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Weekend reading: Gold bugs really bug me

Some good reads from around the Web.

One thing that has put me off investing in gold over the years is people who invest in gold.

At the height of the property boom, smug landlords who’d come to own 5-10 properties and told you that house prices never went down – ignoring any evidence presented that they did – were infuriating.

But they had the good grace not to bring global conspiracies, canned foods and shotguns, or the Mayans and Egyptians into the conversation. They also rarely told you that you were an idiot, or that you were being paid to lie.

At their worst, ‘gold bugs’ do that and more. The lunatic fringe of these investors recite a gabbled litany of sacred truths, acronyms and concatenations to rival a religious order. Non-believers are invariably stoned.

Take the article Cash out of gold and send kids to college by Peter Tasker in the FT [1] this week1 [2]. Tasker points out the gold price has softened, despite European meltdown fears, low interest rates, and imminent monetary easing. He suggests that might be because after rising nearly seven-fold to its peak of $1,900 in just 10 years before falling to around $1,600, the current price might be high enough:

In inflation-adjusted terms, gold remains within spitting distance of the all-time high it reached in 1981. After that it embarked on a 20-year bear market, which delivered a loss of 80 per cent in real terms and a far greater opportunity cost as other financial assets soared in price.

Even now the total market value of all the gold in existence – which, remember, generates a return of precisely zero – exceeds the combined capitalisation of the German, Chinese and Japanese stock markets, with all the productive capacity they represent.

I think those are pretty interesting statistics, at least worthy of consideration.

Here are some quotes from the comments this article received:

And so on. A few sensible voices make some good points in favour of gold, but they are drowned out by the noise. It is always thus when anyone questions the cult.

It’s very hard to imagine this kind of hysteria greeting anyone who said that shares were too expensive, that bonds were over-priced, that property had further to fall, or that cash was a poor store of wealth. Gold bugs see themselves as hardened contrarians – odd given so many sing from a facsimiled hymn sheet.

Some of the charges are ridiculous, such as the FT being on a quest to lower the gold price, or hellbent on publishing anti-gold propaganda. The FT has of course run plenty of articles over the years highlighting the case for gold – just this morning it recaps both sides of the argument [3], including what it terms “strong arguments in favour of holding the precious metal”.

I’ve come to believe that there is a case for an allocation for gold, and I’d like to add to my very small horde stored at Bullion Vault [4]. Every time the price approaches $1,500, I consider buying some more. If I do so, I hope to discover that subscribing to conspiracy websites and inquiring about a Panamanian passport are purely optional.

Hopefully the fact I own a tiny amount of gold – and that Monevator is too titchy to be worth bullying – will keep the more rabid gold supporters from commenting on this article, but anyway if you feel the need, please be warned I’ll delete anything I judge to be either rude or extremist.

Sorry, I mean I’ll be “censoring” it.

From the investing and money blogs

Book of the week: Strangely enough, while we all expect websites like Monevator to be free (much to the disappointment of my accountant) we’re happy enough to spend money on ebooks. In fact, explains Kate Harper in How to Publish and Sell Your Article on the Kindle [16], there’s even a growing market for short articles on the device. If you’ve got wisdom to share but it won’t stretch to a book – or a blog – then give it a go.

Mainstream media money

Product of the week: Engensa is offering cheapish loans [31] to install a solar panel system, which it claims can return you 10% in terms of savings over the years. The Guardian has a summary [32]. I like the idea but I’ve no idea if it’s cost-effective (and I’m no financial adviser [33]) so please do your sums carefully.

Like these links? Get them emailed [34] to you every weekend.

  1. Google the title if the article is restricted to you [ [38]]