The case for gold

[scaredyclassic]

[quote=gzz]Ouch! QCOM completely won its antitrust appeal today. Big win for local RE, makes me feel better.[/quote]

volatility.

so much easier to buy on the way up than the way down.

[scaredyclassic]

https://www.kitco.com/news/2020-08-14/Warren-Buffett-buys-gold.html

buffett buys gold. not sure if thats a good or bad sign

[The-Shoveler]

Yea that kind of caught my attention.

But still not a buyer here near 2K oz.

Just My opinion

[scaredyclassic]

https://markets.businessinsider.com/commodities/news/warren-buffett-bashes-gold-2019-2-1027977003#

buffett wasnt gold neutral; he thought it was a dumb investment; or at least that’s what he said. I don’t know that this means it’ll do well, but it’s definitely a sign of weird times.

[The-Shoveler]

Sometimes dumb things still go up LOL.

[scaredyclassic]

Yes, but buffett allegedly doesnt make big dumb speculative moves.

So either hes demented, or something is changing.

[The-Shoveler]

hmmmm
My father used to tell me the only true sources of wealth are Manufacturing and Agriculture.

Buffet always kind of reminded me of my Father in a way.

But all this MMT and money printing does make me a bit nervous to tell the truth.

[scaredyclassic]

Services?
Entertainment?
Banking/finance?
Art?
Sports?
Software?

Wealth is just making physical things and food?

Reading AGE OF JACKSON by schlesinger. None of our anxieties are new

[Escoguy]

When I worked in Kyrgyzstan in 1998, gold was about $294 an ounce.
A gentleman in the mining business explained how market value at the time was below the mining cost, so he expected the price to go up substaintially which it did. I only bought a small amount of Coeur d’Alene. Coeur is now trading at a fraction of the 1998 price in spite of the price of gold.

Kumtor had a major mine in Kgrgyzstan at the time. The BA flight to London would transport the gold twice a week with the miners. I took that flight with the US Ambassador shortly after the Al qaeda strikes on Kenya and Tanzania.

As we were doing business in Northern Afganistan at the time, I offered her any assistance or connections but there wasn’t any follow up. In jest we even thought of naming a cigarette “Bin Laden lights”. But I digress.

Gold mining is expensive, in 2019, the cost of mining at some of the leading mines (Gold Fields) in about $900 so that is likely a floor. Capex for new gold mines is down significantly since 2009 which may provide some additional support, but the key long term driver will be mining cost. As such longer term, gold will probably not perform as well as the past 20 years. That being said, the capex commitment is riskier today as fewer new projects look as appealing:

“We think we have already entered the era of “peak gold” and there is very little that gold miners can do to change it,” he told DW. “At $2,000 per ounce gold, CFRA thinks it opens up new exploration frontiers, but most miners would need to see a sustained higher price to commit capital to higher-cost projects and therefore, we are unlikely to see a significant increase in exploration success.”

https://www.dw.com/en/gold-coronavirus-commodities-miners-exploration/a-54255845

[scaredyclassic]

this is how a real bull market could get going.

Ohio pension fund approves 5% gold allocation.

https://www.kitco.com/news/2020-08-31/Ohio-Pension-Fund-jumps-into-gold-market-with-5-allocation.html

what if all pension funds followed suit?

not sure what the math is, but quick back of the envelope…total us pension assets, 22 trillion. 5% of 22 trillion is 1.1 trillion.

total value all gold in the world, 8 trillion.

that’s about 14% of all existing gold swallowed by us pension funds in a year. what about the rest of the world? is a possible move toward pension funds holding gold possible without causing the price to go through the roof?

it also strikes me as a sign of something radically wrong with the system if gold is an asset held by pension funds. it’s not supposed to grow, it’s supposed to retain value. if it’s got enough growth potential to be held by pension funds, the system is way out of whack.

[The-Shoveler]

Probably the Pension fund manager is out of wack LOL.

I could see it if it was a gold mining stock like Buffett invested in.

Does not make a lot of sense IMO for a pension fund to buy Gold (the commodity itself).

[scaredyclassic]

[quote=The-Shoveler]Probably the Pension fund manager is out of wack LOL.

I could see it if it was a gold mining stock like Buffett invested in.

Does not make a lot of sense IMO for a pension fund to buy Gold (the commodity itself).[/quote]

doesn’t appear to be an outlier.

https://economictimes.indiatimes.com/markets/commodities/news/gold-wins-over-new-buyers-from-pension-funds-to-private-wealth/articleshow/77238925.cms

was not aware of pensions buying gold…quick search appears this is becoming more common. texas teachers fund…

https://lonestarwhitehouse.blogspot.com/2016/06/why-does-texas-teachers-retirement-fund.html

pension funds make mistakes, but they a re definitely run by thoughtful sophisticated investors.

[gzz]

“but the key long term driver will be mining cost.”

True for nearly all commodities, but not gold.

The reason is that annual gold mining is such a tiny fraction of the above-ground stock.

For gold, the willingness for investment holders and governments to buy versus sell is 97% of the price.

[scaredyclassic]

it is strange to think of all the humanity involved in gathering up all the gold we have, which is not all that much, over thousands of years, hundreds of generations of man scratching away at the surface of the earth to gather up a particular metal, fighting and dying over it, for no real purpose.

but then again, most of what workers do nowadays is pointless too.

all the gold ever mined would fit in an olympic sized swimming pool. it’s pretty rare. people have been looking for it and hoarding it forever.

12 Stunning Visualizations of Gold Shows Its Rarity

[gzz]

There are silver mines in Mexico producing silver for $4 an ounce. The reason they don’t crash the price is they are all in terminal decline, and the cost to expand them would raise the price to $20+.

Precious metal mining is an environmentally dirty business, gold in particular. Less of it would be good for both investors and Earth.

[Author]

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