willthrill81 wrote: ↑Sat Mar 06, 2021 5:32 pm
To be fair, many with that anti-gold sentiment don't want gold because they view the long-term real return as likely to be zero and
they don't want to take on gold's volatility. While I definitely see that argument, I would have a hard time passing up gold entirely to instead take on hefty exposure to nominal bonds that are completely exposed to inflation risk.
Buying a treasury bond is lending to someone who can print more money, change interest rates, revise taxation, modify the rules.
For high net worth individuals, those that can get by on perhaps 1% SWR type withdrawals, wealth preservation might take priority over rewards. Perhaps a ancient Talmud type asset allocation, a third each land/commerce/reserves held via geopolitical diversification of a London home, US stocks, physical gold stored around the world. Apply a 3% SWR to the stock holdings to provide regular income and should that fail you have the gold to fall back upon to perhaps liquidate it and buy stocks to 'have another go'.
If you opted to live in that London home, spending in inflation adjusted Pounds, and perhaps opted to hold silver instead of gold then historically since 1900 that asset allocation supported a 1.5% PWR (worst case). In the average case a further 3.5% real gain was evident, oh and as historic rental yields averaged 4.4% then at a third of wealth in properties that was another 1.4% imputed rent benefit in effect thrown in on top.
As gold wasn't "outlawed" in the UK (as it was in the US 1930's to mid 1970's), with gold instead of silver the figures were near the same, a slightly better PWR of 1.6%, a slightly worse additional average real gain of 3.4%.
Contrasted to a all US stock alone holdings where a 1.5% PWR on averaged saw a further 5.5% additional real gain. Simple sum of those 7%, compared to 1.5% PWR, 3.5% real, 1.4% imputed rent that sums to 6.4%. Factor in taxation issues on top of that and subjectively it could swing either way, might broadly be considered as comparable, but with one having the greater geopolitical diversification and potentially the better tax risk reduction.
There are other quirks involved, such as pre 1932 UK and gold/money were exchangeable in banks by law at a fixed rate. So you might have opted to convert gold to money and then lend that money to the state (buy Treasury bonds) and be paid interest. Which was very much like the state offering to pay you for it to securely store your gold. Which could be considered as gold having paid a dividend.
Old Money (generational wealth) mantra advocates "a third, a third, a third", land, art, gold. A Cambridge University study of John Maynard Keynes (English economist) art collection observed that the longer term financial returns from that compared near equally to that of stock total returns. Some don't like art and might prefer to hold stocks instead, some don't like gold and might also prefer to hold stocks instead. Each to their own.