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Do you think it's a good idea to put some savings in gold?

by sunseb 7y ago

nostromo 7y ago
As part of a portfolio you hold for decades? Sure. Otherwise? No. https://en.wikipedia.org/wiki/Modern_portfolio_theory https://en.wikipedia.org/wiki/Modern_portfolio_theory
- TheHegemon 7y ago
  No, gold has not outperformed even cash in the last 30 years. It is only worth it if you can time it precisely: https://www.macrotrends.net/1333/historical-gold-prices-100-year-chart https://www.macrotrends.net/1333/historical-gold-prices-100-...
  - nostromo 7y ago
    Read and understand the link I posted. The point of holding gold isn't to increase your returns, but to reduce the volatility of a diversified portfolio.
  - icelancer 7y ago
    >> gold has not outperformed even cash in the last 30 years. It is specifically geared to underperform it in markets like this, so it's doing its job.
deleted 7y ago
[deleted]
icelancer 7y ago
If you have to ask, the answer is almost certainly "no." There are reasons to hold commodities and precious metals like gold/silver, but they are pretty specific and for retail investors usually circle the idea of hedging against your first-party currency.
rchaud 7y ago
As with any investment, don't put in more than you feel you can afford to lose. While gold and precious metals assets can appreciate in these times, at some point paper gains need to be converted into cash, so make sure you can liquidate your holdings if you need to. Many crypto investors for example have been burned by being unable to convert their gains into cash due to exchange related shenanigans. I'd guess the gold market is more mature in that regard, but I've never invested so I don't know what it's like for consumer-level investors.
mrfredward 7y ago
I used to be against having any significant amount of gold in a portfolio because it's not a "productive" asset. Companies earn profit, bonds pay interest, and real estate gets rent checks, but gold costs money to store. "Productive" assets get you price appreciation + income. Even companies that don't pay a dividend are investing trying to grow, hence your profit comes partly from economic activity, not just a bet that people will pay more money for the exact same thing tomorrow. Now that many bonds aren't necessarily meeting my definition of a productive asset (small or negative yields for the safest bonds in Europe), I'm backtracking on my stance. The zero-interest rate world is weird.
ThrustVectoring 7y ago
The stereotypical HN reader (age 20-40 tech professional) should have three to six months of salary in cash (interest-bearing savings/checking/money market account), rest in low-cost equity index funds (I use 60% VTI / 40% VXUS). Gold is, IMO, a disaster preparedness thing you buy after purchasing a shotgun, ammunition, and a month's worth of canned food. The main use case for gold is as highly portable physical wealth - in highly messed-up situations, you retain at lease some ability to engage in limited amounts of commerce to get yourself to a more stable situation.
- ant6n 7y ago
  That's an interesting implied point. Does it make sense to hold gold on paper, if it's mostly useful in highly messed up situations where paper gold would become worthless?
  - ThrustVectoring 7y ago
    Yeah, I wouldn't do that. Security costs for physical gold are already low if you have a way to securely store a shotgun, most of what you're dealing with is a wider buy/sell spread, which is pretty small overall. The problem with "paper gold" of various sorts is that it usually winds up being a promise to give you a certain number of dollars based on the spot price of gold. This is a problem if dollars stop being of practical use. There's still a hell of a lot of things that are better to do before buying physical gold here, of course. Bigger risk-mitigation moves are like, minor emergency preparedness, own-occupation disability insurance, term life insurance, and dumping a ton of money into the stock market for getting enough long-term price appreciation.

Do you think it's a good idea to put some savings in gold?

by sunseb 7y ago

Do you think it's a good idea to put some savings in gold?

As part of a portfolio you hold for decades? Sure. Otherwise? No. https://en.wikipedia.org/wiki/Modern_portfolio_theory https://en.wikipedia.org/wiki/Modern_portfolio_theory

TheHegemon 7y ago
No, gold has not outperformed even cash in the last 30 years. It is only worth it if you can time it precisely: https://www.macrotrends.net/1333/historical-gold-prices-100-year-chart https://www.macrotrends.net/1333/historical-gold-prices-100-...
- nostromo 7y ago
  Read and understand the link I posted. The point of holding gold isn't to increase your returns, but to reduce the volatility of a diversified portfolio.
- icelancer 7y ago
  >> gold has not outperformed even cash in the last 30 years. It is specifically geared to underperform it in markets like this, so it's doing its job.

deleted 7y ago

[deleted]

icelancer 7y ago

If you have to ask, the answer is almost certainly "no." There are reasons to hold commodities and precious metals like gold/silver, but they are pretty specific and for retail investors usually circle the idea of hedging against your first-party currency.

rchaud 7y ago

As with any investment, don't put in more than you feel you can afford to lose. While gold and precious metals assets can appreciate in these times, at some point paper gains need to be converted into cash, so make sure you can liquidate your holdings if you need to. Many crypto investors for example have been burned by being unable to convert their gains into cash due to exchange related shenanigans. I'd guess the gold market is more mature in that regard, but I've never invested so I don't know what it's like for consumer-level investors.

mrfredward 7y ago

I used to be against having any significant amount of gold in a portfolio because it's not a "productive" asset. Companies earn profit, bonds pay interest, and real estate gets rent checks, but gold costs money to store. "Productive" assets get you price appreciation + income. Even companies that don't pay a dividend are investing trying to grow, hence your profit comes partly from economic activity, not just a bet that people will pay more money for the exact same thing tomorrow. Now that many bonds aren't necessarily meeting my definition of a productive asset (small or negative yields for the safest bonds in Europe), I'm backtracking on my stance. The zero-interest rate world is weird.

ThrustVectoring 7y ago

The stereotypical HN reader (age 20-40 tech professional) should have three to six months of salary in cash (interest-bearing savings/checking/money market account), rest in low-cost equity index funds (I use 60% VTI / 40% VXUS). Gold is, IMO, a disaster preparedness thing you buy after purchasing a shotgun, ammunition, and a month's worth of canned food. The main use case for gold is as highly portable physical wealth - in highly messed-up situations, you retain at lease some ability to engage in limited amounts of commerce to get yourself to a more stable situation.

ant6n 7y ago
That's an interesting implied point. Does it make sense to hold gold on paper, if it's mostly useful in highly messed up situations where paper gold would become worthless?
- ThrustVectoring 7y ago
  Yeah, I wouldn't do that. Security costs for physical gold are already low if you have a way to securely store a shotgun, most of what you're dealing with is a wider buy/sell spread, which is pretty small overall. The problem with "paper gold" of various sorts is that it usually winds up being a promise to give you a certain number of dollars based on the spot price of gold. This is a problem if dollars stop being of practical use. There's still a hell of a lot of things that are better to do before buying physical gold here, of course. Bigger risk-mitigation moves are like, minor emergency preparedness, own-occupation disability insurance, term life insurance, and dumping a ton of money into the stock market for getting enough long-term price appreciation.