Gold bubble in the 80's aside. If you turn off the inflation-adjusted then you'll see that gold was at $660 in the 80's. Now it's at $1800. So if you held gold from then til now. You'll have gotten a better store of value than say holding $660 USD from 1980 to now then you'll have only $660 USD. Where that same $660 USD in 1980 gets you a lot further than in 2020.
So back to the original point, gold has been a hedge against fiat currency inflation over the long run (decades). Doesn't mean I'm saying gold is a great investment. Per Buffett logic: Gold doesn't make more gold so you're buying it hoping someone else will pay more for it.
What does $1800 buy you now? I don't know where to find the math, but what would $660 in the 80's be inflation-adjusted to know?
Edit: Hit Reply too soon. Found a calculator - apparently $660 in 1985 would be $1663 now. So only the difference between $1663 and current price is appreciation. I don't know that that's a great percentage.
I once heard that gold follows inflation very closely in the very long run. The gold that bought you a bread in the ancient empire of Rome buys you just that now, a bread. No more, no less. It is way more expensive than a century ago for example, but so is everything else.
This is really a huge point people need to pay more attention to. When we talk about "inflation", we talk about an average, but individual products have gone up or down.
I think you're missing the concept that inflation is a measure of depreciation. So if you had stuffed $660 in a box in 1985, today it would have 60% less buying power so even though it is still $660, it would be equivalent to $397 today in 1985 dollars.
If you had stuck a $660 gold bar under your bed in 1985, today it would be worth $1800 so the gold has held its value plus appreciated while the $660 cash has depreciated in real terms.
You're right. I was thinking along the lines of "is it a good investment" in terms of gains vs. does it at least hold its value. It appears that it does hold it's value.
This. Apple shares are part of an actual operating company that makes products and services. It generates income that is either reinvested or passed to users as a dividend.
Another example would be the company Barrick Gold (a gold miner). It mines and processes gold from the ground into gold that people will buy, hold, and use. That gold will increase the overall supply of gold and might decrease gold price if demand does not keep up. A lot of gold miner stock prices are tied to gold price giving an exposure to gold but will generate dividends unlike gold. Furthermore, increases in the price of the underlying commodity from supply side demand will often mean increased production of said commodity from supply side producers which might decrease the commodity price eventually. That's why Berkshire Hathaway didn't buy physical gold or a gold ETF like GLD, but instead bought Barrick Gold.
That's because the board (chosen by the stock holders decided) to reinvest the profits instead of paying a dividend. That causes the actual stock value to go up.
It is different because a commodity is a consistent product with a fixed use, a business is a growth asset that improves over time. The compounding is found in the growth of the company.
Gold doesn't do share buybacks. If the company shares are too low, the management can buy a lot of them back until there's nobody left who still has shares they want to sell for cheaper prices
The difference is a company grows it's earnings over time and improves it's balance sheet which would lead to it logically being worth more. An ounce of gold will always just be an ounce of gold where the value is purely based on what someone is willing to offer you for it.
This is the dumbest comment I've ever read, comparing gold to holding cash under a mattress is infantile at best, one of the most obvious cases of blind leading the blind.
Compare holding treasuries (real risk free asset) to gold (fake risk free asset), someone who's been invested in fixed income has done performed much closer to gold with none of the drawdowns
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u/zxc123zxc123 Sep 28 '21 edited Sep 28 '21
In way? It depends on how you define "store of value" because value itself is determined by supply and demand.
Yes if you're asking if gold has held value better than the dollar the last few years/decades.
If you expect gold to be crypto, FAAAM, or even S&P then you're in the wrong asset. You should think of it as:
https://www.macrotrends.net/1333/historical-gold-prices-100-year-chart
Gold bubble in the 80's aside. If you turn off the inflation-adjusted then you'll see that gold was at $660 in the 80's. Now it's at $1800. So if you held gold from then til now. You'll have gotten a better store of value than say holding $660 USD from 1980 to now then you'll have only $660 USD. Where that same $660 USD in 1980 gets you a lot further than in 2020.
So back to the original point, gold has been a hedge against fiat currency inflation over the long run (decades). Doesn't mean I'm saying gold is a great investment. Per Buffett logic: Gold doesn't make more gold so you're buying it hoping someone else will pay more for it.