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Gold

Stocks and Shares ISA , Choosing funds for ISA's, risk factors for funds etc
Investment strategy discussions not dealt with elsewhere.
GoSeigen
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Re: Gold

#388454

Postby GoSeigen » February 21st, 2021, 4:00 pm

dealtn wrote:
JohnW wrote:
Spet0789 wrote:A private investor who buys long-dated bonds needs their head examined in my view.

Here's another perspective:
'the best answer to low interest rates is not necessarily to sell your bonds and put all of your money in stocks. Instead, consider mixing in some long term bonds to raise the average maturity of your bond portfolio. As you can see from the chart, doing this at low interest rates will increase both the upside and downside potential of your portfolio, so be careful about adding too much risk.'
https://portfoliocharts.com/2019/05/27/ ... convexity/


So the "best" answer is to buy a more volatile outcome? What was the question?


To be fair, it was rather more equivocal than that!

"...not necessarily...", "...consider...", "...be careful...".

GS

1nvest
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Re: Gold

#389648

Postby 1nvest » February 24th, 2021, 5:20 pm

Parky wrote:Gold is a store of value, right? Not this year though. It's fallen 11% in sterling since January 5th (9.5% in $US). I'm glad I didn't pile into gold last year when all the "experts were telling me to do so. My equities have continued to creep up.

Apply a extreme SWR of 8% to all-stock and compare that with all-gold and in around 60% of cases yes stocks did OK, 40% of cases they didn't and when they didn't the gold comparison tended to do well. US data (ease of availability) and a start year of 2000 for instance saw all-stock with 8% SWR failing after a decade - wiped out. Even cash deposited earning a inflation rate of return would last 12.5 years at a 8% SWR. For the 2000 start year at the end of 2009 the gold value was 25% up in real terms - after the 8% SWR. If you'd 50/50 at the start, left to run and drawn 8% SWR from stocks that failed a decade later, left gold untouched (no withdrawals) for a overall 4% portfolio wide withdrawal rate, then the gold value gains would more than have offset the stock losses. Not that you'd run a portfolio that way though, instead you might 50/50 and leave as-is drawing 4% from both equally, or in ongoing proportions, or rebalance back to 50/50 yearly and draw from each equally, whatever.

Fundamentally no asset is consistently good, each have their bad times. Diversification helps avoid over-concentration risk (which is a significant risk factor). You might try and predict what might be the best/worst assets at the start date and adjust your weightings in reflection of that, however such predictions often prove to have been wildly inaccurate.

Gold and stocks are two polar opposites. Some investors 50/50 long dated (20 year) and short dated (1 year) bonds that equates to a central 10 year bond bullet, stocks and gold 50/50 is similar, combines to a bullet. Stocks will tend to do well during periods of positive real yields and/or declining yields, gold tends to do well when real yields are negative and/or spiking.

Gold isn't a store of value, other than over non-human timescales (centuries) it can be highly volatile, can lose you your shirt. As can stocks. Shouldn't be looked at or held in isolation, but instead held as part of a diverse portfolio, where that diversification helps lower overall risk. Yes you can hold stocks, or gold, alone, as you might hold cash, or long dated Gilts alone, but so doing isn't generally as good as more broadly diversifying.

Stocks tend to be global, gold is a form of global currency as well as being a commodity. 50/50 barbell could be considered as being like a global bond bullet. Harry Browne combined that with a domestic bond bullet, held via a barbell of long and short dated Treasury bonds, and called that portfolio his Permanent Portfolio. Historically that has provided modest gains with low portfolio volatility, as collectively its very 'bond like'

scarlettsmith694
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Re: Gold

#389887

Postby scarlettsmith694 » February 25th, 2021, 10:48 am

Gold tends to perform well during the uncertain economic or political environment. Some of the gold stocks have trebled in the past six months

1nvest
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Re: Gold

#391135

Postby 1nvest » March 1st, 2021, 12:57 pm

Stocks and bonds tend to perform badly when inflation spikes sharply. Gold over such times tends to perform well. For much of other times gold tends to perform relatively poorly. It's NOT a preserver of inflation adjusted value, instead its volatile, at least since having seen the end of the gold standard (1970's). Prior to that gold and money were interchangeable at a fixed rate, as such it was more appropriate to hold cash deposited earning interest that at any time could be converted over to gold. Since the ending of the gold standard then the price of gold will tend to rise as more money is conjured up out of thin air. Each new currency note created/spend devalues all other notes in circulation - is a form of legal counterfeiting that considerably benefits the printer/spender at a small cost to everyone else (devaluation of the notes in their pocket) - a form of micro-taxation. As notes are devalued, so the price of gold in those notes tends to rise. Gold is a domestic currency hedge, if the Pound relatively sinks then the price of gold in Pounds will rise.

Using some of stock gains to add to gold over periods when gold is performing poorly builds up reserves that can more than offset losses from stocks/bonds over times when gold is doing well. Such as when two thirds in stocks halves, a third in gold doubles ... in real (after inflation) terms. The cost of that 'insurance' is that when stocks are doing great you lag all-stock and repeatedly take some of additional gains from stocks off the table to add to gold. When stock gains are great paying that insurance is relatively acceptable/comfortable. When you claim against that insurance its very comforting (side stepped large losses that might otherwise have been endured). What is the broader cost of that insurance? Well across full cycles 0%. For instance since 1972 using US data 100% stock compared to 67/33 stock and gold had near the exact same overall annualised total return, but where drawdowns and volatility were lower for the 67/33 stock/gold asset allocation. Same reward with less risk (volatility) is generally considered as being the better risk adjusted reward choice.

Gold is a commodity, that alone can approximate the broader commodity index, somewhat like how a small sub set of stocks - samples - can collectively reflective the broader (total) stock market, but in being a small sample set can see significant variation around the broader total commodity index set.

TUK020
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Re: Gold

#398930

Postby TUK020 » March 25th, 2021, 3:16 pm

Spet0789 wrote:
GoSeigen wrote:
Parky wrote:Gold is a store of value, right? Not this year though. It's fallen 11% in sterling since January 5th (9.5% in $US). I'm glad I didn't pile into gold last year when all the "experts were telling me to do so. My equities have continued to creep up.


I'm very very happy with my holding of gold and gold mining stocks; all have gained c100% or more over the holding period of around 5 years. The odd month of ups or downs is not of much concern to me.

GS


Likewise. I prefer gold mining stocks to gold. Due to their operating leverage you only need about a third as much to add the same amount of covariance (effectively, diversification power) to your portfolio as if you held physical gold.

Spet,
Is there a gold miners ETF to reduce specific company risk?
tuk020

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Re: Gold

#398971

Postby Lootman » March 25th, 2021, 5:05 pm

TUK020 wrote:
Spet0789 wrote:
GoSeigen wrote:I'm very very happy with my holding of gold and gold mining stocks; all have gained c100% or more over the holding period of around 5 years. The odd month of ups or downs is not of much concern to me.

Likewise. I prefer gold mining stocks to gold. Due to their operating leverage you only need about a third as much to add the same amount of covariance (effectively, diversification power) to your portfolio as if you held physical gold.

Spet,
Is there a gold miners ETF to reduce specific company risk?
tuk020

There is:

https://www.blackrock.com/uk/individual ... -ucits-etf

It holds the two biggies (Newmont and Barrick) as well as the two major royalty plays (Franco-Nevada and Wheaton).

TUK020
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Re: Gold

#398974

Postby TUK020 » March 25th, 2021, 5:12 pm

Lootman wrote:There is:

https://www.blackrock.com/uk/individual ... -ucits-etf

It holds the two biggies (Newmont and Barrick) as well as the two major royalty plays (Franco-Nevada and Wheaton).


With nearly 80% of holdings in Canada, US & Australia, it doesn't have scary levels of political/geographic risk.
Ongoing charges of 0.55% seems quite high for an ETF

Spet0789
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Re: Gold

#399034

Postby Spet0789 » March 25th, 2021, 9:11 pm

TUK020 wrote:
Lootman wrote:There is:

https://www.blackrock.com/uk/individual ... -ucits-etf

It holds the two biggies (Newmont and Barrick) as well as the two major royalty plays (Franco-Nevada and Wheaton).


With nearly 80% of holdings in Canada, US & Australia, it doesn't have scary levels of political/geographic risk.
Ongoing charges of 0.55% seems quite high for an ETF


Indeed. This is one of the two gold mining ETFs I hold. The other is GDX (VanEck). The charges are quite high but worthwhile in my view compared with the alternatives.

TUK020
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Re: Gold

#399124

Postby TUK020 » March 26th, 2021, 9:09 am

Spet0789 wrote:
TUK020 wrote:
Lootman wrote:There is:

https://www.blackrock.com/uk/individual ... -ucits-etf

It holds the two biggies (Newmont and Barrick) as well as the two major royalty plays (Franco-Nevada and Wheaton).


With nearly 80% of holdings in Canada, US & Australia, it doesn't have scary levels of political/geographic risk.
Ongoing charges of 0.55% seems quite high for an ETF


Indeed. This is one of the two gold mining ETFs I hold. The other is GDX (VanEck). The charges are quite high but worthwhile in my view compared with the alternatives.

Thank you Spet.
I have just taken a smallish position in SPGP.


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