Why hedging with Gold is Popular

gaussian said:
This is disparaging to the large swathes of people who have been buying gold and getting rich. It's only recently that it no longer makes sense.

Gold is an extremely important component for engineering, electronics, medicine, jewelry, glassmaking, and more. It's "always been that way" because it's one of the single most important elements we have and it's a finite, consumable resource.
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"It's only recently that it no longer makes sense."
I disagree with this :)
It's difficult to trade but possibly that's due to the prolonged bull market, unless gummint ban it I think it has still potential. Maybe young Chinese & Indian & Italian folk may get turned off it for jewelry but it is still one of the best conductors for electronics.
Many foreign Central Banks appear to love hoarding it.
 
The key to getting rich with gold is to be a gold bug when its time to be a gold bug...not all the time. If someone wants to hold gold as a small percent of their portfolio for some diversification and hedging...nothing wrong with that.

Some of you talk about gold as a terrible hedge in case of a calamity. Well, just about everything except necessities will be a bad hedge in that case. But if we have just a 'normal' type of crises (more likely), then gold has proven to be effective at times, but not every time.

Someone said only 16% of gold is used for industrial purposes. A big part of that is because the price of gold won't stay low enough. If gold was much cheaper in price, then its industrial use would rise. The people won't 'let' gold stay low enough for long enough for some reason...you figure that one out. After all, gold has many uses: alloys with many metals, won't tarnish, melted and cast into detailed shapes, conducts electricity, drawn into wire, resistant to corrosion, hammered into thin sheets. Used in medicine, dentistry, electronics, space, commerce as money, and jewelry.

Another individual said gold was "a comfort trade for dumb money". Well, the U.S. government supposedly holds more gold than any entity on the planet. It's this same government that this "individual" puts a lot of faith in to keep propping up his stocks forever. So, is the U.S. government "dumb money"? If so, why would he/she put any of their money/faith in something so "dumb". If fact, you may as well put all the central banks of the world into the dumb money category.

I don't hold bullion, but I have invested heavily into selected miners for years. So, the question is...is it a good time to be a gold bug right now? After all, so many of the countries of the world are addicted to the QE and debt crack they've been smoking for a long time. All of us will have to pay for such ridiculous behavior eventually.
 
BONECRUSHER said:
The key to getting rich with gold is to be a gold bug when its time to be a gold bug...not all the time. If someone wants to hold gold as a small percent of their portfolio for some diversification and hedging...nothing wrong with that.

Some of you talk about gold as a terrible hedge in case of a calamity. Well, just about everything except necessities will be a bad hedge in that case. But if we have just a 'normal' type of crises (more likely), then gold has proven to be effective at times, but not every time.

Someone said only 16% of gold is used for industrial purposes. A big part of that is because the price of gold won't stay low enough. If gold was much cheaper in price, then its industrial use would rise. The people won't 'let' gold stay low enough for long enough for some reason...you figure that one out. After all, gold has many uses: alloys with many metals, won't tarnish, melted and cast into detailed shapes, conducts electricity, drawn into wire, resistant to corrosion, hammered into thin sheets. Used in medicine, dentistry, electronics, space, commerce as money, and jewelry.

Another individual said gold was "a comfort trade for dumb money". Well, the U.S. government supposedly holds more gold than any entity on the planet. It's this same government that this "individual" puts a lot of faith in to keep propping up his stocks forever. So, is the U.S. government "dumb money"? If so, why would he/she put any of their money/faith in something so "dumb". If fact, you may as well put all the central banks of the world into the dumb money category.

I don't hold bullion, but I have invested heavily into selected miners for years. So, the question is...is it a good time to be a gold bug right now? After all, so many of the countries of the world are addicted to the QE and debt crack they've been smoking for a long time. All of us will have to pay for such ridiculous behavior eventually.
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comparing central banks vs. individual investors.... not valid.

central banks, especially the Fed can print all the money they want to buy whatever they want, of course at the cost of diluting the currency... that is an action very very different from individual investors with limited number of dollars and have to choose investment allocations.
 
It's reasonable to have a small portion of your portfolio in gold to hedge a global Armageddon. The more interesting question is, which gold instrument do you choose? If you own ETF's or futures contracts, your hedge is potentially beyond your reach if the financial systems are down. Perhaps some American Gold Eagle coins hidden in a mayonnaise jar underneath a floor board in your basement closet? They will be handy if you need to buy essentials for survival. This is a decision that requires some scenario analysis!
 
Noticed a trend with more & more retail traders talking about hedging which is typically what investors & pension fund mgrs do, not traders.

Stanley Drukenmiller's long term record is among the best, if not the best. Here's his view on hedging which I could not agree more with.

"I don’t really like hedging. To me, if something needs to be hedged, you shouldn’t have a position in it."
"Hedges can be expensive and good trades don’t need them, a good exit plan is the best hedge."
 
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comagnum said:
Noticed a trend with more & more retail traders talking about hedging which is typically what investors & pension fund mgrs do, not traders.

Stanley Drukenmiller's long term record is among the best, if not the best. Here's his view on hedging which I could not agree more with.

"I don’t really like hedging. To me, if something needs to be hedged, you shouldn’t have a position in it."
"Hedges can be expensive and good trades don’t need them, a good exit plan is the best hedge."
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Couldn't agree more...I think many individuals like to use the term hedge as a big ego boost for themselves or to impress others.
 
Gold has always been popular among investors, and now even more, since with that new virus people think more about investing in gold, since they feel that their capital would be safer.
 
Louisamo said:
Gold has always been popular among investors, and now even more, since with that new virus people think more about investing in gold, since they feel that their capital would be safer.
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I don't know of too many poor people investing, CoronaVirus is not exactly a wealth building mechanism.
Do you think people cooped up at home, can't attend to employment they will twiddle their thumbs and buy gold?
Do you think investors who are getting margin called will decide they have money for gold?
Do you think business who are financially struggling because everything is shut down will buy gold?
 
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