The standard policy of people all over the world who mistrust their currency has been to buy and hold gold.
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Here are some historical data from Intelligent Investor by Benjamin Graham:
The price of gold in the open market rose from $35 per ounce over 35 years to $48 in early 1972 - a rise of only 35%. But during all this time, the holder of gold received no income return on his capital, and instead incurred some annual expense from storage. Obviously, between 1937 - 1972, money earning interest in a saving bank, in spite of the rise in the general price level, was better than investing in gold.
It was obvious that during that period, the near-complete failure of gold to protect against a loss in the purchasing power of the dollar must cast doubt on the ability of the ordinary investor to protect himself against inflation by putting his money in either gold or "other things."
Very few readers will find the swimming safe and easy investing in gold.
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There were others who pointed out that there were years when gold showed robust ability to outpace inflation. A tiny allocation to this metal (say, 2% of your total assets) is too small to hurt your overall returns when gold does poorly. But when gold does well, its return are often so spectacular - sometimes exceeding 100%.
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3 comments:
Today the value of the Gold held is the US is worth $210,585,164,529.42 at today's prices. The rest of the world's holdings are $561,554,397,491.24
http://nomedals.blogspot.com
This article is very misleading.
You state that gold went up from $35
'...over 35 years to $48 in early 1972'.
Why did you pick 1972? In 1968 it was still $35, a net gain of 0%! You know why it was still $35 per ounce? Because America was on the gold standard! The price of gold did not fluctuate against the dollar!
So technically you are correct. Between 1937 and 1972 gold was a horrible investment. But things could not be more different now, and you are wrong in your premise.
Dear Edzillion,
My post is to challenge those who wish to invest in gold to have a better understanding of this investment. It is neither easy nor straightforward for the majority who invest into this alternative asset class.
Above all, the people who wish to buy gold should be able to tell the difference between their investing and their speculating.
It is alright to speculate or "invest" in gold. However, do make sure it is with a sum of money set aside for this purpose that is separate from the money used for serious investments.
BB
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