RT: Central banks buying up gold to diversify away from US dollar

«The demand for gold has renewed worldwide with the price for the precious metal climbing to nearly $1300 per ounce for the first time in 15 months. The rally has been led by the world's central banks loading up on gold to diversify from the US dollar.»

(But any idiot 'knows' investing in metal is a fool's errand — central banks obviously just don't get it.)

exactly. just now.

http://www.bloomberg.com/quote/PICPGRC:SW

There's gold in them thar hills.
Its a gamble,who knows?

Another way to get into good is to buy shares of the gold mining companies. This will solve the problem of gold storage and you will even get a yield via dividend. Randgold Resources is one of the companies that comes to mind and their shares are stamp duty exempt.

Gold demand up 21% in 2016 breaking first quarter record.
Global gold demand rose at its fastest pace ever in 2016, according to an industry report released on Thursday.

Demand for gold has spiked by a 21 per cent from January to March this year or 1,290 tonnes.

This is the largest increase on record, according to the World Gold Council (WCG)

Source

If you saw the movie "The Big Short", you saw the protagonists realize that the only explanation for the prices of stocks (and their shorts) related to the real-estate investment bubble being as they were (and not reflecting the reality), was that the market was completely fraudulent.
If the gold-price should be much higher than it actually is, maybe the rest of the stock-market is equally a more or less complete fraud?

Anyone noticing that PM articles are beginning to appear in MSM (Lame stream media) these days?
Example: Business Insider

http://www.ft.com/cms/s/0/73d9ed58-1...#axzz48uCY644U

Hi Phil

Re the FT article you linked, it is unfortunately a subscription based service. This means that most readers can't read the article.

Gold will come into its own when there is a general distrust of the currency. Since the FT seem all too willing to take my dollars, we are not there yet.

Just type the headline into Google and click through the result to view.

Year. Federal Debt. Interest rate. Interest on debt. US government spending.
2001 $ 5.8 trillion. 6.06%. $ 351 billion. $ 1.8 trillion
2006. $ 8.5 trillion. 5.02%. $ 426 billion. $ 2.6 trillion
2011. $ 14.8 trillion. 3.96%. $ 602 billion. $ 3.6 trillion
2016. $ 19.0 trillion. 2.93%. $ 574 billion. $ 4.0 trillion

The USA has benefitted greatly from the general reduction in interest rates.

Historically interest on debt has been around one-sixth of federal spending.

If rates were to return to the former levels, they would need to borrow more in order to pay the interest. (Borrow from Peter to pay Paul).

The trouble with needing to borrow more, is that the last dollar you borrow is going to be more expensive than the first. You have to pay a higher interest rate to sucker someone into lending it to you.

If that happens, it will be complicated and not good.

Over-spending by Governments is nothing new. I just came across a May 1963 article:

'The Real Truth About the Federal Budget"

"....spending more than can be collected in taxes has swollen our national debt to more than $300 billion. Just the interest on this is eating up $10 billion a year of our taxes. That's more than we spend for any item of government except defense......".

"...the advertised budget of $98.8 billion is only a fraction of what the government plans to spend next year......by the Administration's own calculations, spending in the next fiscal year will run $4.5 billion more than this year....".

1963 National Debt $ 300 billion.
2016. National Debt $ 19.0 trillion (63 times as much).

1963 Interest on debt: $ 10 billion.
2016 Interest on debt: $ 574 billion. (57 times as much).

1963 Federal budget $ 98.9 billion.
2016 Federal budget $ 4.0 trillion (40 times as much).


The price of almost everything has risen since 1963:

1963 Gold Price $ 30 an ounce.
2016 Gold Price $ 1350 an ounce (45 times as much).

1963 Year End Close Dow Jones Industrial Average 762.
2016 Dow Jones Indusrial Average 17'000 (22 times as much).

The Dow pays 3% to 4% annually in dividends so the end result would be larger with re-investment.

1963: Average Cost of new house $12,650.00
Average Income per year $5,807.00
Gas per Gallon 29 cents
Average Cost of a new car $3,233.00
Loaf of bread 22 cents
Bedroom Air Conditioner $149.95

Dow Jones has had in excess of 10% returns dividends reinvested since January 1963, i.e your capital doubled every 7.2 years.
The increase is 16477.74% or 164.77 times your original investment.

So there you have it Gold 45 times, however you will have to pay insurance & storage costs so some actually less V 164 times for equities.

Attached Thumbnails

 

Good points Fatman.

Both gold and equities incur some sort of carry cost. In the case of gold it's the cost of a bank safe. With equities, it's the custody fees and the transaction costs. Also it's hard to get away from 30% withholding tax on US dividends. I suspect that after adjusting for these factors the return from equities and gold is about the same.

For equities I would reduce the annual return by 0.35% for custody and other bank charges and by (4% X 30%)=1.2% for withholding tax. Lastly I would deduct 0.30% for the TER cost of holding an ETF. Zero for transaction charges. However, you would incur some transaction charges as you re-invested the dividends. How does the return on eqities look if you reduce it by 1.85%?

Where did you find the calculator tool?

I don't pay any custody fees on US holdings.

Withholding tax on US equities is just 15%, Switzerland increased it to 30% if you use a Swiss Broker.

Your estimation of charges is absurd. Even with 8% growth fund doubles every 9 years so still beats gold by a huge factor even if gold has no expenses at all. No way are they a similar return, gold is a poor long term investment as it just sits there.

Google

http://www.ft.com/cms/s/0/e8de9a7e-2...#axzz49sWNGygt

http://www.ft.com/cms/s/0/458731ea-2...#axzz4AyS8LKpt

Gold over $1,300 today; driven by fear and Fed having cold feet on rate increases.

BITGOLD

Anyone here using BitGold?

Wow, that's a ing awesome idea!