It's not gold appreciating it's the fiat dollar depreciating which means it takes more dollars to buy the same amount of goods, services.An asset can deliver a return via a combination of:
So then why has gold outperformed stocks during your period mentioned? Does an asset need interest or earnings to be worthwhile of holding?
Why hold gold at all? Is it a diversifying asset away from stocks, bonds and cash? Is some value added to rebalancing into asset classes that you’ve chosen to hold that have underperformed others you have?
--Internal returns
--Speculative returns / price appreciation
With gold, all of the return is from price appreciation as it has no internal returns.
I, personally, wouldn't want to have 25% of my portfolio dedicated to an asset where all of the investment return comes only from price appreciation.
However, in the context portfolio construction, small amounts of gold have in the past been useful because of gold's erratic low correlation with stocks, and has, in certain time periods, increased risk-adjusted returns of a stock/bond portfolio.
In the argument of money vs (currency and credit) we have the expansion of debt.
If you looked at M1 currency supply and you asked yourself how many dollars would be needed to back the M1 with just 20% gold backing. Jim Rickards said it was calculated to be around $23,000 per oz.
They can expand debt by lowering interest rates and the mechanism is working to devalue your currency even faster.
Gold is an important component of a diversified portfolio.
Statistics: Posted by naturewalker420 — Sat Nov 16, 2024 6:34 am — Replies 88 — Views 6736