Precious metals.. bubble? good investment?

[boost]

A friend of mine is starting to buy precious metals and is convinced by some quacky newsletter/website called Nation Inflation Association, which runs on fear mongering from what I've read, that this is a fool-proof investment.

The basis of the claim seems to be that precious metals, unlike fiat currencies, are immune to bubbles. While gold does have intrinsic value in that it is a great electrical conduit, much of it value seems to be derived from the same faith faith-of-society that gives paper money value. Why is this not the case? Or is it the case? How can precious metals be bubble proof?

I guess we can discuss the practicality of investing in gold... insurance, brokerage fees, storage fees, etc.. but I'd like to cover the basics of how it is or is not susceptible to being a bubble.

[Renton]

I know nothing of the subject, but I can infer from the Law of Corruption of Advertisement that since you can't watch cnn/fnn without being inundated with repeat viewings of the goldline commercial that it must be a poor investment.

[wufwugy]

Immune to bubbles? LMAO Tell your friend to stop listening to his own opinion

The only good investment in gold right now is if you think it's going higher and you know what signals the crash and you'll sell before it happens. I haven't been following this virtually at all, but it's very probable that we're at the very end of the bubble growth, it's going to sit close to where it's at, fluctuate, then eventually pop. Housing was similar. If you're investing in gold right now, you must keep in mind you're not investing but speculating, and you should learn the ins and outs of who's selling, why, and what they're looking to happen. It's just another financial game, which is what most "investments" have become

[boost]

Right right, but how do I put this in a way that he'll understand? How can I dispel the claim that precious metals are in someway different from other investments? I really don't want the opportunity to say "I told you so!" But I also don't want to be that guy, "click the mouse, lose the house. You can't win at gambling. The house always wins. You've got a gambling addiction, but its ok, I'm here for you, we can get through this."

Our snake oil radars picked up the bullshit a mile away, so, for us, it's easy to just dismiss this crap. I have tried to google around a bit, but I can't seem to find the right string.. I just get a bunch of precious metals cheerleaders..

[swiggidy]

I googled "gold bubble" and this is the first result
The Shocking Truth Behind the Gold Bubble (BAC, GFI, GLD, IAU, JPM, UNG, UPL)

It sounds way to smart for my attention span at the minute, and means it's eons above your friends head, simply because he believed something is immune to a bubble.

I suggest showing your friend this article and while he's hunched over your laptop sneak up behind him and smack him in the face with your dick. Or just show him this thread, I donno.

[wufwugy]

How can I dispel the claim that precious metals are in someway different from other investments?

Because NO investments are immune to the whole pricing dynamic; things like supply/demand ratio, inflation, speculation

The only realistic and meaningful ways the price of gold can go up are 1) changes in supply/demand i.e. somebody loses a portion of gold at the bottom of the sea and the markets reflect the supply loss or somebody finds a big ass mine and harvests more gold and the markets reflect the supply increase, 2) holding its value standard against monetary inflation, this is a slow process and currently very tiny given we're doing disinflation, or 3) financial speculation i.e. market wagering, this accounts for virtually all short term movement and any huge spikes outside of the aforementioned rare supply/demand crunches/surpluses

Breaking them down further

Supply/demand: this isn't changing in a meaningful way. It is, however, changing in a fake, bubbly way, just like housing did. That shit crashed and ALL the gains were lost if you weren't savvy and knew how to exploit the bubble. Artificial demand is being pumped up, but it's not for any solid economic reasons. Compare the housing of the last few years and oil of the last decade. Housing increases were bubbled fake demand based on marketing, fraud, and cascading econ effects; oil, however, has seen dramatic real demand increases in places like China and India actually using the product for real necessities. Once the housing demand started dropping, it plummeted because that's how bubbles work, but oil can't do that because demand won't drop because the demand is based in necessity

inflation: this is long, long term shit. It's also a "crummy" investment because if you're a smart investor, its ROI is too low for you. Gold prices of recent do not reflect inflation one bit, but only over the decades and decades will you see inflation reflection. Even then, you probably get a much better ROI with a good government bond or interest bearing account. Inflation is the only real "good" investment in gold, but it's only better than holding cash under your mattress

financial speculation: this is what's going on now. If you don't hear about a huge crunch or surplus of supply or retail activity, yet you're seeing dramatic shifts in pricing, it's because of speculation, either in inadvertent bubble form or manufactured Wall Street form, or a little of both.

Here's the rule of thumb: if something is a "good investment" and people are buying it for that purpose, it's bubbling. No ifs ands or buts. Good actual investments are for when people aren't focusing on the investment purpose. If, for example, a whole bunch of new wealthy Victorian-esque people suddenly came into society, their personal desires for gold would boost up the price in a non-bubbly way, but that ain't happening.

Something else to keep in mind is that investment is quickly becoming a thing of the past. It will never go away by any stretch, but the big big big thing is speculation. The banks have a choice between investing in housing and making millions, or artificially pushing housing trends then speculating on trends and reaping billions. The former is good for society, the latter is good for banksters, and the latter is becoming the primary mover of markets. The amount of "value" in derivatives alone is dwarfing the entire US GDP

[mbiz]

not sure gold is a great investment still , because it already has been for a while. Gold CAN go down in value.

I recently invested in a uranium miner because i see nuclear power as an inevitability (hopefully in my lifetime in western world, but sooner in china). Im like the furthrest thing from an expert on investments, but i think you will surprise yourself that you can use your common sense and come out ahead. Minerals are a finite resource and thus generally a good long term investment if the company is solid imo. Key word being long term, short term trading looks so difficult to me that id rather just work a 9 to 5 and play poker.