Is Gold Cheap? Who Knows? But Gold-Mining Stocks Are

@https://twitter.com/candicelanier

Candice writes for several publications, including The Christian Post, Red State, The Black Sphere and Patriot Update. She is the Science & Tech Editor at the Minority Report Blog and the founder and Editor-in-Chief at Front Lines. She's also the founder of Candice Lanier's Tech News and works as a computer consultant. Additionally, Candice is an antiques dealer.

Christophe Vorlet

Growing numbers of investing experts have been declaring that gold is a bubble: an insanely overvalued asset whose price is bound to burst.

There is no basis for that opinion. And understanding why can help point an investor toward clearer thinking about frenzied markets.

Sure, gold seems expensive. At its recent price of $1,813 an ounce, gold is off only slightly from the record high of $1,912 touched on Sept. 6 (unadjusted for inflation). Gold is up more than 40% over the past year, largely on fears that paper currencies like the dollar won’t retain their value.

But that doesn’t mean it is overvalued. Unlike bonds, which provide interest income, and stocks, which produce dividends and earnings growth, gold generates no cash flows. As John C. Bogle, founder of the Vanguard funds, told me two weeks ago, gold “has no internal rate of return.” As a result, there isn’t any reliable way to tell what it is worth.

So the people who say gold is in a bubble might well be right. But the people who think gold is heading for $2,500, $5,000 or $10,000 also might be right.

Folks on both sides would be more intellectually honest if they admitted that they are just guessing what gold is worth. With no measures like price/earnings ratios or bond yields as benchmarks of value, figuring out whether the precious metal is cheap or dear is like trying to solve a Rubik’s cube while you are blindfolded.

Decades ago, the great investing analyst Benjamin Graham pointed out that there is no such thing as a “good” stock; every company is good at one price (when it is cheap) and bad at a higher price (when it is too expensive). But try asking a gold bug at what price he would sell, and you are likely to get an answer somewhere between $6,000 and “never.” Ask a gold skeptic at what price he would buy, and you be met with silence, followed by “never” or a quavering “$900, maybe?”                     More

wordpress visitor counter

Get Free Email Updates!

Signup Now to Receive Updates and Alerts!

We will never give away, trade or sell your email address. You can unsubscribe at any time.

More in

Screen Shot 2015-02-14 at 7.59.11 AM

Weekly Republican Address: Gov. Mary Fallin (R-OK)

Steve FoleyFeb 14, 2015
Screen Shot 2015-02-14 at 7.22.41 AM

We Are Grateful U.S. Army Will Honor Fort Hood Terror Victims with Purple Hearts

Steve FoleyFeb 14, 2015
cdn-media.nationaljournal.com

GOP Will Have Fix In Place if SCOTUS Rules For Plaintiffs in ObamaCare Case

Steve FoleyFeb 14, 2015
Keystone-XL-Pipeline-Prot-007

Americans for Prosperity Launches Major Effort Urging Keystone Passage

Steve FoleyFeb 14, 2015
Screen Shot 2015-02-14 at 6.57.09 AM

Grabien Montage: ‘Brian Williams: Disqualified from NBC … Qualified for Washington’

Steve FoleyFeb 14, 2015

The Minority Report is a network of websites devoted to Conservative & Libertarian politics in the United States. In 2014 the network had over 20 million page views!

On this site you'll find posts & links to some of the best and most comprehensive center-right news and opinion on the net...

September 2011
M T W T F S S
« Aug   Oct »
 1234
567891011
12131415161718
19202122232425
2627282930  

Archives

Copyright © 2014 The Minority Report Network