rms 14.5 cents fair value, page-61

"Low interest rates have nothing to do with the gold price.
In 1987 when their was inflation problems and the gold price crashed interest rates were at all time lows and it didn't keep the gold price high"

Interest rates are relevant to gold when there is persistant inflation as there was between 1966 and 1980.

Gold was rising too much in the 1970s, so interest rates had to rise to 20% to break the gold bull market.

The period between 1980 and 2000 was inflationary for most real estate and stock assets, but DEFLATIONARY for commodities, that is why gold dropped in 1987, as gold moves in tandem with commodities and commodities were depressed until 2001.

As you know gold gives no yield, so as interest rates approach ZERO, holding gold becomes more appealing to investors, and prior to this year gold has averaged returns in the teens every year.

Interest rates cannot rise now due to large deficits on govt and private balance sheets.

Three safe havens.
Cash is being devalued over time so it is only a short term safe haven
Bonds are one of the biggest bubbles in history, with some countries even offering negative interest rates.
Gold has been a safe haven for millennia and has no counter party risk and cannot be devalued by central banks.

For a buy and hold I see precious metals as the best option UNTIL real interest rates turn POSITIVE.



"The gold price is way too high to be used as any sort of investment protection or inflation hedge. It has basically become high risk investment."

High compared to what exactly?

Gold is less than double its high from 1980, and considering how scarce gold is, it is quite affordable relative to income in Australia.


"In my opinion gold is behaving exactly like a textbook analysis"

What text book is that? Gold has been considered a "barbarous relic" in the last few DECADES.

It has been the absence of gold recommendations for portfolios that has led to gold accounting for less than 1% of global assets, the long term average is much higher.