What about Gold?


#1

What about gold ?

What makes more sense:
Gold from a Swiss ETF ?
Gold from a Swiss that buys it from US and hedges to CHF ?
Gold from US ETF ?

I understand gold acts again inflation but wouldn‘t it only cover inflation in the original currency gold was bought? In other words if USD goes down would US people buy Swiss gold ?


How do you hedge your currency risk?
#2

I hold some gold (5% of portfolio), but there are a few things to consider.

  1. Gold has been the contrarian investment in the past, but during this years’ sellofs in February and October, gold didn’t provide any reasonable return

  2. Even bitcoin has been more stable than gold in the previous 6 months (this is not a recommendation for crypto, but I do have a tiny bit just in case)

  3. Swiss ETFs such as the ones from ZKB and UBS promise that the gold can be taken out in physical form

  4. Owning a gold ETF is costly compared to potential or historical returns.

  5. Currency shouldn’t matter for gold. Gold is THE currency


#3

Do you think there is a difference between Swiss gold and American gold? What is Swiss gold anyway? Gold protects against inflation in any currency, because you cannot make more gold. Doesn’t matter which currency you bought it for and which currency inflation you want to protect against.

So you’re asking what difference does it make when you buy these:

It makes no big difference if you buy it in CHF or USD. Just buy it in the currency that you have or in the currency that is the most liquid (that means where you have a lot of peopl trading and spreads are low).

Just check out this chart, the return of both red and blue is identical:

Now for the hedged CHF, it is like this: you think gold is a good investment, you want to buy some, but you also think that CHF such a cool currency and it will be much stronger than USD in the future. So you take your regular return of gold in CHF and multiply it by CHF/USD exchange rate. So if CHF goes up, your hedged ETF goes up, if CHF goes down, your ETF goes down.

That being said, when I invested my money in VT, my reasoning was: I invest in thousands of companies, where millions of people work, and I have a strong feeling than in 10, 20, 30 years these companies will be much more advanced than they are now, and they will have provided a lot of value to the people over these years.

What is the reason behind gold? Because it’s rare, shiny and people love it. I guess it makes sense to keep a bit of physical gold for a doomsday scenario, only if you have a safe place to store it. But a buy-and-hold ETF?

And why should currency matter for, say, VT?


#4

Hedge against doomsday scenerio is one thing (that’s why physical bullion coins are better), but the other is if it gonna perform nicely due to increase demand by rising Asian middle class, especially Indians who use it heavily for religious/traditional reasons (but that reasoning most likely applies even more to EM equities).


#5

What if, by becoming richer, the Indians become less traditional?


#6

Yup, gold is only a store of value for doomsday, any other thesis is speculation.

Buffett made the point clear in one of his shareholder’s letters:

Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be about $9.6 trillion. Call this cube pile A.

Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?

Plus you have the obvious point that investors in those productive assets gain income from them. Investors in gold might get a store of value (although that rather depends upon when you buy and sell) but investors in productive assets are gaining rents, incomes, dividends over the years.

Further, when you’re looking to the long term, those various incomes will almost certainly, when compounded, return much greater sums of money to the investor than whatever the straight price of gold is likely to be in the future.


#7

BTW. Here’s interesting piece on gold by Ben Carlson from his blog:

PS. @Julianek, probably fork, not sure though.


#8

That’s why - diversification and most of the portfolio in equities.


#9

Worlds’ population had a couple of thousand time to become less traditional as it became richer. I doubt this will happen during my lifetime :slight_smile:


How do you hedge your currency risk?
#10

image

image

For non-Polish speakers:

  • Chart 1: How many dominicantes (going to church) and communicantes (taking communion) are in Poland
  • Chart 2: I follow Church guidelines (green), I follow my own faith guidelines (yellow), I am an atheist (red)

#11

You’re offtopic. This is about GOLD, not GOD :)))


#12

Yeah, yeah, potato, potahto :stuck_out_tongue:


#13

Here is a nice interview with Mr Bogle.

In his opinion he would not invest in gold - but he says you could, maybe, justify having a very very small proportion of your portfolio invested in gold to hedge against hyperinflation. (Personally its not for me)