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Gold: a lose/lose?
Posted: 29 November 2012 10:18:38(UTC)

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I'm getting increasingly nervous about keeping a singnificant amount of my portfolio in gold (an Etfs priced in GBP). Am I being overly pessimistic about the virtues of gold, does anyone else believe 2013/14 will see it hit $5,000?

I invested (in PHGP) as a hedge against inflation, but the more I look at it, the more I think that's a bad idea. It seems the gold price is only a hedge against inflation in the US because the commodity is priced in USD.

If the dollar strengthens, gold goes down. If GBP weakens or the Euro looks more vulnerable, the dollar strengthens and gold goes down. If the stock markets rally, gold drops.

Therefore holding gold is more of a punt on the future recovery and success of the Euro or decline of the dollar than any hedge against the effects of QE by the Bank of England.

I can't help thinking the Euro is doomed - or at least destined for more devaluation. Is now the time to dump gold and back the dollar to rise?
Steve L.
Posted: 29 November 2012 18:52:42(UTC)

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Fine as part of a balanced portfolio, hold about 6% in ETFS and Blackrock equity fund as a useful hedge against downside risk (Iran, Banks, Sovereign debt) and as a diversifier - largely uncorrelated to other asset classes. Inflation protection would be a bonus.
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Buyhighselllow on 29/11/2012(UTC), Pois fisher on 30/11/2012(UTC)
Eddie B
Posted: 29 November 2012 19:43:00(UTC)

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If the US defaults and goes over the' cliff ', surely the dollar will no longer be seen as a safe haven? If this occurs than gold will rally hard as the dollar depreciates and people panic? If a timely deal is done and the debt extends with minimal imposed measures - then markets will rally along with gold and most other asset classes?

Win win for gold in the short term, unless Europe collapses and we enter another period of sustained deflation ?

Let me know what you think?
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Buyhighselllow on 29/11/2012(UTC)
Posted: 29 November 2012 23:13:01(UTC)

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Thanks for the advice. Maybe yesterday's "flash crash" spooked me!

My rationale is based on the belief there is no way America will go over this fiscal cliff. It's brinkmanship. Republicans and democrats have too much to lose.

So, once America's Armageddon is averted the major basket case, with no solution in sight, is the Euro. The two scenarios are break up or QE. Either way USD gains and gold falls.

I also fear a few big gold players have been driving the relentless positive news about gold. They've managed a spectacular PR offensive.

Anyway, I'm sticking with gold for the foreseeable... So that will surely condemn gold to plummet like a stone. Time will tell.
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banjofred on 01/12/2012(UTC)
Posted: 30 November 2012 16:28:55(UTC)

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It would be worth your while reading a very thoughtful article from Grant Williams available at

You may have to register (well worthwhile anyway) and find it
John Roycroft
Posted: 30 November 2012 16:37:14(UTC)

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I started buying gold in November 2009 - mainly bullion with Bullionvault. Very healthy profits so far. I had 35% of my portfolio in gold but have reduced it to 25% to allow for some diversification.
For various reasons I think gold will continue to rise.
Although my overweight position is very risky my main concern is that I should have stuck at 35%.
Hang on in there - you will be handsomely rewarded!
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banjofred on 15/12/2012(UTC)
david rogers
Posted: 30 November 2012 16:46:58(UTC)

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I dont think you should be considering gold as something you bounce in and out of . It is essentially a hedge against Armageddon and should feature as a more or less permanent hold or not at all. I doubt if you will see $5000 in the very near future but all the studies I have seen suggest a medium term floor around $1600 and a reasonable likelyhood of up to about $2300 in the next 18 months.
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banjofred on 15/12/2012(UTC)
Posted: 01 December 2012 17:42:14(UTC)

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Apparently the mining cost of gold is now above $1400, so it would be hard to go less as they would stop mining for it.

The USA is steeped deeply in debt, as are many others and the ony way out is todevalue currences, rob the savers and pensioners, and clear the debt. Its
easy they have done it many times.

I would recommend downloading the app from, and reading the daily blog of the Arkansas gold peddler, Franklin Sanders, The Moneychanger.

I read him every morning! He prefers the yellow metal to paper promises form bent politicians. So do I.

Gold dropped 15% in September, but is on the move again.

Its no good having 6% in as a "balanced" portfolio. That will be no help when it all goes to hell again and the market drops 40%. (around February perhaps?).

Hey I am by no means expert, but have gradually reduced funds and shares and sit on cash and funds heavy in gold. (not Smith and Williamson gold fgs its terrible).

or maybe you think things will get gradually better and the ftse will be going about 7000 ?
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mick howson on 02/12/2012(UTC)
Steve L.
Posted: 02 December 2012 09:11:16(UTC)

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By "Balanced" I mean trying not to rely on a single bet or asset class, there are other defensive assets you can hold, index linked gilts or bonds, hedge funds etc. even traditional gilts or bonds.
mick howson
Posted: 02 December 2012 12:34:26(UTC)

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hi banjo fred. what funds would you suggest that are heavy in gold? thanks
Posted: 02 December 2012 14:24:29(UTC)

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The best gold funds (if a spread is what you are seeking) are the Royalty based companies such as Royal Gold, Franco Nevada and Sandstorm Gold (also Silver Wheaton for silver). The problem with funds are the fees, often hidden in the bid/offer spreads.
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Damazia Ajayi on 02/12/2012(UTC), dlp6666 on 03/12/2012(UTC)
Posted: 03 December 2012 09:50:07(UTC)

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I have just increased my exposure to gold.... now about 5% of total investable assets...purely as a result of reading some convincing Armageddon articles.
Now mixture of unit trusts ( Blackrock and Investec), EFTs , gold mining shares and sovereigns under the bed.
Karl Smith
Posted: 03 December 2012 10:19:49(UTC)

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Holding high percentages of any asset class is a risk. This because at the end of the day it is a binary bet. Either the asset will rise or fall. However, risk isn't something necessary to be wary of, just aware of as without some risk there is very little benefit.
The issue with the dollar is that the US has a heap of debt (much in hock to the Chinese through a large holding of treasury bonds) and the route they seem to be looking to reduce this is QE(x).
This inflationary pressure (that devalues the dollar) will be around for a while. Mind you the UK is following a similar route (whilst being associiated with the fortunes of the Euro) and is likely to fall relatively to thhe dollar.
Prehaps the issue isn't the holding of gold but the holding of it denominated in GBP. Is this not simply exposure to currency risk?
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Buyhighselllow on 03/12/2012(UTC), Clive B on 20/12/2012(UTC)
Posted: 15 December 2012 08:19:09(UTC)

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Mick, sorry about the delay i have not bee on for a while.

Well obviously gold funds are heavy on gold, I don't know why I ever went for Smith and williamson, with its divi 5 months after xd, its veyr high charges, and its ability to losemoney even when the gold market was rising. I sold out of this and blackrock etc long ago (made good profit son Blackrock).

I am in mainly defensive funds right now as i see Armageddon coming (again). Now if I am wrong i have only lose the opportunity to make more interest, but if I am right i can re-invest after the dust settles.

Of course all of these defensive funds defend by holding some gold, so when the gold market dips they drop a little bit.but overall i feel safer with these guys that then ftse

i am in troy trojan which has made a steady increase for 5 years. it is expensive and low divi, and penalties in and out, but there you go. big chunk in there, he sits on london gold, swiss gold coupla gold mines. He has been The Man for me so far, but, yes, i am looking for 2013 ideas

I am in Newton Real Return where the fund price has gone nowhere for a while but pays out very nice divids every 6 months, he has some gold as well

I am in Willima littlewoods artemis strategic, as i like his approach. wish he coul dmkae me some money a bit faster, but he may be standing months the ashes when the next crash comes. He is in gold, and has also done ok being in platinum

Every morning without fail weekdays i read the moneychanger franklin saunders on the goldprice aPP on the phone. He gives a down home view of the gold price.and murmurs about govt manipulations of dollar, metals etc. Worth a look

look its common sense - gold is real

the rest is toilet paper (as proved by that premier league footballer this week, who used £50 notes)

I promise to pay the bearer on demand but hang on while i print a shedload more of this crap paper.

if you held sovereigns not only are they free of capital gains, when the gov tprints more pounds the sovereigns wont fall in value.

Gold at $5000 dont think so, but surely $1500+ and currently adjusting at a disappointing $1696 after being $1700-$1730 for a while.
Posted: 20 December 2012 15:45:54(UTC)

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So I seem to have been prescient in my gold price doom mongering - at least in the short term.

I just cannot understand why there is such a strong selling pressure. Gold seems to fall on positive news about talks to resolve the 'fiscal cliff' and falls on negative news.

Can anyone pinpoint the key drivers for this? What am I missing??

From my perspective the world economy looks in as greater peril as it ever has. And reading the below link, I'm in esteemed company. Why isn't gold holding up?


Do I hold my nerve or cut my losses and sell?
Clive B
Posted: 21 December 2012 14:32:17(UTC)

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I know Barclays do an annual Equity Gilt study.

Does anybody know of a study that compares regular (e.g. monthly) investment in Gold vs Equities ?
J Thomas
Posted: 21 December 2012 15:25:38(UTC)

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As someone who has bought and sold gold sovereigns as a hobby and investment for the last thirty years I know the time to buy is when the major jewellery manufacturers order large amounts of gold to stockpile at spot price.
They never seem to get it wrong.
Tim Garrett
Posted: 24 December 2012 07:13:06(UTC)

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J Thomas;17276 wrote:
As someone who has bought and sold gold sovereigns as a hobby and investment for the last thirty years I know the time to buy is when the major jewellery manufacturers order large amounts of gold to stockpile at spot price.
They never seem to get it wrong.

Interesting point JT. Have the jewellers bought recently, or do you foresee an investment coming soon?
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Guest on 25/12/2012(UTC)
J Thomas
Posted: 30 December 2012 18:46:02(UTC)

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Back from holiday and noticed this post, regarding any manufacturers who may be buying or dealing I'm afraid customer confidentiality and/or insider trading laws would preclude me from making that information available or acting on it.
From a personal perspective I believe the gold price will fall further over the next six months before rising towards $2000-£2200 by 2014.
The gentle decline in real terms over the last year is a result of over buying in the period 2008 to 2011. That said gold will not fall below the cost of extraction which for 2013 will be about $1400 per ounce.
Nobody is going to get rich with gold at todays prices, it is merely an asset for storing wealth due to it's scarcity value, most of the gold on Earth is stored molten in the planet core and is impossible to access.
Gold will always have value as a physical metal, I dont believe in trading in gold shares as they always seem to lose money, rather as a hobby collecting gold Sovereigns and Guineas.
While I am a great believer in holding blue chip shares directly for the dividend income, they are essentially held in trust on a computer screen, it seems rather etheral to watch your portfolio valuation fall or rise by £1000 every five seconds.
Gold however is not transitory, the golden guinea in your hand was formed over five Billion years ago from a Supernove explosion when metals were produced from exploding stars, moreover that gold will still be in existence in another five billion years when the Earth is consumed by our Sun in its red giant phase.
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