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Why gold is making a comeback

36 Comments
By STEVE ROTHWELL

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Gold is a dumb investment. Doesn't earn dividends, must always be stored in a highly secure (and expensive) environment and has no real role in the financial system. Just a piece of metal for jewelry and limited industrial uses, whose price is driven by paranoid speculators.

Gold by itself is nearly useless. At the end of day, it must be converted into fiat money if you actually want to purchase anything.

-8 ( +3 / -11 )

Gold is a dumb investment.

You should tell the people who bought gold at about $250 oz in 1999 how dumb it was.

Doesn't earn dividends, must always be stored in a highly secure AND it must be converted into fiat money if you actually want to purchase anything.

These are about the only correct parts of your post.

9 ( +12 / -3 )

" Gold plunged by $140 an ounce, or nine percent, on April 15 as investors unloaded their holdings. That was the biggest one-day decline in more than 30 years."

All of which were in ETFs, paper gold, not physical gold.

JeffLee, a man bought 40oz in '99(bars) with his bonus as an investment for the long term. $10,000 then would get him a good deal more now. About 600%. If that's dumb...

8 ( +8 / -0 )

This is an article for the promotion of fiat (paper) gold and that is fine, but physical gold is what the people of China and India are buying.

With India they were heavily limiting gold bullion buying (coins/bars) so much that people moved to physical silver. -I am unsure of their position on this now. http://www.reuters.com/article/2013/08/19/india-gold-imports-idUSL4N0GH1G820130819

Physical gold can be leased (monetized) out etc (most bank gold is). Many countries you can buy directly with gold and is the preferred method of payment (dinar etc). The people of Turkey mostly use gold (a physical gold economy). Gold = real money

7 ( +7 / -0 )

Well, this "dumb" and non-dividend paying investment has been used for THOUSANDS of years by cultures around the world for money, or the base of any paper money.

Just because a handful of central bankers have hijacked the system in the last hundred years or so doesn't erase THOUSANDS of years of history.

Speaking of history, NO fiat currency has EVER been successful in the long term.

Gold has.

Besides, gold isn't an investment. It's a store of value. If all governments collapsed today, and we lived in the dark ages for 1000 years, and then new governments rose up, guess where people would put their money when things got rough?

Gold, that's where.

And "paper" gold is only good if less than 10% of people ever take delivery of actual gold, since the amount of gold DOES NOT EQUAL the amount "traded" via ETF's and what not.

It's also important to note that the wealth of the world literally EXPLODED when most countries (with advanced economies, Europe, U.S, Japan) used currencies backed by gold, and not banking shenanigans.

4 ( +4 / -0 )

It's really irresponsible to advise people to invest in ETFs, i.e. paper gold, when the most important thing to know about precious metals at the moment is that the price has been artificially suppressed for ages by such entities as J.P. Morgan's selling into the market gold and silver that they don't have. The ratio of paper to physical metal is enormous, and if the time comes when someone wants to redeem his paper gold/silver for physical, he will probably find nothing available, and will be lucky even to get some portion of its value when purchased, in the fiat currency whose disappearing value will probably be the reason he wants the physical. . Note that when Germany recently asked for the return of its gold that has been in the hands of the Fed, it was unable to get it, as it has all been sold or leased out. Only physical metal is a good investment, and when the scam of the paper metals is fully exposed, the price will skyrocket.

3 ( +3 / -0 )

Conflict makes gold and bitcoin rise in value

1 ( +1 / -0 )

Precious metals are always good to have but not on paper, get the real stuff. It's also good to know that gold has never hit zero in value unlike currency (hyper inflation).

3 ( +4 / -1 )

The physical price of gold/silver has not changed at all.The worthless bits of speculative paper that make up ETFs has, and that has lost an immense amount of money for some people.

A fair part of my savings are in precious metal coins and for the most part the trend is up.

Coins have a numismatic value and a bullion value-the yen is in free fall but most of my wealth is being protected.

0 ( +1 / -1 )

Thing a lot of folks don't realize is that if the economy really gets bad & all this BS finance crap that's been building mountains of artificial wealth ever comes tumbling down, well then those with paper gold will have nothing, those with gold in hand will find out it doesn't taste very good

0 ( +2 / -2 )

Conflict makes gold and bitcoin rise in value

-People that cannot get real currency are going BitCoin (Argentina has strict restrictions on phyz gold etc). Plus BitCoin can be used around the world easily, is an appreciating currency etc.

You can get a Kitco "Pool Account" and buy fiat/paper gold (speculate) and pay out in phyz + premium from spot + appreciation taxes.

Singapore (+HK) wants and is becoming the center for gold for Asia and the World. =Massive trend up.

http://www.bloomberg.com/news/2013-07-31/anz-opens-50-ton-gold-vault-in-singapore-on-increasing-demand.html

0 ( +1 / -1 )

"Coins have a numismatic value and a bullion value-the yen is in free fall but most of my wealth is being protected."

"Numistic" -that pertaining to coins, paper money. Which means the value of your coins has the value of existing as coins and being metal. OK, alright...um, yeah.

"the yen is in free fall"

100 yen to the dollar over several months is "free fall"? Wow, I'm really enjoying this rationale.

"my wealth is being protected"

By what? Gold plays no productive role in the economy, apart from making a few shiny things. You realize that once gold is mined, it never goes away? It keeps on becoming more common. That represents a massive downside risk, as the threat of glut is always looming. In this regard, gold is the opposite of property or anything else with real utility.

"Precious metals are always good to have."

Please read the last paragraph of this article. I'm old enough to know plenty of people who have lost their shirts over gold, silver, and other lumps of useless metal whose value is driven upward by speculators who preach Armageddon that never materializes.

-1 ( +1 / -2 )

Japanese sovereign debt approaching to 250% and an emerging market heading to a turbulence, I would invest in gold if Japanese sales tax hike does not get a "Green Light" to go by Abe.

globalwatcherAug. 24, 2013 - 04:34AM JST

dated 8/23/13

Time to consider gold.

Lagarde calls for more crisis ‘lines of defence’

The world needs to build “further lines of defence” against a possible emerging markets crisis but the International Monetary Fund stands ready to provide financial support if needed, its managing director Christine Lagarde declared on Friday

Posted in: Shares close 2.21% higher

-1 ( +0 / -1 )

I own half a kilo of gold and five kilos of silver. With the threat of stagflation and hyperinflation in America and Europe, precious metals are the only sane place to be.

1 ( +2 / -1 )

I need to add this to my previous comment for more clarification. I have been a coin collectors over 40 years and am a member of US Numismatic Society. I used to buy/sell a cigar box of silver coins for my hobby, but it is getting too expensive to do that. It is a good investment. I would not invest on paper gold.

-1 ( +0 / -1 )

By what? Gold plays no productive role in the economy, apart from making a few shiny things. You realize that once gold is mined, it never goes away? It keeps on becoming more common. That represents a massive downside risk, as the threat of glut is always looming. In this regard, gold is the opposite of property or anything else with real utility.

Gold is actually real money, fiat notes are typically structured as "debt." That is a huge difference = physical gold is a true asset where fiat money is not. Many of these fiat debt notes have no backing (assets, phyz gold, silver etc). Even worse is the digital money (SDRs (special drawing rights) etc). If these "digital monies" fail you have nothing = instantly wiped out financially. Big banks hold physical gold = that is the real money.

https://www.silverinstitute.org/site/supply-demand/ (silver is specifically tight)

-1 ( +0 / -1 )

in times of crisis, the value of gold skyrockets as investors look for places to store their wealth.. i.e Syria, the Libya situation 2 years ago..

What Jeff is saying does make sense.. if you want to own gold, their are associated costs with doing so - storage, insurance, etc. But to hold it as the only investment in your portfolio... you're likely missing out on other gains and something that actually pays you money on a quarterly basis

as always, hindsight is 20/20 - ask someone from 1999 where they thought gold would be in 2011-2013... maybe they'd have said $500?... certainly not close to $2000 back in August 2011... probably the same for people who owned AAPL at $7 back in 2001

if anyone is interested, here is an article discussing the differences in paper/physical gold markets: http://www.zerohedge.com/news/2013-04-23/guest-post-physical-gold-vs-paper-gold-ultimate-disconnect

1 ( +1 / -0 )

By what? Gold plays no productive role in the economy, apart from making a few shiny things. You realize that once gold is mined, it never goes away? It keeps on becoming more common. That represents a massive downside risk, as the threat of glut is always looming. In this regard, gold is the opposite of property or anything else with real utility.

You make it sound as if Gold is unlimited under the earth. The rate at which Gold is mined and enters the market is at a stable rate. The Gold retains its valuable in the market as i continually recirculates.

Gold is a dumb investment. Doesn't earn dividends, must always be stored in a highly secure (and expensive) environment and has no real role in the financial system. Just a piece of metal for jewelry and limited industrial uses, whose price is driven by paranoid speculators.

Gold is not an investment, it's a store of wealth preservation..

0 ( +1 / -1 )

@jefflee

Gold is money.Silver is money. I can use either to purchase goods and services in many countries. In others I have to convert to the currency of that country but still I can do so.

There are many uses of gold and silver.

Electronic devices use gold,your pc and cellphone do so.

When I pay more for my gasoline at the pump I see that my yen has lost value but I know that the bulk of my savings are in gold which rides in tandem with higher oil prices.

The upcoming war in Syria will cause a spike in gold and I will then sell some gold to buy food.

Do you see how it works JL?

However,I fail to see what your points are?

-2 ( +0 / -2 )

Because gold tends to go up when stocks go down, it can be useful to have a small portion of your investments in gold, together with stocks, bonds, real estate, cash to make a diversified portfolio, if you are interested in wealth creation.

If you put your money in gold because you fear an apocalypse then that's a poor decision. Sorry but the world is not going to collapse. Even if there were an apocalypse, you'd have to invest in a lot of security to protect your gold from the hoards when they find out you have it.

Any investment should be looked at from a long term point of view. Your wealth will later be passed on to your descendants etc. don't be dazzled by gold's "recent" gains. Overall it lags far behind US stocks.

"Because of inflation, a dollar acquired in 1802 would have been worth just 5.2 cents at the end of 2011. A dollar put into Treasury bills at the same time would have grown to US$282, or to US$1,632 had it gone into long-term bonds. Held in gold, it would have grown to US$4.50.

True, that's a gain even with inflation taken into account. But the same dollar put into a basket of stocks reflecting the broad market would have grown to an astounding US$706,199.

As an investment, gold has some flaws. Anyone who owns it in significant quantity would be wise to ante up for secure storage, which creates a cost that drags on the return, says Siegel. And, unlike bank savings, bonds or dividend-paying stocks, gold does not provide income. "It's a very volatile asset with no yield," according to Allen.

Nor does gold provide rights to share in corporate profits - a perk enjoyed by any stockholder. Investors who want safety can use government bonds, knowing the government can use its taxing power to make good on its commitments to bond owners. No one stands behind the price of gold.

In a period of hyperinflation, when currency becomes virtually worthless, or a time of great distrust in the economy or banking system, gold may indeed become a safe haven, Siegel notes. "There isn't anything that's clearly better if you're concerned about those sorts of events."

But he adds that people who turn to gold tend to be "overly concerned" about catastrophe. Putting a large portion of one's wealth into gold would therefore mean sitting on the sidelines waiting for an unlikely event while other assets, such as stocks, produced better long-term returns. "

0 ( +0 / -0 )

Sue jones - nice information thank you. Can I ask one question though. What happens if America cannot service it's debt and as now the dollar falls to nothing? Stocks in the companies will fall also? No? Gambling isn't it. America has had a good run so far....? Gold is not as high a return but safer? Just a question, sorry for my ignorance....

0 ( +0 / -0 )

0 ( +0 / -0 )

And simply put gold is making a comeback because of the enormous debt that Japan and USA governments have accumulated. If they are unable to make repayments then gold will skyrocket

0 ( +0 / -0 )

"What happens if America cannot service it's debt and as now the dollar falls to nothing?"

How can America NOT service its debt, when its debt is denominated in dollars and the US gov't has a monopoly to issue those dollars?

"Gold is money.Silver is money. I can use either to purchase goods and services in many countries."

Thanks for the very useful info. Next time I want to buy a new Corolla, I'll chip some bits off my gold rock and take them to the Toyota dealership for payment. Next time I check in at the Hyatt in Singapore, I'll fling a couple of silver nuggets at the staff instead of my credit card. LOL.

-1 ( +1 / -2 )

Too much reading for me.

1 ( +1 / -0 )

Sue Jones,

Your wealth will later be passed on to your descendants etc.

This is not so true for residents of Japan, unfortunately.

-1 ( +0 / -1 )

" I'm old enough to know plenty of people who have lost their shirts over gold, silver, and other lumps of useless metal whose value is driven upward by speculators…"

Must be referring to W.Buffet who stuffed himself up by treating gold like stocks. Serves him right. Ask Jim Rogers about gold, Jeff.

FYI, there's a relatively new gold product on the market called "Combibars" which are also fungible, available in gold, silver, platinum, and (I think) palladium.

I convert a percentage of my income into PM as a store of wealth, long-term, and use the funny-money while it lasts.

Gold and Silver are real money. A gallon of gasoline still costs a quarter, in pre-1965 US quarters, and there ARE gas stations that accept such payment.

1 ( +1 / -0 )

"Must be referring to W.Buffet"

Actually, I'm from Canada, one of the world's great gold producers, and there was a gold investment frenzy there in the 80s and 90s. A few winners but lots and lots of losers, including teachers' pension funds, day traders and the like, who saw their dollars turn into pennies.

Gold mining shares were also all the rage, like Placer Dome and Bre-X, the latter perpetrating one of the biggest scams of all time.

That's why I chuckle when people think that owning or investing in this largely non-productive metal makes them feel "protected."

-1 ( +0 / -1 )

Investing in shares Is a different matter from investing in physical gold. It is not the supply of gold that changes rather it is the supply of money and that is why we see gold at a healthy level.

For all the doubters out there please answer the question why it is central banks all over the world buy gold?

India and China have a special place for the yellow metal and we all know to whom the 21at century belongs don't we?

-1 ( +1 / -2 )

Gold is back because people are waking up to reality. Quick rule of thumb: If you can't put in your hand, you don't own it.

0 ( +0 / -0 )

Gold mining shares were also all the rage, like Placer Dome and Bre-X, the latter perpetrating one of the biggest scams of all time.

Mining stocks are a tough call right now since many of these operations are almost break-even with cost. =Better off just buying the physical. Will we see consolidation of these mines with this huge ETF (paper gold/silver sell-off). This industry on a whole is on a teetering edge right now -but as a trend people are buying phyz assets and getting out of paper.

China Silver:

In the same year, 1933, while most of the Western countries (especially Britain and USA) had left the gold standard because of the Great Depression, it was said that China almost avoided the depression entirely, mainly due to having stuck to the silver standard.

0 ( +0 / -0 )

at the end of the day gold is as worthless as money, if there was a worldwide market crash and money was worthless, people would go back to the old ways of trading, what do you have to trade for this bread? its the countries who produce large amounts of food to sustain there populations who have the real power, eg Russia Australia NZ, USA few European countries. another interesting fact is gold is only rare on the surface of the earth, if you were able to extract all the gold from the center of the earth it would cover the whole world knee deep! doest sound so rare now does it.

0 ( +1 / -1 )

Mining strikes in S Africa War in Syria

Gold goes over 5000 yen an ounce and I'll be looking at a 20% gain It will fund my next holiday in SE Asia.....,

-2 ( +0 / -2 )

Correction 5000 a gram....

-1 ( +0 / -1 )

another interesting fact is gold is only rare on the surface of the earth, if you were able to extract all the gold from the center of the earth it would cover the whole world knee deep! doest sound so rare now does it.

That may be true, but what are the costs. =How much is your Leprechaun gold stash gonna cost me? How much does extracting gold from the moon cost? I am talking physical gold here and not paper/fiat/ETF gold.

0 ( +1 / -1 )

Just list a few highlights from the second quarter of 2013: ・53% more bullion was purchased worldwide this quarter than in 2012 year-over-year (YoY). ・Demand for gold jewelry worldwide grew 37% YoY. ・ Global coin and bar demand hit a quarterly record of more than 500 metric tons. ・ For the 10th consecutive quarter, global central banks increased their net gold reserves.

But, gold is dumb, right?

2 ( +2 / -0 )

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