Wednesday, Sep 19, 2007
Time to invest in gold as Bernanke devalues the dollar
MoneyWeek: Bernanke signs the dollar's death warrant - buy gold
Yesterday's half-point cut in US interest rates may have sent stock markets around the world soaring, but it's left sensible investors with only one choice.
Posted by mary @ 11:02 AM (1208 views) Add Comment
16 Comments
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1. also sold to rent said...
2. also sold to rent said...
okay, well dump this into your browser and laugh ;o)
http://bp3.blogger.com/_KrMlmJB9_4U/RvAnxd4g62I/AAAAAAAAARI/kePT1RL28_A/s1600-h/bernanke-helicopter.jpg
3. planning4acrash said...
The thing to watch now is the gap between CPI and both core inflation and RPI. CPI went down last month in US and UK, but core inflation went up in the US and RPI soared in the UK. Core inflation is a better indication of long term inflationary pressures, because it strips out more volatile elements. Great depression for 2012, just about when peak oil hits home? Surely even Gold won't survive a great depression?
4. whiteknight said...
Buy gold, buy oil , buy resource backed currencies
5. cyril said...
How unusual for MoneyWeek to suggest buying gold. I have never heard them say anything else.
6. Renterabroad said...
I've read that the price of gold has shot up to an already relatively high price - so why should the present be such a good time to buy any?
7. alan said...
I think that the challenge in coming weeks will be to ensure that credit is available, but I've said enough on that already.
Moneyweek says that there is too much credit in the system, however I feel more importantly by dropping IRs, that asset purchase has been made less risky. Dropping IR takes risk from the system. Consider valuable coins or a painting. The opportunity cost of buying them is now much lower, compared to interest from bank deposits as the returns from Building Societies and Banks get smaller.
I also said that the 0.5% cut was an opening gambit. Further US cuts probably will happen because the housing market has a glut and it will take more than this current reduction in IR to redress it.
Commodities will be rising in price, soon.
Expect people around the world to continue to look for alternative investments to the dollar.
8. talking rot said...
I love this part of the article: "Faced with the choice of propping up the US dollar or propping up the US consumer, Ben Bernanke was always going to opt for the consumer. The American way of life is non-negotiable, after all. And it’s very hard to explain to people whose houses are being repossessed that keeping interest rates at a reasonable level is actually a good thing in the longer term."
This gives me faith that UK politicians will do the same thing. Forget sound financial management and prudence - Prop up the consumer [and ergo, UK house prices].
Watch out for UK interest rates cuts coming to a UK country near you soon. Very soon.
Always work for the best over the short term because the long term is merely a sequential series of short-terms happening one after another.
We won't get [CPI] inflation in this country because the economy is fundamentally sound and the Government's official figures prove it. The fact that your Pound is able to buy less stuff then it did last year is irrelevant.
Looks like Caesium, Property Landlord and David??? might be laughing at the last afterall. (But there again, they might not be ...)
9. paolo88888 said...
I followed the link in this article to http://www.moneyweek.com/file/23315/a-beginners-guide-to-investing-in-gold.html. Money Week is often lauded on this site but this article contains some glaring errors:
"Gold Exchange Traded Funds (ETFs) ... Stamp duty is applicable ..." - No it isn't! Not on any US shares, and, I believe, not on UK ETFs as announced in the last budget.
"and there is an annual administration fee of between 0.4% and 0.5% per annum. Thus every year the amount of gold or silver backing an ETF share shrinks by that amount. This makes them unattractive as a medium or long term way to invest in gold." - if the return on this investment will not cover a fee of 0.5% then it isn't the great investment that the main article claims.
"Derivatives, such as ETFs, ... One does not directly own the underlying asset and one does not have a right to take possession of the underlying tangible asset." - yes you can - the whole concept of ETFs is based on the idea of creation units which can be created or redeemed.
Does Money Week really deserve the reverence with which it is treated on this site?
10. Property Owning Democracy said...
Rates will keep getting cut. There will be inflation. They will go back up. Etc.
11. harold said...
The FED is just making the final collapse all the more catastrophic. What they have done, IMHO, is buy themselves a little more time so that some important political / military objectives can be carried out regarding oil and Iran. Isn't democracy and the rule of law just great? (No scoffing please.)
Oh, and yes, buy gold.
12. inbreda said...
Paolo - I may be wrong but gold is a way of hedging inflation, not returning a profit - the moneyweek comments make sense to me.
13. paolo88888 said...
inbreda,
If gold does no better than inflation, then it is worse than NS&I IL savings certificates which return IL + 1.35% tax free and no costs. I don't want to hedge against inflation, I want to become stinking rich when gold sky-rockets in the coming financial armageddon! What MoneyWeek, and the very long gold thread on the forum ever seem to tell me is why I can't just buy ETFs, but have to bury bars of gold beneath the geraniums.
14. d'oh said...
paolo - I think what the gold bugs believe is that gold follows real inflation in the long run and not the fiddled measures such as the RPI and CPI.
15. inbreda said...
Absolutely - if you think I'm going to peg my wealth to such an obviously fictional estimate of inflation you are very wrong.
The price of gold supports the notion that CPI is a crock.
16. mybrainhurts said...
Here is an article from Moneyweek on the excellence of ETFs as a vehicle for owning all sorts of stuff, including gold:
http://info.moneyweek.com/article.php?bbcam=adwds&bbkid=ETFS&x=&jtid=2074764&UID=JF+-+Google&p_id=4643. Quote:"Investing in Exchange Traded Funds means you can buy actual commodities such as oil and gold without ever taking delivery of oil, or carrying an ounce of gold." Further quote:" If You're A Longer-Term Investor Or Position Trader: Exchange Traded Funds are a very strong alternative to mutual funds for most long-term investors. With lower fees, tax advantages (little to no capital gains to pay) and no short-holding redemptions penalties, ETFs are increasingly prevalent in more long-term portfolios." Yet in today's article MW mentions the admin fee for ETFs but not the much higher fee for mutual funds. And the bullionvault crowd actually charge an annual storage and insurance charge.
To answer paolo's question: the ETFs aren't physical gold argument is valid (a bit) in the context of a survivalist fantasy where you are sitting on a pile of bars with a pump action shotgun to defend them. But if you let bullionvault keep them in London for you, The argument works i you can imagine a scenario where the system is so wrecked that you can't liquidate an ETF holding but at the same time so intact that you can get to London, get to Gringott's bank or wherever the vault is, persuade them you are who you say you are (which is very difficult because the system is electronic and no one has a specimen of your signature; indeed the system may not even know your real, meatspace name) and safely walk out with the goodies and return home without getting dead. I think moneyweek are cheerleading for bullionvault here and if there is any hitch with ETFs they haven't identified it.