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Thank you for your excellent posts in this thread.
Many people view all investable asset classes as individual opportunities for portfolio growth rather than view total portfolios as the result of all asset classes' interactions. Some assets are in a portfolio not necessarily for their growth potential, but for their ability to mitigate risk in other asset classes.
I also have utilized GLD in my portfolio for a very long time. It doesn't always work the way I expected, but over my investing horizon, it has added to my return.
Exactly …things are very different when used in a portfolio and each part can bring something to the table .
I think of cookies
When most investors look at assets like gold , they see the asset classes in isolation.
They fail to see how the different asset classes work together in the portfolio.
Each asset classes in a really diversified portfolio have such extreme strengths and weaknesses, it would be crazy to hold any of them on their own.
I wonder what these investors think when faced with a cookie recipe of:
Flour
Butter
Sugar
Chocolate Chips
Baking Soda
Salt
“Ugh! Flour? That’s disgusting. Flour tastes horrible. Why would I want a cookie with flour? Just give me some chocolate chips. Everything else in there is gross!”
Everyone knows that cookies are delicious, and the investor that looks at the ingredients in isolation is missing out.
The cookies tastes delicious as a whole but individually who would want to eat any of those ingredients
Gold does not pay me interest income to live on,utility companies do.
Gold is good when there is political turmoil,when the local currency collapses,like during the Kuwait invasion,Kuwaitian who fled to neighboring countries found their Kuwait dinar not accepted,their credit card no good but gold is welcome.
Same can be said of Ukrainians fleeing Ukraine,East german when it united with West Germany,white Russians leaving Russia and come to Paris,London/
Vietnamese boat people carry gold ,they were robbed by pirates in the sea,if they survive and arrive here,they sell their gold to buy food.
You know what is worthless -Diamond.
Even toilet paper is worth more in time of crisis or a bag of flour,sugar,tobacco
By the way,why are central banks keep buying gold these days,do they know something we dont know???????
Gold is a hedge against the dollar ..it is what it does best .
Watch gold soar if inflation weakens the dollar .
Gold has a 5000 year history of value
It needs no electricity and it can be transportable and divisible .
Gold has loads of industrial , electrical and jewelry uses .
Gold needs not to pay out a penny any more then a piece of lumber does yet it’s desired around the world as a desirable asset .
Plus gold’s volatility lends itself well to functioning in a portfolio so it can buy other assets when they fall as gold usually zigs when other assets zag.
Which is why you would have to really cherry pick a time frame to find a time frame where equities and bonds beat equities and gold .
Think about that , as bonds pay interest and gold does not .
Yet gold did a better job sharing the work with equities then bonds did
Since the market high a year or so ago i am down about 8% but gold seems to be going higher right now to help that pain some. I guessing for real protection in a portfolio one needs more than 10% in gold to have a bigger impact as i have about 7%.
Unfortunately in recent times (past ~25 years), whenever there's a recession, turmoil, loss of confidence etc., Planet Earth comes running to Momma Dollar. Even when a crisis starts right here in the US (subprime crisis, 2007), the dollar rises. Indeed, a falling dollar is a surrogate for "everything is going to be OK, after all".
A great financial transformation that I hope to witness in my lifetime - but probably won't - is the dethroning of King Dollar. When that happens - if that happens! - gold would presumably be the safe-harbor and the bridge from the current world, to the future one.
As for the tumultuous year of 2022, gold ended the year, about where it began it. We should hasten to admit, that gold did much better than bonds - and so, to your point, Mathjak, gold DID serve as a better hedge or antidote vs. stocks, than did bonds. Still, one would have thought that during inflationary times, gold should have risen substantially. It did not. Why not?
Last 90 days gold up 15% , long term treasuries up 12% , total market fund up 6% …..
So it’s the contrarian assets taking the lead now
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