Store of value?

[GodsMoney]

So I hear it said constantly that unlike other assets or currencies, Gold in particular is a store of value. Please explain this concept to me because when I look back at the price charts Gold has had periods where its halved in value? Its price fluctuates doesn't it like any other asset? If I load up £100k today at £1450 an ounce and it drops to £1000 per ounce then its lost almost a third of its value right? Is it because it maybe isn't as volatile as some stocks? 

I want it to be a store of value btw so I'm not being negative on the metal, I love it but I'm not sure i get this mantra of store of value 

[FriedrichVonHayek]

20 minutes ago, carrigher82 said:

So I hear it said constantly that unlike other assets or currencies, Gold in particular is a store of value. Please explain this concept to me because when I look back at the price charts Gold has had periods where its halved in value? Its price fluctuates doesn't it like any other asset? If I load up £100k today at £1450 an ounce and it drops to £1000 per ounce then its lost almost a third of its value right? Is it because it maybe isn't as volatile as some stocks? 

I want it to be a store of value btw so I'm not being negative on the metal, I love it but I'm not sure i get this mantra of store of value 

From starting work in 1989 I have on average earned the equivalent of just over 1 Gold Sovereign a week after tax.

So in 33 years of work I would say its a decent store of value.

[James32]

18 minutes ago, carrigher82 said:

So I hear it said constantly that unlike other assets or currencies, Gold in particular is a store of value. Please explain this concept to me because when I look back at the price charts Gold has had periods where its halved in value? Its price fluctuates doesn't it like any other asset? If I load up £100k today at £1450 an ounce and it drops to £1000 per ounce then its lost almost a third of its value right? Is it because it maybe isn't as volatile as some stocks? 

I want it to be a store of value btw so I'm not being negative on the metal, I love it but I'm not sure i get this mantra of store of value 

Don't take this as financial advice. 

But to summarise, zoom out on the charts and as "Yazz" sang 🎶 🎵 the only way is up.

Yes there's going to be drops and stagnation along the way. But history tells us when viewed as a long term vehicle, it will protect our buying power.

How long each individual is prepared to hold can only be answered personally. Buy little and often and you should protect yourself from wild price swings.

 

[SiCole]

You can store gold through a SSAS or SIPP as a pension plan if you don't already have one set up. It must be in bar form and stored in a vault though. I would discuss with a financial adviser first though tbh.

[Fadeingstar]

I think you have to look at gold as a long term (15+) year store of wealth.

Looking at the charts:
25 years ago gold was around £175 an oz. Using the Bank of England inflation calculator £175 in 1998 is now worth £311 today however an oz of gold is £1476 at the moment
15 years ago gold was around £400 an oz. Using the Bank of England inflation calculator £400 in 2007 is now worth £620 today however an oz of gold is £1476 at the moment
10 years ago gold was around £1019 an oz. Using the Bank of England inflation calculator £1019 in 2007 is now worth £1344 today however an oz of gold is £1476 at the moment
5 years ago gold was around £940 an oz. Using the Bank of England inflation calculator £940 in 2007 is now worth £1152 today however an oz of gold is £1476 at the moment

In all of the above gold has performed well. I appreciate that this is a little brute force and not as elegant as I would like but I think it illustrates the point well enough.

Like everything gold does have some periods where the price does drop but these seem to be temporary and that the price recovers. One way is to buy little and often although there are higher premiums on the smaller bars this can help iron out market fluctuations. Also, it is advisable to not have all your monies stored in precious metals. I am a big advocate for keeping at least 3 ideally 6 to 9 or even 12 months’ worth of your expenditure stored as cash. This cash would be stored under your mattress or in a high interest savings account. This way if the market was to crash you are not having to sell for PM's potentially at the bottom of the market (with others) and can ride it out for a little longer. What I mean by expenditure is the minimum amount you need to pay your mortgage/rent, utility bills, loan repayment (if any), food, things like that the absolute essentials!

With regards to stocks in my opinion it is essentially gambling I am a person who does enjoy a wager on the turn of a card or that delicious roulette wheel. That being said in my opinion ETFs are the way to go as a way to spread risk across the whole market and not just the fortunes of a single or small handful of companies.

This is just my opinion and your priorities may be different

 

Edited December 17, 2022 by Fadeingstar

[Anteater]

I think that gold is sometimes oversold as a special/magical "store of value" by people within the "stacking" community. The fact that it's performed well so far this century is, if anything, a bad thing for a store of value because there's no strong reason to think that any buying power gained over the last few decades can't be lost over the next few decades. (If circumstances can change one way they can change the other too.)

It is, however, unusual in terms of the combination of factors it can provide:

- maintaining value in the very long term (doesn't tend to go to zero)
- very long term durability
- fungibility
- transportability
- potential for privacy
- lack of reliance on legal, physical or information infrastructure.

 

 

[Anteater]

18 minutes ago, Fadeingstar said:

That being said in my opinion ETF's are the way to go as a way to spread risk across the whole market and not just the fortunes of a single or small handful of companies.

An ETF is a type of investment vehicle rather than a choice of investment. While, for example, index fund ETFs will tend to do what you describe there are also very concentrated/specialised ETFs that very definitely do not do this.

The important thing to get at is a diversified set of investments, likely via a fund. And personally I choose Index Funds (and Index Funds-of-Funds). Whether it's as an ETF or a more conventional structure (eg OEIC) is far less important, though there are differences between them.

Edited December 17, 2022 by Anteater

[Gordy]

1 hour ago, Fadeingstar said:

I think you have to look at gold as a long term (15+) year store of wealth.

 

Looking at the charts:
25 years ago gold was around £175 an oz. Using the Bank of England inflation calculator £175 in 1998 is now worth £311 today however an oz of gold is £1476 at the moment
15 years ago gold was around £400 an oz. Using the Bank of England inflation calculator £400 in 2007 is now worth £620 today however an oz of gold is £1476 at the moment
10 years ago gold was around £1019 an oz. Using the Bank of England inflation calculator £1019 in 2007 is now worth £1344 today however an oz of gold is £1476 at the moment
5 years ago gold was around £940 an oz. Using the Bank of England inflation calculator £940 in 2007 is now worth £1152 today however an oz of gold is £1476 at the moment

 

In all of the above gold has performed well. I appreciate that this is a little brute force and not as elegant as I would like but I think it illustrates the point well enough.

Like everything gold does have some periods where the price does drop but these seem to be temporary and that the price recovers. One way is to buy little and often although there are higher premiums on the smaller bars this can help iron out market fluctuations. Also, it is advisable to not have all your monies stored in precious metals. I am a big advocate for keeping at least 3 ideally 6 to 9 or even 12 months’ worth of your expenditure stored as cash. This cash would be stored under your mattress or in a high interest savings account. This way if the market was to crash you are not having to sell for PM's potentially at the bottom of the market (with others) and can ride it out for a little longer. What I mean by expenditure is the minimum amount you need to pay your mortgage/rent, utility bills, loan repayment (if any), food, things like that the absolute essentials!

 

With regards to stocks in my opinion it is essentially gambling I am a person who does enjoy a wager on the turn of a card or that delicious roulette wheel. That being said in my opinion ETFs are the way to go as a way to spread risk across the whole market and not just the fortunes of a single or small handful of companies.

This is just my opinion and your priorities may be different

 

 

 

great message matey...... speaks volumes

[Mcgrimes]

2 hours ago, carrigher82 said:

So I hear it said constantly that unlike other assets or currencies, Gold in particular is a store of value. Please explain this concept to me because when I look back at the price charts Gold has had periods where its halved in value? Its price fluctuates doesn't it like any other asset? If I load up £100k today at £1450 an ounce and it drops to £1000 per ounce then its lost almost a third of its value right? Is it because it maybe isn't as volatile as some stocks? 

I want it to be a store of value btw so I'm not being negative on the metal, I love it but I'm not sure i get this mantra of store of value 

A store of value is literally just that - something of value that is stored. 
Your house is a store of value, your bonds are a store of value, your blue chip stocks are a store of value, your pound notes are a store of value…. They’re assets.

There are some zealots that will argue that only PMs are true stores of value, because they want and need to you believe the same.

The relative value of each asset will vary. The benchmark is performance against inflation, but everything experiences volatility based on supply and demand.

Currency is a great store of value in the short term, but is eroded by inflation if left under your bed. 

[ZRPMs]

I started buying sovereigns roughly about 10 years ago. Sovereigns were about £180/ £200 each then. Now £370/ £390. I would say Gold has ticked away quite nicely over them 10 years. Its fluctuated a little over that period but my £ cost average has had to steadily increase since I've started. Suggesting gold has kept up with inflation preserving the spending power I had way back when. Its not a conventional investment and doesn't produce an income. But long term, It does seem to hold its spending power.

[Roy]

2 hours ago, FriedrichVonHayek said:

From starting work in 1989 I have on average earned the equivalent of just over 1 Gold Sovereign a week after tax.

So in 33 years of work I would say its a decent store of value.

Interesting observation! I shall do the same calculation 👍

Welcome back, stick around for a bit eh? 😊

[Happypanda88]

2 hours ago, Mcgrimes said:

Your house is a store of value, your bonds are a store of value, your blue chip stocks are a store of value, your pound notes are a store of value…. They’re assets.

This is highly debatable what you have stated.

Weren't General Motors and Lehman Brothers the so called "blue chip" stocks back in 2008 ? Or Marconi before the dot-com bubble ?  Had shareholders of these companies invested long term a few years earlier, then what would they get in return after the markets crashed ?

Yes, they filed for bankruptcy and investors got burnt. So not much of a store of value in these "blue chip" companies for investors then. 

I have never viewed the Pound (nor any world currencies) as a store of value and I tell you why. They all lose their purchasing power over a period of time and eventually goes to zero. This is because a piece of paper backed by nothing has an intrinsic value of zero !

In the well known case like Germany back in 1920's, the German Mark hyper-inflated away. A man with 500,000 marks thought he had enough to retire on but sadly found it was only enough for a train fare home a few years later ! 

I could talk a lot more about the Chinese yuan back in the 1930's or in recent years the Argentinian Pesos, Turkish Lira, Zimbabwean Dollar. The list goes on.  Fiat currencies to me are not assets.

4 hours ago, Mcgrimes said:

There are some zealots that will argue that only PMs are true stores of value, because they want and need to you believe the same.

You can add me to the list of zealots on this forum.😎

Yes, I do view PMs (along with farmland) as the true store of value. All of them have stood the test of time !

[Roy]

7 hours ago, FriedrichVonHayek said:

From starting work in 1989 I have on average earned the equivalent of just over 1 Gold Sovereign a week after tax.

So in 33 years of work I would say its a decent store of value.

I crunched the numbers and concluded that neither of us are union general secretaries or train drivers.

[Mcgrimes]

3 hours ago, Happypanda88 said:

This is highly debatable what you have stated.

Weren't General Motors and Lehman Brothers the so called "blue chip" stocks back in 2008 ? Or Marconi before the dot-com bubble ?  Had shareholders of these companies invested long term a few years earlier, then what would they get in return after the markets crashed ?

Yes, they filed for bankruptcy and investors got burnt. So not much of a store of value in these "blue chip" companies for investors then. 

I have never viewed the Pound (nor any world currencies) as a store of value and I tell you why. They all lose their purchasing power over a period of time and eventually goes to zero. This is because a piece of paper backed by nothing has an intrinsic value of zero !

In the well known case like Germany back in 1920's, the German Mark hyper-inflated away. A man with 500,000 marks thought he had enough to retire on but sadly found it was only enough for a train fare home a few years later ! 

I could talk a lot more about the Chinese yuan back in the 1930's or in recent years the Argentinian Pesos, Turkish Lira, Zimbabwean Dollar. The list goes on.  Fiat currencies to me are not assets.

You can add me to the list of zealots on this forum.😎

Yes, I do view PMs (along with farmland) as the true store of value. All of them have stood the test of time !

Haha, but you’re a nice zealot - we all have our passions!

By very definition, a reputable currency is a store of value (to remove opinion from the equation).

 The efficiency on each store of value clearly varies over differing time frames; and it’s too easy to cherry pick to make a point. 
Worth noting that the downside with gold is loss of investment growth (beating inflation), and it’s a relatively illiquid asset with storage costs and high buy/sell spreads.

 Pick your assets for your investment timeframe - given the rising interest rates, I’d rather avoid a 6% mortgage than hold gold that yield nothing

[GoldDiggerDave]

11 hours ago, carrigher82 said:

So I hear it said constantly that unlike other assets or currencies, Gold in particular is a store of value. Please explain this concept to me because when I look back at the price charts Gold has had periods where its halved in value? Its price fluctuates doesn't it like any other asset? If I load up £100k today at £1450 an ounce and it drops to £1000 per ounce then its lost almost a third of its value right? Is it because it maybe isn't as volatile as some stocks? 

I want it to be a store of value btw so I'm not being negative on the metal, I love it but I'm not sure i get this mantra of store of value 

A sovereign is about a "stored" weeks wage there are fluctuations however over a longer period of time It's hard to lose,  even if you come across the time where gold dips and it's cheap....back the tuck up.     50 sov's 2 tubes = a okay ish/basic  take home salary for 1 year?    It's likely the 50 sovereigns will be equal to a years basic take home salary in 20-30 years.......Unless we are all sat at home on UBI. 

Best thing to do with gold is buy it and then almost forget about it........  I do see a good few people buying gold who can not afford to hold it, I.E they buy a few oz and then the MOT comes or some other unexpected expense and then they are selling at a loss.  

 

 

Edited December 18, 2022 by GoldDiggerDave

[ZRPMs]

I might be showing my age a little but here we go. Being self employed most of my working life I used to pay for income insurance. I never thought it was too expensive for the peace of mind it gave me at £26 a month. Roll on about 15/ 16 years with only a modest increase to I think the last payment I made was just over £30. the company was Cirencester friendly. I took ill. Started coughing blood up. Panic sets in, thinking the worst. no energy and couldn't work. eventually got a diagnosis of Sarcoidosis. Curable and not the big C. Any how tried to claim on the insurance. All I could get from them was 2 lots of £80. That's after paying in, lets say an average of £28 X 12 months X 15 years = £5040. Had I been putting the money into Sovereigns instead of the insurance. not only would I have still had my £5k but the ones bought at the beginning would have been worth more than 7 times what I'd paid for them. Sound's like a great store of value to me. 

[LawrenceChard]

7 hours ago, Happypanda88 said:

I have never viewed the Pound (nor any world currencies) as a store of value and I tell you why. They all lose their purchasing power over a period of time and eventually goes to zero. This is because a piece of paper backed by nothing has an intrinsic value of zero !

Approximately correct!

If we assume that the Bank of England target of 2% inflation (annual depreciation) is achieved, this gives a future value of the pound sterling as 0.98^n, where n represents the number of years into the future.

Mathematically, this can never become zero, but approaches zero.

😎

[Anteater]

1 hour ago, ZRPMs said:

All I could get from them was 2 lots of £80.

Well that's not a fair comparison - buying jelly-beans would be a better store of value than that

I've looked at income protection/illness insurance several times in the past as on paper it's something that would have made sense for me to have, but after reading a lot of small print I was never able to get any confidence that I'd be able to actually claim successfully if I needed to.

[Happypanda88]

4 hours ago, Mcgrimes said:

By very definition, a reputable currency is a store of value

Can you name one  ? 

 

[LawrenceChard]

2 minutes ago, Happypanda88 said:

Can you name one  ? 

 

Looks like yet another TSF "boating accident"

😎

[Anteater]

8 hours ago, Happypanda88 said:

Yes, they filed for bankruptcy and investors got burnt. So not much of a store of value in these "blue chip" companies for investors then. 

You can add me to the list of zealots on this forum.😎

Yes, I do view PMs (along with farmland) as the true store of value. All of them have stood the test of time !

Investing in specific stocks is generally not recommended (unless you really believe that you know better than the market) and if your aim is to preserve wealth then you would not normally be advised to go 100% equities either. If you had steadily invested in the market as a whole (eg index funds) over the last few decades then you'd have a pretty good return, even with the dot-com bust, 2008, etc.

But all investments (intended to provide return) and stores of value (intended to preserve wealth) have risks: currencies, stocks, bonds, land, gold, etc. IMO it's a matter of choosing an appropriate combination of risk profiles rather than picking one. A local major currency is usually good in the short term (low short-term volatility helps avoid forced sales of other assets at low points) but bad in the long term (inflation). Land is often good in the long run but is subject to political risk (war, confiscation, future land taxes) and concentrates risk unless you have a lot of money to invest. Market investments have generally provided the best overall growth at lowest effort but are less resilient in the face of extreme circumstances. Physical PMs are resilient in the face of many circumstances that adversely affect other assets, but are at are greater risk from other factors (eg fire, theft) and do still experience volatility.

Edited December 18, 2022 by Anteater

[ShineyMagpie]

I think you are on the money (excuse the pun) the gold is just a proven "vehicle" for the storage. It has proven reliable over a prolonged period of time. So is considered far more of a stable investment and less of a speculation. You could put it all in milk, but this is a perishable good with short shelf life so not a good long term storage. Investing in a new company has potential for rapid growth and returns, however it also has the potential to do the opposite and flop and loose everything. Storage assets such as gold appreciate over time where as fiscal money looses it buying power (depreciation). Even more so in a digital currency word that we currently work in. 

Without too much rambling (realised this has gone on abit already) £5 cash note is well £5, you pay for service with it the vendor gets all £5 an in turn, buys supplies with it, that vendor then gets the full £5. Digital currency (card payments etc) same example. You pay £5, but after bank/ transaction fees vendor gets £4.50 of the £5, they then buy supplies that vendors on gets £4.05 of the original £5. Even if you only used cash, others would still use card so the worth of money goes down? 

Hope that makes sense, that's my thoughts at least 😅

[Mcgrimes]

20 minutes ago, Happypanda88 said:

Can you name one  ? 

 

USD - it’s accepted globally and isn’t even backed by anything! 

[Happypanda88]

24 minutes ago, Mcgrimes said:

USD - it’s accepted globally and isn’t even backed by anything! 

The USD being accepted globally does not imply that it is a store of value, especially when it is worth only 2% from a hundred plus years ago.

No fiat currencies in my book are a store of value.

 

[ZRPMs]

1 hour ago, Anteater said:

Well that's not a fair comparison - buying jelly-beans would be a better store of value than that

I've looked at income protection/illness insurance several times in the past as on paper it's something that would have made sense for me to have, but after reading a lot of small print I was never able to get any confidence that I'd be able to actually claim successfully if I needed to.

Exactly, As my illness wasn't listed and I had a small rental income. I was told the 2 payments I had were really a good faith payment and that I wasn't covered for my situation. They then had the brass neck to tell me it was good cover when I cancelled the policy. Best to find out how much the insurance costs. Then save it as cash, silver, gold. Even wine gums would be better than the insurance policy.