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You reveal a huge bias by the fact that you selectively pick only an extreme event that spans about 0.001% of 30 years as a prime example. The wild peak of gol

by shingen 15y ago

You reveal a huge bias by the fact that you selectively pick only an extreme event that spans about 0.001% of 30 years as a prime example. The wild peak of gold in 1980 lasted for days, on a temporary burst higher. The average price of gold in 1980 was $615 or so. Your scenario requires that buyers of gold do not cost average over time, but rather that they only buy at very specific points in time and only sell at very specific points in time. You could have just as easily purchased gold at $55 in 1972. Or $125 in 1977. Or in 1985 at $300. Or at $266 in 2001. You make my point about gold: it's a wealth protector, not a vehicle for seeking big real returns. If you had bought gold in 1850 and passed it down the generations, that wealth would have been completely protected from the fiat disaster of the green back the past 90 years. You would not have grown the wealth in some spectacular fashion, because that is not what gold does.

InclinedPlane 15y ago
Gold is subject to speculative bubbles just as housing and stocks are. Gold is not a wealth protector unless you are lucky, but that's true of anything. If you buy gold during a speculative bubble then gold is more likely to be a wealth destroyer. If you buy gold today, near the peak of a classic and obvious speculative bubble then you are not doing yourself any favors. Worse yet, gold tends to return to a constant value after speculative crashes. Compare that to property and stocks which tend to end up higher in the long term, regardless of speculation. If someone had invested their money into houses, land, or stocks in 1850 or 1919 they would have seen a vastly superior rate of return than from gold. People who advocate buying gold right now are giving irresponsible advice that if followed will almost certainly lead to people losing money.
- shingen 15y ago
  You don't have to be lucky with gold. You could have bought in roughly 88 of the last 90 years and been perfectly well protected over time from the loss of value in the dollar.
  - InclinedPlane 15y ago
    Indeed, it's always good to sell near the peak of a speculative bubble. What is your argument that "this time it's different" for gold? That the current exceptional run-up of gold prices over the last decade is sustainable and the current inflated gold price will be the price floor for the remainder of the 21st century? If you're lucky enough to buy gold in the doldrums and sell it at the peak of a bubble, you make a killing. If you're unlucky enough to buy gold during a bubble and sell it during the doldrums you lose a lot of money. If you're neither lucky nor unlucky and buy and sell during the doldrums then you end up making a very paltry return on investment that is inferior to the average of other equally popular forms of investment (such as property or stocks). Buying gold today is just as smart an investment as buying a house in 2006 or buying stock in pets.com in 1999.
    - shingen 15y ago
      No, I'm not making any argument that "this time is different". I'm making the argument that the dollar is not going to increase in value over the next 10, 20, 30 years. Rather, the dollar is going to continue to lose large amounts of real purchasing power. Gold priced in dollars will rise accordingly. Just calculating entitlement costs alone, the Fed will be required to massively devalue the dollar over the coming decades to keep a mass social panic from occurring due to defaults by the Feds on paying SS or Medicare et al.

by shingen 15y ago

InclinedPlane 15y ago

Gold is subject to speculative bubbles just as housing and stocks are. Gold is not a wealth protector unless you are lucky, but that's true of anything. If you buy gold during a speculative bubble then gold is more likely to be a wealth destroyer. If you buy gold today, near the peak of a classic and obvious speculative bubble then you are not doing yourself any favors. Worse yet, gold tends to return to a constant value after speculative crashes. Compare that to property and stocks which tend to end up higher in the long term, regardless of speculation. If someone had invested their money into houses, land, or stocks in 1850 or 1919 they would have seen a vastly superior rate of return than from gold. People who advocate buying gold right now are giving irresponsible advice that if followed will almost certainly lead to people losing money.

shingen 15y ago
You don't have to be lucky with gold. You could have bought in roughly 88 of the last 90 years and been perfectly well protected over time from the loss of value in the dollar.
- InclinedPlane 15y ago
  Indeed, it's always good to sell near the peak of a speculative bubble. What is your argument that "this time it's different" for gold? That the current exceptional run-up of gold prices over the last decade is sustainable and the current inflated gold price will be the price floor for the remainder of the 21st century? If you're lucky enough to buy gold in the doldrums and sell it at the peak of a bubble, you make a killing. If you're unlucky enough to buy gold during a bubble and sell it during the doldrums you lose a lot of money. If you're neither lucky nor unlucky and buy and sell during the doldrums then you end up making a very paltry return on investment that is inferior to the average of other equally popular forms of investment (such as property or stocks). Buying gold today is just as smart an investment as buying a house in 2006 or buying stock in pets.com in 1999.
  - shingen 15y ago
    No, I'm not making any argument that "this time is different". I'm making the argument that the dollar is not going to increase in value over the next 10, 20, 30 years. Rather, the dollar is going to continue to lose large amounts of real purchasing power. Gold priced in dollars will rise accordingly. Just calculating entitlement costs alone, the Fed will be required to massively devalue the dollar over the coming decades to keep a mass social panic from occurring due to defaults by the Feds on paying SS or Medicare et al.