: Value Investing Forum - Singapore, Hong Kong, U.S.

Full Version: Is Gold considered as investment or insurance?
You're currently viewing a stripped down version of our content. View the full version with proper formatting.
Pages: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
This is what Warren Buffet said recently about gold.

“Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce — gold’s price as I write this — its value would be about $9.6 trillion. Call this cube pile A.

Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?

Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. Buyers — whether jewelry and industrial users, frightened individuals, or speculators — must continually absorb this additional supply to merely maintain an equilibrium at present prices.

A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops — and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil (XOM) will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.”

It does not mean owning physical gold is the only way to get exposure to the positive effect of the policy change. I wonder any of the warehouse reits own gold vaults.
With GOLD FEVER still on.. Wat do you think about CNMC GOLDMINE..
This stock just IPO last year in SGX..

Financial statement sucks..
Brought in by a man known for all the con-men S-chips brought in over the last decades...
But lotsa hype ...
(21-02-2012, 05:14 PM)Zelphon Wrote: [ -> ]With GOLD FEVER still on.. Wat do you think about CNMC GOLDMINE..
This stock just IPO last year in SGX..

Financial statement sucks..
Brought in by a man known for all the con-men S-chips brought in over the last decades...
But lotsa hype ...

There will still be people walk-in with their eyes open even with all the facts on the face. At the end of the day, one have to think carefully what Buffet said. Is to avoid losing money.

Investment is all about probability.

(21-02-2012, 03:15 PM)egghead Wrote: [ -> ]This is what Warren Buffet said recently about gold.
Quote:“Today the world’s gold stock is ......
..... You can fondle the cube, but it will not respond.”

Here is the other part of what he said about gold...

Quote:The second major category of investments involves assets that will never produce anything, but that are purchased in the buyer’s hope that someone else – who also knows that the assets will be forever unproductive – will pay more for them in the future. Tulips, of all things, briefly became a favorite of such buyers in the 17th century.

This type of investment requires an expanding pool of buyers, who, in turn, are enticed because they believe the buying pool will expand still further. Owners are not inspired by what the asset itself can produce – it will remain lifeless forever – but rather by the belief that others will desire it even more avidly in the future.

The major asset in this category is gold, currently a huge favorite of investors who fear almost all other assets, especially paper money (of whose value, as noted, they are right to be fearful). Gold, however, has two significant shortcomings, being neither of much use nor procreative. True, gold has some industrial and decorative utility, but the demand for these purposes is both limited and incapable of soaking up new production. Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end.

What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As “bandwagon” investors join any party, they create their own truth – for a while.

Over the past 15 years, both Internet stocks and houses have demonstrated the extraordinary excesses that can be created by combining an initially sensible thesis with well-publicized rising prices. In these bubbles, an army of originally skeptical investors succumbed to the “proof” delivered by the market, and the pool of buyers – for a time – expanded sufficiently to keep the bandwagon rolling. But bubbles blown large enough inevitably pop. And then the old proverb is confirmed once again: “What the wise man does in the beginning, the fool does in the end.” (pg. 18)

I remember (yup, I no spring chicken anymore) in the early 2000s Straits Times published an article on this guy who put his whole net worth of $500,000 into gold at USD 250 and it has doubled to USD 500 when the article was published.

He believes gold will continue to double to USD 1,000!

I think many at that time must have poured cold water like today... Gold just sits there...

But if he had held on till today, he's a multi-millionaire and we are still "debating". LOL!

Who cares if it's and investment or insurance? I wish I had bought this kind of insurance!

Gold has outperformed my equities holdings since the 2000s.

I wonder how many here have outperformed gold?

I know. I know. Not fun being beaten by a cube!

Charts below that a spring chicken would not be able to see...

Comparisons can be made over any period with vastly different results.
40 yrs eg:
1970s: gold ~170 USD/oz; S&P500 ~100
now: gold ~1700 USD/oz; S&P500 ~1400
multiplier 1970s-now: gold ~10X; S&P500 ~14X (excl div)

[Image: gold_all_data_o_usd.png]

[Image: z?s=%5eGSPC&t=my&q=l&l=off&z=l&a=v&p=s&l...&region=US]
I have took some hard view on gold and index charts many times in the past. Because i do fear losing my pants.
However i feel it may not be perfectly fair to compare Gold Chart with S&P Stock Chart.

Gold don't earn interests or give divdents. Is more of inflation hedge and how much interests into using it to protect our "soft" assets.
Neither it has large resource/operation cost as in salary to whole company staffs/workers.
Gold is always Gold but the underlying companies in Index will not.

With rising internet speed, wealth, china and banking services, the interests and investment savvy level are different.
No doubt the Gold Chart do look scary on the peaks, which i once blogged before. But my view changed.

We all have to do the needed calculated risk.

Just 2 cents.
(09-04-2012, 03:23 PM)Behappyalways Wrote: [ -> ](I am bearish of the stock market and I am thinking of Gold for quite a while.....Thinking of UOB Gold Saving Acct. Still thinking...what Warren Buffet said weighs on my mind but recently I was reading a history of Empires....Portugal and Spain in the fifteen and sixteen centuries tried to get as much gold as possible from the Americas in order to sponsor their conflicts in Europe and to trade with other countries esp China since gold and silver were more acceptable than their currencies....Got me thinking again about gold....would anyone want Euro dollar or US dollar a few years down the road....would gold be more preferred......still thinking..........)

Gold does Nothing

I understand your concern about paper money losing value due to the amounts of QE globally. Even if you do not wish to hold cash, you are probably better off putting money into the stock of a company with good fundamentals at a reasonable price, than in gold.

You mentioned your bearish sentiments about the general stock market, but remember that gold is also risky asset. There is no guarantee that you can get out at or above your entry price and no one can predict its movement in the future because it has no fundamentals. If it tanks badly, it may take decades to recover and you may have to experience the pain of loss cutting. Hence, taking a longer term view seems to be in order, and a well-managed company with good competitive advantage bought at a fair price will likely give you an above-average return on investment in the long run and protect the value of your wealth.
(09-04-2012, 04:26 PM)Behappyalways Wrote: [ -> ]If one could lock the share price of a good company then i would take the bite but most probably when the stock market falls, the share price of a good company would also fall.....

I think this is where you have to be disciplined and look for a fair price. You are in essence locking in the intrinsic value of the good company at a fair price. After that, you will have to adopt the value investor mantra of ignoring Mr Market, look at the longer term and believe that the eventually the market will recognise the value of the good company.
Pages: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28