Gallup’s poll on Americans’ favorite investments always makes fascinating reading.
Every year, Gallup asks Americans to choose the best investment from the following choices: Real estate, stocks and mutual funds, gold, savings accounts and certificates of deposit, or bonds.In the years since the 2008 financial crisis and housing bust — after which Americans as a group briefly ranked gold as their favorite investment — real estate has once again swung back into favor:
But as Barry Ritholtz notes over at Bloomberg View, the most interesting thing is that there are some serious differences between the investment styles of the poor and the rich.
Statistics don’t lie, but the interpretation of them can mislead.
The smart investor is diversified, with some money in rental real estate, some in dividend-paying stocks and 10% in metals. Gold (and silver) are insurance. It’s a way to bet against the system as a hedge.
Just because the wealthy invest in stocks or real estate doesn’t mean they don’t also invest in metals.
Lots of rich people as well a the Central banks are holding the metals. The very rich are also holding fine arts which no—productive at all.
p.s. Productive can be meaningless or even be lose when the products unselling well. Such as some tech products that not many people want so the corporation’s investments are all go down to the drain like Black Berry and the Nokia phone etc.
You are better off to hold your Gold bars
There are roughly 7 billion people living on earth today. If all the gold above ground (roughly 160,000 tons) would be equalliy divided among all people, then everybody would be entitled to just 0.7 of an ounce of gold. At present market prices, this is the equivalent of $900. So clearly, gold is only for the poor people. There is simply not enough gold in the world for all the billionaires and millionaires of this world to invest into gold.
The valuation of all investments is at least 100 times as large as the value of all the gold of this world. Gold is indeed only for the poor of this world.
Then how do you explain the vast amounts held by central banks?
The vast amounts exist only on paper. For instance, the US owns close to 8,000 tons of gold. Divide that among 300 million US citizens, and you get a holding of .85 ounces of gold per US citizen. Is that really a vast holding of gold? At 0.85 ounces, this is roughly the average per world citizen.
The reality is much worse. A few years ago, the German central bank asked that 300 tons of the 1,500 tons of gold which are held in custody at the New York Fed for the account of the German bank be returned back to Germany. It turned out that this gold could not be returned. One year later, the German bank reported that as a result of its request, it received from the New York Fed 1.5 tons of gold. At that rate, it would take more than 1,000 years to return the alleged deposit of 1,500 tons back to Germany. Incidents like these are an indication that the actual amounts of gold held by central banks are much smaller than publicly advertized.
There is a huge secrecy regarding national gold holdings. Since gold holdings are not audited and are not subject to public scrutiny, actual claims of “vast” holdings should be viewed with caution if not suspicion.
A similar situation exists on the subject of oil reserves held by major oil producing countries. For instance, the oil reserves of Saudi Arabia do not change from year to year which makes it very likely that these number are mostly fictional.
Fort Knox is very probably empty, but the US is effectively bankrupt. China, on the other hand, has increased its holdings.
BTW, the fact that Germany asked for its gold back supports my position – not yours.
I made a factual mistake when claiming that the NY Fed returned to the Bundesbank 1.5 tonnes of gold. In truth, it was 5 tons of gold. Still, this is a small fraction of the 300 tons requested. At this pace, it would take 60 years to return the full 300 tons of gold. This is a further proof that gold is scarce.