Investing in gold

Shurakai

I'll get the obvious question out of the way early: Is investing in gold and/or precious metals a good idea for the future?

The reason why I've been considering this of late is basically due to the looming peak oil disaster and its effect on the delicate world economy. I would be even more concerned if I lived in the united states, but I don't, I live in Canada. As everyone knows we are pretty co-dependant (resources go south, commerce and culture go north) and I predict that if the US suffers a very large hit in world economics (such as oil moving to the euro), the Canadian dollar might drop along with it.

I've never experienced a depression, or even a recession before, but I hear they are very bad things. Will investing in a hard currency like gold help protect against the worst case scenario? Or is it for various reasons I'm not aware of not a very good way of going about it?

Incenjucar

Personally, I'd go for platinum and the like.

It's worth more than gold, and it's used in so many new things every year, especially with all the emissions stuff going on, which makes it that much more valuable.

Thanatos

If you honestly believe the world economy is going to go into depression, gold is probably not a good hedge against that, considering how overvalued it is right now. They'll tell you it's a good hedge, but in reality, if the economy were to actually collapse, most of the current uses for gold would end, and the bottom would fall out of the market.

If you want a solid, secure investment, buy whatever the Canadian equivalent to U.S. Treasury Bonds are. If the government of Canada collapses, you're probably going to have more to worry about than your treasury bonds.

oniian

Thantos is on the right track but I wouldn't take it to that extreme. Gold will always care some value. Especially if there are people like Ron Paul wanting to move us back on the gold standard. It is relatively stable and has some practical uses. But it does have an inverse relationship with periods of strong economic times. It deviates from a price to a certain degree when things are going good but it can jump in price astronomically when things turn to... well... now. Many people close to the chaos cash in their currency jumping ship to a more liquid and universal commodity. Look at the late 90's where the price was around $270 to a year or so ago when the price hit its apex around $700. But unless you think that things are just going to get worse as far as stability and economics go, than gold is not a good choice (the same could be said about bonds too as far as its correlation to the health of an economy).


Edit: So to answer the question, I might carry some precious metals to diversify my portfolio but I would also have something in there in case the you happened to be mistaken. Course if everything goes to pot then all bets are off and stocks become pretty pieces of paper. Thantos is right that it is grossly over valued. Really if you want to hedge against the US dollar, trace the paper trail and find a country that is not heavily invested in the US and maybe one that would benefit from the US is devaluation. My, how morbid.

Djeet

you'd be better served owning gold/mining stocks than trying to hold bullion.

the price quoted on cnbc or whatever is a spot price. you will never get to buy it at spot nor sell it at spot, when doing an exchange expect to get hit with transaction expenses, plus where are you going to keep it? talk to a reputable estate jewelry appraiser for more info. if you collect coins or something then you may have a line on playing gold, but there your more likely to profit by the numismatic value than the melt value. the problem is converting your cash into gold (youll get hit) and converting your gold into cash (youll get hit) or some form of tender that you can buy stuff with.

if you really want gold then you might try purchasing stock in companies like anglogold or rio tinto (these are not recommendations, just examples), or you could try an index like goldtraxx (i think this index just holds bullion so it should attempt to track the spot price).

you may want to look into oil companies as well, canada has vast oil sands resources which are likely to be of greater and greater relevance. as a canadian you may get some kind of tax break on these (i'm speculating here). also i think canada is a player in the diamond market

and peak oil? didn't the peak oil fans say we've already globally peaked? several times already? :P