Comment by OrvalWintermute | Hacker News Reader

Comment by OrvalWintermute | Hacker News Reader

Parent Full thread

OrvalWintermute

Gold is great as a hedge for many things, and that is exactly how I use it. However, I am not suggesting all people have to have a physical supply. There are 3 ways at least that it is regularly used as an investment

Physical Gold

Gold via a fund e.g. SPDR (GLD) https://www.spdrgoldshares.com/

Gold mining stocks e.g. SPDR (GLDM) https://www.spdrgoldshares.com/

Gold does work as a hedge against sustained inflation, but not momentary blips in inflation https://www.investmentnews.com/gold-standard-fight-inflation...

Gold also works as a hedge against currency hyperinflation

First of all, most fiat currencies don't last very long. https://medium.com/@bewdliberty/on-a-long-enough-timeline-th...

2nd, diversification across asset classes still makes sense https://www.morningstar.com/portfolios/why-portfolio-diversi...

In the case of a weakening dollar, sanctions as weapons, and the potential rise of a new basket, or reserve currency, there are many reasons why gold may make sense to add to a portfolio.

>Gold is an unproductive asset

Anecdotally, my gold hedge via GLD is up >20% per annum in capital gains.

If the US dollar is debased more through excessive printing, it will go much, much higher.

> Gold also works as a hedge against currency hyperinflation

currency hyperinflation is often caused by (very) bad monetary policy (or other decisions) from the gov't, or an apocalyptic event of some sort - which, even if you try to hedge, will not save you from the fallout from such an event.

You'd be better off moving away to a more stable country, or if there's no where to move, you'd be needing guns and ammo. Either way, investment returns would be the last thing on your mind.

A hedge is a financial instrument that is negatively correlated with an exposure. A hedge position is not supposed to have a positive return, it's supposed to offset another position, so that the combined return of both positions is zero, or close to zero. You're using financial jargon in an attempt to sound clever, but you only sound like somebody who doesn't know what they're talking about.

> You're using financial jargon in an attempt to sound clever, but you only sound like somebody who doesn't know what they're talking about.

Stop with the snark, you're violating the rules.

> Hedge defined "To hedge, in finance, is to take an offsetting position in an asset or investment that reduces the price risk of an existing position. A hedge is therefore a trade that is made with the purpose of reducing the risk of adverse price movements in another asset. Normally, a hedge consists of taking the opposite position in a related security or in a derivative security based on the asset to be hedged."

https://www.investopedia.com/terms/h/hedge.asp

> "What Are the Advantages of Buying Gold Over Treasuries? Gold is popular among investors because it can be used as a hedge against currency devaluation, inflation, or deflation. It’s also liked for its ability to provide a safe haven during times of economic uncertainty. When it comes to gold and taxes, depending on your income level, Treasury investments are typically more favorable tax-wise."

https://www.investopedia.com/articles/investing/092514/bette...

I have hedged my heavy US bond & US Treasury & US stock positions & US dollar positions with another asset class.

My hedge is producing outsized returns is the anecdotal observation.

> I have hedged my heavy US bond & US Treasury & US stock positions & US dollar positions with another asset class.

No, you just have a portfolio that consists of a bunch of random assets.

> No, you just have a portfolio that consists of a bunch of random assets.

No, I have a diversified portfolio that consists of 5 asset classes divided into percentages that match my risk appetite.

While I am regularly in derivatives too, currently I am not for some specific reasons.

What is your risk appetite? How does gold affect the risk profile of your portfolio, specifically in terms of volatility and value-at-risk, and also more generally?

Reply on news.ycombinator.com