# Gold/Silver or real estate?



## revv (Oct 8, 2014)

I have some bought some gold/silver a while ago and was wondering if I should keep it or sell it and buy a condo to rent? 

Right now it doesn't seem like gold or silver is going anywhere and it is not making me any money while real estate would probably make me money right?


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## Just a Guy (Mar 27, 2012)

My bet would be that real estate is headed downward at some point, it's been a good run, but I can't see much more to drive it higher and many things which could drive it lower. Of course, there are deals to be found, but they are few these days. 

Not sure what is safe and what can increase.


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## james4beach (Nov 15, 2012)

Precious metals are just another asset class. Long term investment strategy is more or less the same as the stock index or anything else:

_You buy, ideally at a discount or depressed price. Then you hold it for a very long time. If you're going to cash out, ideally you look to unload it at a time when it's super hot._

Now with that in mind, look at these charts:

5-year chart of gold priced in CAD
5-year chart of REITs as a proxy for real estate and rentals

If anything it's the right time to the opposite of what you propose. Don't sell your precious metals at a time they are somewhat depressed. This is the time to buy more.

And real estate has been super hot for many years. You certainly aren't getting in at a good buying opportunity


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## Oldroe (Sep 18, 2009)

You bought gold and silver at the top of the market and loss money. You want to buy into the housing market at the top. See a pattern here.

Even if real estate corrects you still have income if you structure it to survive. 

You need to time markets better.


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## lonewolf (Jun 12, 2012)

Rev If you wanted income from your gold you could switch your gold into a Swiss gold annuity. 250,000 Swiss Franks minimum requirement


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## fatcat (Nov 11, 2009)

my belief is that real estate is a better investment than gold/silver
ASSUMING
you know how to pick a good income property and are prepared to put up with the upkeep, bookeeping and tax issues ... not to mention the possibility of tenants from hell

gold/silver is best thought of as disaster insurance and not as an investment since it is so unpredictable and can go long periods returning nothing
it certainly earns nothing

but right now every asset class is scary
they all seem to be topped out

if it were me i would sell the pm and buy good well capitalized defensive stocks probably
good luck


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## Just a Guy (Mar 27, 2012)

From everything I've read, gold and silver are more a preservation of wealth (buying power) than it is an investment. Of course, every once in a while it does shoot up, but generally corrects again back to the preservation. 

Real estate tends to increase in value and creates cash flow, but the market is high right now, so finding investments is really tough.


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## fatcat (Nov 11, 2009)

Just a Guy said:


> From everything I've read, gold and silver are more a preservation of wealth (buying power) than it is an investment. Of course, every once in a while it does shoot up, but generally corrects again back to the preservation.
> 
> Real estate tends to increase in value and creates cash flow, but the market is high right now, so finding investments is really tough.


but it is a very poor and totally erratic preservation of buying power (i.e. inflation)



> Inflation hedge? Nope. A chart of gold prices versus year-to-year changes in inflation – one measure of unexpected inflation — shows a random cloud. Another chart showing the rolling 10-year return on gold versus Consumer Price Index also shows a random pattern. Trailing annual returns to gold investors ranged between almost negative 6% per year to nearly 20% between 1985 and 2012, while inflation rates showed a more narrow range of 2.3% to 7.3% a year. *Conclusion: Investors can’t hedge against unexpected inflation by holding gold, since the returns from gold appear to have no clear relationship to inflation.*


http://www.forbes.com/sites/danielf...-hedge-for-anything-unless-youre-a-centurion/

gold isn't good for much except armageddon (and it's not very good even for that)


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## james4beach (Nov 15, 2012)

fatcat said:


> gold isn't good for much except armageddon (and it's not very good even for that)


Gold is also good at _outperforming the TSX_. In the last 10 years, gold has outperformed the XIU + dividends.

10 year total return of gold in CAD: 190%
10 year total return of XIU+dividends: 102%

And that's despite TSX being practically at an all time high right now and gold being somewhat depressed. Gold has still kicked the TSX's *** in the last 10 years.

I think you're being a bit unfair saying gold isn't good for much. It's another asset class. People on this forum are tripping over themselves trying to find things that beat the TSX, and here's one asset class that has beaten the TSX over a decade!


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## Oldroe (Sep 18, 2009)

You can't buy anything with gold and you can't eat it. Just sell it to Harold for 20 cents on the dollar.


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## fatcat (Nov 11, 2009)

james4beach said:


> Gold is also good at _outperforming the TSX_. In the last 10 years, gold has outperformed the XIU + dividends.
> 
> 10 year total return of gold in CAD: 190%
> 10 year total return of XIU+dividends: 102%
> ...


james, i think you have pointed to the precise problem with gold ... it is an erratic asset ... it will have good stretches and then bad stretches ... and those bad stretches can ruin the earning power of your portfolio

obviously you would not want to compare golds performance over the last *5 years* to equities since equities have creamed gold ... and you can't tell the future but i would rather own equities in solid companies going forward

it certainly still is an asset class and always will be i suppose but, as the article i reference points out, many of the classical "uses" of gold simply don't measure up

it IS very useful for hyperinflation though ... if your local currency craps out, you are going to want to have put some of it in gold

the classical 5% is too much though .. i would say more like 2-3% even then i can find better places to put my money


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## Westerncanada (Nov 11, 2013)

james4beach said:


> Precious metals are just another asset class. Long term investment strategy is more or less the same as the stock index or anything else:
> 
> _You buy, ideally at a discount or depressed price. Then you hold it for a very long time. If you're going to cash out, ideally you look to unload it at a time when it's super hot._
> 
> ...


Fully agree.. now is the time to be buying Gold/Silver.. definitely do not want to unload when prices are this low. Lots of solid buys in the mining space right now when prices are in the depressed situation they are.


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## james4beach (Nov 15, 2012)

You're saying gold is erratic but stocks aren't? Have you noticed what stocks have done since the late 90s? There have been not one, but two, -50% crashes

Stocks are just as volatile as gold. What's nice is they may be volatile at different times. Heck, the price of gold (in CAD) was extremely stable during the financial crisis, a time where stocks crashed 50% - or more!


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## fatcat (Nov 11, 2009)

james4beach said:


> You're saying gold is erratic but stocks aren't? Have you noticed what stocks have done since the late 90s? There have been not one, but two, -50% crashes
> 
> Stocks are just as volatile as gold. What's nice is they may be volatile at different times. Heck, the price of gold (in CAD) was extremely stable during the financial crisis, a time where stocks crashed 50% - or more!


what i am talking about is this: in 1979 gold was $459.00, it took until 2005 when it reached $513.00

that is 26 YEARS of dead money ... money that returns absolutely NOTHING ... no interest, no dividends, nothing ... 26 *years*

this is what gold does ... this is how gold behaves ... this an awful, terrible, even catastrophic place to put your hard earned money

there is no way johnson and johnson or walmart or exxon or berkshire are going to stiff you like that, you will have pullbacks, even big ones but these companies sell stuff people actually need and actually use ... unlike gold

gold is as much a fantasy as it is an actual asset ... it's a state of mind 

i do own a little in the forms of coins and jewelry, nothing wrong with that but to put big money in gold makes zero sense ... to me anyway


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## james4beach (Nov 15, 2012)

This is true, gold was dead money for a very long time. It's only around 2000 that it started taking off.

The same can be said for commodities as a whole, if you look at the graph of the $CRB index. Dead money until the millennium.

So I take it you wouldn't invest in commodities or anything like oil or miners?


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## hboy43 (May 10, 2009)

fatcat said:


> but to put big money in gold makes zero sense ... to me anyway


Me also.

I would invest in oil and miners even though they have been dead money at times because unlike gold, oil and materials are ultimately useful. Plus I don't have to buy at the peak, so I don't. Back in the day, I made money on Inco, Alcan after many years of being dead ... and after many years absence in the mining sector I have TCK.B at under $18, not at ~$50 of recent years. COS will likely prove rewarding at $9 instead of $55, the decade high.

Some people for whatever reason have to find the worst possible scenario with very low probability and focus on that instead of what is a reasonable scenario and very likely. I often wonder what financial trauma they or a close relative suffered to so skew their world view to the irrational. 

I have some sympathy for these people, for something similar happened to me (non-financial) and it took me 30 years to realize the truth of the situation. Hopefully those with investing trauma can come out of it quicker than 30 years.

hboy43


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## fatcat (Nov 11, 2009)

james4beach said:


> So I take it you wouldn't invest in commodities or anything like oil or miners?


you are correct ... i own SU for a specific purpose and that is to hedge us dollar inflows of my social security ... oil and the canadian dollar generally play against each other ... other than that i avoid commodities and miners ... and reits

you don't need gold or commodities or reits or even certain sectors of the economy, like cyclicals for example 

stephen jarislowsky and warren buffet are two examples of self-made billionaires who avoid these assets and sectors almost entirely

ps. which is not to say if i saw an opportunity for short term hold especially with a dividend payer like POT or TCK i might go in if i had spare cash .. i have held both in the past


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> Gold is also good at _outperforming the TSX_. In the last 10 years, gold has outperformed the XIU + dividends.
> 
> 10 year total return of gold in CAD: 190%
> 10 year total return of XIU+dividends: 102%
> ...


Gold's going up at twice the rate of the TSX index, has beaten the TSX index yet only the index is over-valued?
Maybe and maybe not ...




james4beach said:


> I think you're being a bit unfair saying gold isn't good for much. It's another asset class.


+1 ...




james4beach said:


> ... People on this forum are tripping over themselves trying to find things that beat the TSX, and here's one asset class that has beaten the TSX over a decade!


It should be considered ... but on the other hand, I suspect some are overlooking the boring, run of the mill stuff.

Taking at look at the ten year performance of some of the boring stuff ...
BMO +110%, BNS +133%, TRP +171%, BCE +188%, FTS +209%, EMA +244%, Rogers +250%, ENB +436% and MRU +478%.

I suspect some are waylaid by the sexy choices or sure fire choices.


Cheers


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## dogcom (May 23, 2009)

Oldroe I don't think you would have any problem cashing in gold and silver coins. Of course it would be harder getting value for it if you tried to buy something in a store with it. It would be the same for stocks as well, you wouldn't be able to just hand over stock shares to buy groceries. During meltdowns like a currency crisis or war or something then silver and gold coins may be the only thing a merchant or black market would take as payment besides bartering. Westerncanada I agree I wouldn't want to unload gold or silver at these prices and if I needed more insurance I would buy at these prices.

As far as prices rising like other underpriced investments I would be careful there. Gold and silver are anti central banks and they will do anything to keep the price down or in check and the can do this legally because they make the rules for themselves. They will one day completely fail and the price will explodes skyward and this could happen tomorrow or in 5 years or more if they can keep finding the physical metal to deliver to those they have to like China. As for the rest of us they could keep the scam going for decades by just typing zeroes on a computer and not allowing us to get the metal and settle in cash instead.


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## james4beach (Nov 15, 2012)

I'll just describe a bit of my thinking so others know what's underyling my plans. Like other people, I see gold as another asset class. It's a very small percent (less than 5%) of my exposure and I hold way more cash and bonds than gold.

But personally, I think gold and commodities in general are in a bull market and I think the secular bull trend started in 2000. I think a fundamental underlying reason for this is that heavy money printing started in the mid 90s, in the Greenspan era, and "jumped the shark" (attained wacky new levels) post-2000. This money printing has accelerated as the economy fundamentally weakened, hit a wall in 2000, and has never regained its prior strength. And it's logical that central banks have taken to money printing as an avenue to make up for all the fundamental weakness in western economies. And it just keeps increasing; post 2008, they ramped it up with ZIRP and then this crazy QE stuff.

I think that 2000 (or let's say the mid/late 90s) is a line that delineates two very different eras of western/American markets: on one side, fundamental organic growth and the rise of real wealth -- things like real wage growth and a true economic boom. On the other side of the line, where we are now, we have a chronically poor economy. Lack of jobs, no real wage growth, no organic economic growth. Occasional bubble spurts that end horribly as there are no fundamentals backing them up. You can see this reflected in a myriad of different indicators, charts and stats. Something changed very dramatically around 2000.

That being said, I think that while gold/commodities may have been dead money on the left side of the line, I think they are in a secular bull market now. And I think the reason for this is that western money printing (all central banks) floods the world with paper money. Signs we are in a secular bull market is that gold has indeed outperformed even the S&P 500 from its 2003 low! I don't see any reason to abandon gold as an asset class worth holding.

And when you believe you're in a secular bull market, and you see the price on the low side and currently out of favor, you BUY. It's that simple. That's why I bought in December, and January, and why I'm hoping to buy more in the summer. There is absolutely no reason to think the secular bull trend has ended.


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## Oldroe (Sep 18, 2009)

Where the gold is king in a financial crisis theory gets fuzzy is. That transition period between paper money and hard currency. Likely years and no infrastructure to use gold for currency.

If this ever happened I would trade a few lbs of gold for the American way.


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## dogcom (May 23, 2009)

I believe what happens is important countries get together and put their cards on the table and work out the new money system. By cards this means how much gold generally do you have to back up this new money so we can have trust in the value of the money. Then of course you put in regulations and rules which western central banks have completely broken or changed them so they can scam the system to pay for military and social programs and so on. The world is sick of this new dictatorship over them by the western military and reserve currency status but it takes time as you say to back the system and put in the infrastructure to change this. 

China is setting up the new AIIB bank which which countries like even Britain are signing up to legitimize it. Then we have Russia setting up its own SWIFT system and we have these countries sucking up all the physical manipulated gold by the west so they can back up their currency when asked or when the time comes.


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## fatcat (Nov 11, 2009)

james, the problem with your theory is this: you have no contingency plan in place if you are wrong ... you may be right but you also may be wrong and if you are are wrong, you have made a very expensive mistake ... a contingency plan would involve holding a significant amount of equities and you hold a pittance of equities, like less than 5% ... 

quite frankly you are natural candidate for harry browne's permanent portfolio: 25%-cash 25%-gold 25%-bonds 25%-equities, i don't think this is a good portfolio but it would at least make more sense than the extreme overweighting you now have toward guaranteed assets and precious metals

you just haven't faced the fact that you may be incorrect in your suppositions ... i would love to have 90% in equities but i remain at +-50% because i may be incorrect about the direction of equities

dog, you have chosen to invest based on a theory that fundamentally says "when central banks can no longer hold down the gold price it will skyrocket" ... that may be true but the question remains, how much opportunity do you lose by betting it all on gold ?

what if the central bank "conspiracy" takes 20-30-40 years to unfold ? and gold remains flat (until it of course skyrockets) ... you getting no yield, no payoff, you may not outlive the "skyrocket"


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## dogcom (May 23, 2009)

You are correct fat cat and that is why I don't put everything in gold and silver and such. I have been overweighted in the past as you know and have lost money on that account but I still hold equities even though the market is very high. I also have rules like never borrow or go on margin to invest in equities or these things like gold even if I thought it looked good. People who are trumpeting on this forum to borrow to buy equities could be right but could be in big trouble if equities face a long decline which is possible just like what gold is facing today.

On gold and silver equities I have been investing in them T.gal style and have done ok by swing trading half the shares as they go up and down while I hold them. My rules holding me back from going all in and borrowing, have saved me from the problems many holding gold and silver have seen. The big problems all investors face is their mortality, so even if our grandchildren look back in time it may appear for example that holding gold was a slam dunk but in real time it is a different story. This is the mistake many investors are making on the forum is they are talking about the past in stocks over the decades, but if the decline comes living through it for years in real time will be much harder. For someone like hboy who really practices and thinks long term it won't be a problem, but for the greedy ones borrowing and counting the dividends to pay off loan interest or counting all their future gains it will be a different story.


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## fatcat (Nov 11, 2009)

dogcom said:


> You are correct fat cat and that is why I don't put everything in gold and silver and such. I have been overweighted in the past as you know and have lost money on that account but I still hold equities even though the market is very high. I also have rules like never borrow or go on margin to invest in equities or these things like gold even if I thought it looked good. People who are trumpeting on this forum to borrow to buy equities could be right but could be in big trouble if equities face a long decline which is possible just like what gold is facing today.
> 
> On gold and silver equities I have been investing in them T.gal style and have done ok by swing trading half the shares as they go up and down while I hold them. My rules holding me back from going all in and borrowing, have saved me from the problems many holding gold and silver have seen. The big problems all investors face is their mortality, so even if our grandchildren look back in time it may appear for example that holding gold was a slam dunk but in real time it is a different story. This is the mistake many investors are making on the forum is they are talking about the past in stocks over the decades, but if the decline comes living through it for years in real time will be much harder. For someone like hboy who really practices and thinks long term it won't be a problem, but for the greedy ones borrowing and counting the dividends to pay off loan interest or counting all their future gains it will be a different story.


well said dog ... cash management is critical ... you borrow to buy equities and they tank, you find yourself in downward spiral of depleting assets and you still have to pay off the loan ... glad you are inequities to some degree ... james has less than 5% equities and that just isn't enough imo ... especially since if equities tank he has plenty of offsetting assets


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## Oldroe (Sep 18, 2009)

My position is the day after. If we go into no currency the sun will come up the next day.

Some live in fear of a correction. The sun will rise in the east and set in the west.

The Computer could not function after Y2K so we would all wake up broke pennyless and guess what The SUN ROSE IN THE EAST AND SET IN THE WEST.

We will be broke without gold holdings. Give me a gun way better than gold.

We have a few gold coins and the wife rings. That's why gold has been a turd for 52 of my 57 years. And 5 good years is still just a turd.


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## tenoclock (Jan 23, 2015)

Interest rates have been at a historic low for a historic length now, and this does not seem likely to change anytime sooner. The QE bubble could burst next week or next year or next decade - who knows, but I think this is not a healthy economic environment, not even in the US. Still I am 90% equities and 10% gold, coz I have 40 years of compounding in front of me. 

Regardless, OP wants an opinion on gold vs real estate, not gold vs stock.. and I think that's a no brainer. Gold is still low, Real Estate is at an all time high.


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