Gold vs Property

I was at a seminar last week-end, from Bill Zheng. One of things he is pushing at the moment is gold. The argument for gold being that, with all this money being issued after the GFC, high inflation is inevitable. So to protect yourself against inflation, you buy gold.

You could also buy property though. At least, property provides an income, while gold has little practical use beyond jewerly. As long as population is growing, demand for property keeps increasing. The demand for gold seems more speculative to me.

Does anybody hold part of their wealth in gold? If so, why?
 
Good idea to include gold or something stable as part of a good wealth creation plan. The PLAN is key above the vehicles involved.
 
I was at a seminar last week-end, from Bill Zheng. One of things he is pushing at the moment is gold. The argument for gold being that, with all this money being issued after the GFC, high inflation is inevitable. So to protect yourself against inflation, you buy gold.
I would say Gold is not so much an inflation hedge as it is a crisis hedge, but it can act in different ways depending on the situation.

You could also buy property though. At least, property provides an income, while gold has little practical use beyond jewelry. As long as population is growing, demand for property keeps increasing. The demand for gold seems more speculative to me.
Gold has a history of being used as money and a store of wealth for 5000+ years. I would call that a practical use.

Using physical to partially protect ones wealth I wouldn't call speculative, at least not more so than people's faith in paper/plastic money. In the US I personally think it would be much more speculative to hoard USD than Gold.

Obviously with the entry to the market of hedge funds, there is a certain degree of speculation in the current market & price. How much? A lot less than in Australian property in my honest opinion, given the still fragile state of the worlds financial systems.

In Australia Gold is also somewhat a currency play, so is speculative in that way as well.

Does anybody hold part of their wealth in gold? If so, why?

Yes, because it's shiny.
 
I was at a seminar last week-end, from Bill Zheng. One of things he is pushing at the moment is gold. The argument for gold being that, with all this money being issued after the GFC, high inflation is inevitable. So to protect yourself against inflation, you buy gold.

You could also buy property though. At least, property provides an income, while gold has little practical use beyond jewerly. As long as population is growing, demand for property keeps increasing. The demand for gold seems more speculative to me.

Does anybody hold part of their wealth in gold? If so, why?

Although jewelry is the "primary use of gold", you might find a few more uses of gold here.
 
I hold part of my wealth (for want of a better word) in gold shares...specifically Perseus Mining shares.

www.perseusmining.com.au

IMO this is one of the most promising companies I have invested in. Nuigini Mining (subsequently Lihir gold) was another. I have been investing in shares since 1984 and learnt many trading lessons and made many mistakes.

Perseus Mining is an ASX (stock code PRU) and TSX listed company with gold tenements in Ghana and Ivory Coast (and in excess of 7 million ounces of gold delineated to date). They will have 12 drilling rigs operating simultaneously later this year and are planning on drilling 220,000 metres (i.e. 220 kms of drilling) over 12 months. Persueus are probably in the crosshairs of the large gold majors and are ripe for takeover...particularly after they receive environmental planning approval which will allow construction of their Ayunfuri mine in Ghana to commence (which should happen some time in March/April). They have between $95m and $100m cash in bank and about 350m shares on issue (last traded at $1.76).

One of my reasons for having $ in gold shares (and not all in property) is my belief that economies continually printing paper money will result in a falling value of fiat curencies (particularly $US) and rising inflation. Some commentators (such as Warwick Grigor BGF Securities) have been saying gold could reach US$5000/ounce in the next 2 years. There woud be a considerable multiplier effect * on the value of gold stocks (as the profit from mining would climb far quicker than any increase in gold price provided the company's production is mostly unhedged ).

It is difficult holding gold stocks as the price of gold and gold stocks are quite volatile-gold price moving up and down at the moment (from $1180 highs to mid $1000's then back again).

http://www.kitco.com/charts/livegold.html

Silver could be a similar bet for falling value of fiat currencies and rising global inflation.

Ajax

*What I mean by saying multplier effect can be explained by the example below:-

Assume gold producer sells gold at current spot price of $1100/ounce and that operating costs of the mine are $550/ounce. The proft is therefore $550/ounce.

If gold price doubles to $2200/ounce, the profit will now be $1650/ounce (i.e.$2200-$550).
Profit has trebled.

Furthermore a higher gold price will enable the gold miner to mine less high grade ore bodies that up till now have not been economical.

This is why I would prefer to be holding shares in an unhedged gold producer as opposed to physical gold in a rising gold market.
 
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i read this post as property Vs Gold and i do not wish to take the thread but i went to a car show and shine in canberra , they were all EH holdens and the like . some were for sale beetween 15 and 30k i had one once i sold it for 3k as it turns out houses were about 100k back then as the cars have increased in their sale value at about 5 to ten fold and the homes only five fold ?? go figure?
 
Although jewelry is the "primary use of gold", you might find a few more uses of gold here.

You would find that the primary use of gold is still to backstop currency.

Keynes famously called it a "relic" but it has not yet been consigned to the dustbin. When the IMF announced that it was going to sell 400 T of Au. India bought half before it hit the market.

Gold is money.
 
I was at a seminar last week-end, from Bill Zheng. One of things he is pushing at the moment is gold. The argument for gold being that, with all this money being issued after the GFC, high inflation is inevitable. So to protect yourself against inflation, you buy gold.

You could also buy property though. At least, property provides an income, while gold has little practical use beyond jewerly. As long as population is growing, demand for property keeps increasing. The demand for gold seems more speculative to me.

Does anybody hold part of their wealth in gold? If so, why?

I was at the same seminar. Found it very interesting. I guess it is a good idea to hold a portion of ones wealth in gold/sylver. The question is what percentage as a proportion of ones portfolio/LVR/income/etc the max efficiency is achieved?
Gold/Sylver bullion are not income producing asset. Also, leverage is questionable, etc.
Another question I have is what's the difference of buying bullion from Investors Direct or from the Perth Mint if any?
 
Gold/Sylver bullion are not income producing asset.

But nor is -ve geared property. You actually have to pay up every month. You are not about to suggest that the next noob posting here will be advised to save up enough deposit to make his investment CF +ve are you?

I have more dollars in property than precious metals but I am selling property, not metals or the miners. :D

Edit: 3 month US bonds pay something like 0.02% pa. The US$ is buying less domestically every year via inflation (3-4% officially, 10% unofficially) and has lost up to 40% internationally, if compared to the Oz$ or the Looney. The gold market is too small to handle a tiny fraction of the "liquid" cash looking for a safe home.
 
Another question I have is what's the difference of buying bullion from Investors Direct or from the Perth Mint if any?

I think I'll buy direct. I spoke to one person who decided to buy after the Robert Kiyosaki seminar (where they said the same thing) and he bought direct.

The thing they were pushing with buying it through them is the safe storage and not getting ripped off. I might just put it under my pillow. Might be a bit lumpy with the silver though.
 
What's the difference between gold & tulips?

Buying gold is nothing other than speculating on a peice of metal dug out of the ground.
Now that it relaitve high in value, so many come out of the shadows yelling "buy gold! I did bought it!".
And for what reason? It was used as cureency thousands of years ago.
Actually afaik silver was used as currency more than gold.
As for keeeping value, more hogwash.
I also noticed that some guy is buying ads in YIP touting gold trading courses with some more "theoretical" fantasies.

So now let me give some real life examples:
House in Camp'town bought in 1973 that was fire damaged for $1000, + $4000 repairs = $5000 tot. Land = 680msq
Cashflow positive after 3 mths, rented at $25 wk! (26% yld!!)
1989 rent = 80wk 1999 rent = 160 wk.
Current value, in a dead market 220-240k.
Improvements to date= nil!

-House in Liverpool, close to CBD bought in 1974 for 16,000
CF+ from day one, current value 320-350k

-Parcel of land bought in 1973 90k, sold late 90s >900k

-House in Liverpool near cbd bought 1984 $42k current value 340-360k unimproved.

-Commercial land bought in late 70's 300k, sold for $8 mil 2003.

-Comm RE bought in 1989 for 2.5mil and CF+, sold in 04 $4.5mil

Nobody "investing" in gold for the last 40-50yrs has achieved those returns.
So with all due respect all those theories of gold & silver imo are not worth all the Purex I've used today.

As for Mr Zheng, ask him how much he made (nett equity) buying and selling gold the last 30yrs. You can even ask him (and all the others) ho much he made buying & selling RE the last 30+yrs.
And of course how much has your gold actually cost to keep so far?
I may been an RE bear recently, but I aint no gold pig.
 
Interesting replies.

What worries me about gold is that its value is so much based on people's beliefs. It may be good to hold during a crisis, but fundamentally there is no desperate need for gold. At least there is a need for shelter/ property.

In the late 1970's, I have heard that it was the Japaneses piling into gold, pushing up its price. Now it seems the Chinese govt is encouraging people to buy gold. This may well push up its price, but only for as long as people believe it will keep going up. When sentiment turns, it could go down just as quickly. What is the downside risk? It seems so hard to quantify, especially after increasing by 3 times in the last 8 years.

While people have been saying that gold has been a store of wealth for thousands of years, it seems that, in the last few hundred years, land an property has become a store of wealth, possibly a much larger one than gold.

Could property replace, or has property replaced, gold as a store of wealth?
 
i'm also wondering, how many gold can you buy, and seriously where do you store them? i was contemplating on this too 3 years ago i think, when gold was about $800++ after listening to robert K. but becos of the question above, i gave up and just speculating it for awhile... now, i'm over it. So, if you can provide a good suggestion of where to store all these gold... that would be great! i'm not sure if we can get "rich" by holding the few gold jewelery as suggested by mum when i was age 7. So ??

well, property is definitely another place to store the money, but then again, Aust's property is well over price don't u all think? i hear people keep saying migration and population increase so there are limited houses, but frankly, i've been looking around Aust and i can see ALOT OF EMPTY land... and alot alot alot of land release over these few years...So now i'm also confused.

it will be good to hear what you all think about that as i'm very open to all suggestions
 
property has been referred to as "overpriced" for decades.
Value keeps going up though.

Why fight it when you can benefit from it?
 
Has there ever been a time when property was considered a bargain? I'm not talking about looking back 10 years later, but at the time.

You hear all the time that 'property was cheaper back then', but did people really think that at the time? I know that 10 years ago, when I started buying IPs, I don't remember hearing or reading that property was considered particularly cheap. Obviously, looking back, prices seem ridiculous and I should have bought more. But that's only in retrospect.
Alex
 
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