Discussion in 'Shares' started by jason626, 15th Nov, 2009.
with the price of gold on the up is it a good investment vehicle?
Gold is not an income producing investment, nor can it be made into one.
As such, I don't really consider it an "investment" as such - it is a purely spectulative vehicle reliant solely on capital growth from sentiment of the market.
I'm not saying you can't make money from gold - only that there is no guarantee that you will and there is no alternative strategy you can employ in case you don't.
I think with any investment you should have multiple exit strategies - a "plan B" as such in case thing don't go the way you expected.
There can be only one exit strategy for gold - to sell it.
I'm not saying don't invest - just make sure you are perfectly clear as to why you are investing in gold. Do you know the drivers behind why the price is going up? Will you be able to recognise when those drivers are no longer in play? What is your plan to stop yourself losing money?
Gold is currently one of the "trendy" investments - all the "cool kids" are buying gold, it is seen as the sophisticated thing to do and you can then brag to your friends about how many grams you own. This makes for very bad investment decisions in my opinion.
Gold isn't an investment, as much as it is an insurance policy against the debasement of currency by governments and central banks.
Gold makes for a good investment when the fiat money system is poorly managed is likely to have large inflationary pressures going forward.
Through out histroy gold has had a much better track record of preserving monetary value than any fiat currency managed by governments and central banks.
I don't want to sound all dooms dayish, but believing that governments and central banks aren't infalliable is recipe for disaster. As such is always pays to have a little money put aside in the currency that is virtually accepted all around the world (gold).
That said, if you are really insistant on the your "investments" having cash flow, then you can always consider gold mining companies.
I don't think many people would call the Chinese and Indian central banks "cool kids"... but they are definitely "trend setters".
Central banks have a valid reason for holding gold (at least they used to - back when paper money was supposed to be backed by real assets).
I have no problem with people using gold as an insurance policy ... I also have no problems with someone looking to actively trade gold. This (hopefully) shows they have an understanding about how gold works and where its value is.
I do have a problem with people believing that it is an investment strategy in its own right.
This probably one of the best reasons to hold gold. Historically fiat currencies never last (not over the long term).
And even more curiously, if there is no legislative reason for central banks to hold gold then why have the recently started to buy it again? It's obviously still holds value in their eyes.
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