not subject to CGT. I also ask Perth Mint and read through Perth Mint Gold prospectus, it clearly states that no CGT subjected to gold bullion.

 

[MRC & Co]

Well, to be honest; I wouldn't have it any other way. Nothing to me is more important than being able to sleep well at night, forget the troubles of the day ... & drift off into restful sleep. Money isn't worth losing years off of your life due to stress, or putting yourself under strain, & not enjoying day to day living! I'd rather die penniless, & have enjoyed life ... than die a sleepless billionaire :

When you start losing sleep over the market / losses, that's when you've become a gambler, & not an investor with confidence. It's at this point that you should be in nothing but cash

Yes, I agree with the major sentiments of the post. Nothing is more important than good health and peace of mind! NOTHING!

However, putting yourself under strain could cause you to die penniless. You can die a rich man by being safe if you compound a decent capital base for many years!

I loose sleep over the market, but that is because I am so excited, I cant wait for it to open (or stay up watching the US and futures) or I have read so much that I have dreams (nightmares), about figures and charts! LOL. Though it aint so funny at the time

 

[MRC & Co]

You can see that shares outperform gold in the 1990's when there is low inflation, and high growth. But clearly Market is cyclical, things change, the period since 2001 is period of high inflation, where gold outperform shares (if you invest in USA market), and gold perform on-par if you are in Australia (as a commodity country).
Things will change again when we have low inflation and the commodity boom is over, by then Gold will be going under. But I don't see this commodity boom is over soon in one or two years time. In the mean time why fight the trend ??

Regarding 'CYCLE', not only gold has its own cycle, but so does share market. Study the shares performance from early century till now then you'll see it has had shocking performance every 8 years or so (at least 30-40% down).

Judging from the response of this thread, Gold since ancient China/Egypt has and will always incite passion .

You mean in the last decade? NOT the 90s in general..........

Trouble with any statistic, is it has to be relative........the stockmarket had a LOT more than 8 years where it didnt perform, however, what was this return when dividend adjusted?

What has been the average real interest rate over the previous several years you mention gold rising, in comparison to the preceeding several years?

Nyden is not a gold bug like us however, but does he have the decisiveness to go with his sentiments on energy/food (both of which I also like)? Fair enough if he likes his sleep, and 8% in the bank is a decent return. However, I would much prefer my 25% return. Again though, it comes with risk...........

 

[MRC & Co]

You mean in the last decade? NOT the 90s in general..........

Sorry Josjes, misread that post.

 

[Tysonboss1]

1. other people in this forum have gold in their investment portfolio and
2. if yes what percentage ? Whether you plan to increase your gold holding ?
3. if no, why you are not interested in gold ?

No gold in m portfolio I have never reall taken the time to examine the benefits but are far as my limited veiw is concerned it can only really have a short term benefit if you are activly trading it,

a bar of gold does not pay a dividend , I can't rent it out so it is just a load of capital sitinng idle