I have read that some people plan to convert their PM's to shares when the Dow:Gold ratio hits 1:1.... ? That a high Dow:Gold ratio is a boom and a low one is a bust... ? At one point, gold is undervalued/shares overvalued, at the other, it's vice versa? I see the Dow:Gold ratio has been falling for a number of years. I don't see any shining light that would make it climb again any time soon. So I'm trying to put 2 and 2 together, and I think I just saw a spring pop out of my head, with a cog attached. Can anyone recommend an easy way to understand when to do what? Because it seems like a good barometer, if only I could understand it better. Looking for a long term strategy, to retire as comfortably as possible. (Circumstances: 28yrs to retirement, only child about to turn 18, owe $137k on $500k house, earning capacity increasing 2012, newbie stacker.)
you're stacking PM's for the wrong reasons, if you are in them to make a captial gain then you shouldnt be. PM's are a hedge against inflation and a way to save money (Gold is money) which will be worth its weight in the future. A good Armani suit was worth an oz of gold in 1910 and it the same now. So when you retire in 28 years owning gold will still be a wise choice? Just think in 28 years the year of your retirement theres another GFC, suddenly your Super is worth 30-40% less and you're forced to work another 10 years to get it back. Now along the way if you make a capital gains from PM's thats an extra bonus.
There are many people on this forum who would disagree with you. They see PMs as just another investment class that was "undervalued, and about to boom". Bit like housing in late 90's and early 00's. Not saying I agree/disagree with it, just saying.
Oh yes thats cool and I appreciate different views, lets put it another way, if gold was to appreciate less than the current bank rate for the next 10 years would you continue to own it?
Thanks for the responses! I'm looking to build a hoard of physical as an inflation hedge, that's true. I don't want to have money that has to work harder and harder in the bank, just to avoid going backwards. I didn't expect I'd see physical PM holders with an exit strategy into shares though (using Dow:Gold as their barometer). I thought they were mostly hoard builders. I have a feeling jumping backwards and forwards between asset classes would involve a fair bit more risk and money leakage.
I'm much like you Ag-ness, I'm stacking to improve my wealth in preparation for retirement. But also I really love silver so it is an enjoyable way to invest. Eventually (but not yet) I will cash out....maybe to gold or property as that is my first intention. However when the time comes, another asset class ( stocks, another commodity or business opportunity) may have appeared so I am flexible there. Even after its all over and the fat lady has sung I will still have a stack of silver albeit a very much smaller one. I really love the stuff.
I know its not a good time to be in housing but is it worth having a PPOR just for the tax dodge it provides? I am currently wondering whether selling my PPOR and investing in silver would be worth the tax hit of CGT? ATM the mo I have a foot equally in both camps and the way forward is not so clear cut.
Please don't ask this question on a PM stackers forum and expect an unbiased answer - exactly the same as I wouldn't ask this on a property forum and expect an unbiased answer!! malachii
One of the recent vids/posts/links about capital gains and inflation (secret tax?) explains a lot. In an inflationary scenario with a concomitant increase in POS, the vast majority of any increase in value is taxed as capital gain. It seemed to me, we only win if everything else stays the same: it won't. Unless silver bubbles over... The govt gets you with CGT as well as inflation. Someone will have to link to the source. I'm about to take my three sons under five to the movies!
1981 - 2001 : hardly inflation edge. Yep, thats gold, and yep in that 10 yo period it would erode your wealth.
I think the fact goverments are debasing currencies will guarentee PM's as a hedge for some decades or until WW3
Not going to advise you either way but will point out that selling your PPOR does not incur CGT (as long as you have lived in it for in excess of 12 months).
