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SilasBarta comments on Public Service Announcement Collection - Less Wrong
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You would have missed out on doubling or tripling your money if you hadn't bought gold when those same people had made the predictions.
The S&P 500 has outperformed gold since quantitative easing began. I don't believe there has been a time past four years where a $100 gold purchase would be worth more today than a $100 S&P 500 purchase.
Are you saying that no one expected the printing money (bidding up gold) before it happened, or is there a more subtle reason why the only relevant comparison is from the moment the policy called QE started?
Someone who bought gold after the Lehman fiasco (08), but before any of those QE milestones would have had several options since then to redeem for 2-3x gain.
It's an even bigger gap if you compare to any year before, back to ~98. S&P has had a horrible volatility/return performance going back to at least then.
According to Wikipedia, QE1 started in late November 2008. Between November 28th 2008 and December 11th 2012 these were their respective returns:
Gold: 110% S&P500: 47,39%
Now Index-funds are normally better, but just look at the returns from late 2004 to today:
Gold: 165% S&P500: 45%
Gold has been rising more or less steadily over all those years except for 2005 and 2012 (stagnant) and 2013 (falling). It hasn't tripled, but for the 2004-2012 it was a good buy.
I have always heard that gold isn't meant to be a return-on-investment kind of deal, more like a safe store for your money that is going to maintain value over time.
Gold has declined more than 30% so far this year.
26.6% is more than 30%?
It will probably come back up, & since it is low now is a great time to buy.
http://www.youtube.com/watch?v=IRgSJRcG4HQ
Gold is about jumping the gun, both on the way in and on the way out, because it is bubble prone in highly predictable ways. This sort of trade can be entertaining, but it is not investing. You are engaging in a zero-sum game of skill against all the other participants and might as well be playing poker.
What does "bubble prone in highly predictable ways" mean?
People buy gold under the delusion that it is an alternative, safer currency. Then they realize it isnt, the people who didn't get out in time get burned, and gold falls back down to a price where people can actually afford to have jewelry made out of it. Wait a generation (so people forget), and for something to make people get nervous about their means of exchange, and there you go again. It's tulip mania, but shiny. Profit is made by getting in during the runup to a bubble, and then getting out and staying out before it ends. The second part is very stressful, because you feel like you are missing out if you bail at any time before the absolute peak, which makes it tempting to go back in.. Which is a surefire way to wind up holding the bag when the inevitable collapse comes. Poker. Better for your blood pressure.
Well, it was a pretty safe bet in '08 given typical reactions to economic crises, and the prevalence of advice like this P/S/A that "oh, there totally won't be inflation from the printing money".
You seem to be mocking the idea that we'd avoid inflation. Look at the actual inflation stats, and we have. Velocity has dropped so significantly that the quantity of money rising was necessary just to maintain stability.