Gallup poll ranks gold as #1 long term investment

RedTiger

A recent Gallup poll ranks gold number one in terms of long term investments (link).

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Thirty-four percent of Americans say gold is the best long-term investment ... Real estate (19%) and stocks (17%) are distant second choices.
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This is the first time gold was included in this Gallup survey which says something by itself. Without other surveys to give context it is one data point. However, it does show that the gold bandwagon is filling up. Gold was at record highs during the week of the survey. Gold was ranked #1 by every income group, and every age group, Republicans, Democrats and Independents.

* Results for this Gallup poll are based on telephone interviews conducted Aug. 11-14, 2011, with a random sample of 1,008 adults, aged 18 and older, living in the continental U.S. selected using random digit dial sampling.

I posted the above in my blog on Friday (see signature link). I am surprised by gold's popularity among all groups, especially young people. The survey was done when gold was at all time highs, going up daily. I would guess that the recent beat down would have lowered the poll numbers. I wonder about the poll methodology, though Gallup is known for rigorous polling. For example, if the question is always asked with gold given as the first possible response, it will tend to skew results towards that response. Same if gold is always given as the last choice, each time. Again, Gallup is known for being rigorous, so would randomly rotate the choices in the list.

It is tough to draw any conclusions from one data point, one survey. That said, today is NOT a ground floor opportunity in gold. If gold is ranked number one by every age group, every income group, every political group, it isn't an undiscovered, unloved place to invest. Elsewhere, I have observed a few players that I consider smart money, that may have bought near the all time lows, taking some money off the table and moving closer to the gold exit. Those coming in the front door at this time or later, and buying their first gold now, after 12 straight up years and a 500% up move off the lows are likely to be among the 80% of the crowd that gets trapped inside the bubble, if we see a bubble top. That unfortunate (and herd following) 80% will ride the gold rocket all the way back down.

Another point, is that while people voted gold as the number one investment for a 30 year time frame, how many actually have money in gold? Seems like many income and age groups have been selling their gold jewelry just to pay bills, and a high percentage of the population has near zero net worth, or negative net worth (debt).

Personally, I still think $3000 is a reasonable target, as I did on the first day I joined the PCGS forum. I haven't sold any of my physical. I remain long on a trading basis as well in GLD options, though the option position is a complicated one. Sentiment is one of the best indicators for calling market turns, so the Gallup survey is very interesting to me.

jmski52

If gold is ranked number one by every age group, every income group, every political group, it isn't an undiscovered, unloved place to invest. Elsewhere, I have observed a few players that I consider smart money, that may have bought near the all time lows, taking some money off the table and moving closer to the gold exit. Those coming in the front door in this time or later, and buying their first gold now, after 12 straight up years and a 500% up move off the lows are likely to be among the 80% of the crowd that gets trapped inside the bubble, if we see a bubble top. That unfortunate (and herd following) 80% will ride the gold rocket all the way back down.

One thing that I've learned not to say is, "this time it's different".

But I still have this nagging thought in the back of my head that says, "it's always been this way" and only now is reality coming back into vogue. It does seem that gold is gaining more recognition as the true reserve currency of the world, if only by default. And this time around, it is quite literally - by default. But hasn't that been true throughout the history of this, and all civilizations?

We've been riding in a fantasyland of fiat currency for my entire lifetime, but that doesn't necessarily mean that the Federal Reserve Banking System is the endpoint for the evolution of money. Obviously, it is not.

If this is a reassertion of the primacy of gold as the true reserve currency, it has wide implications. In some ways, I applaud the idea. But I also worry that the same people who screwed up the whole system the first time around will also be in charge even if gold becomes top dog.

Support your local US Constitution.

RedTiger

<< <i>If gold is ranked number one by every age group, every income group, every political group, it isn't an undiscovered, unloved place to invest. Elsewhere, I have observed a few players that I consider smart money, that may have bought near the all time lows, taking some money off the table and moving closer to the gold exit. Those coming in the front door in this time or later, and buying their first gold now, after 12 straight up years and a 500% up move off the lows are likely to be among the 80% of the crowd that gets trapped inside the bubble, if we see a bubble top. That unfortunate (and herd following) 80% will ride the gold rocket all the way back down.

One thing that I've learned not to say is, "this time it's different".

But I still have this nagging thought in the back of my head that says, "it's always been this way" and only now is reality coming back into vogue. It does seem that gold is gaining more true recognition as the reserve currency of the world, if only by default. But hasn't that been true throughout the history of this, and all civilizations?

We've been riding in a fantasyland of fiat currency for my entire lifetime, but that doesn't necessarily mean that the Federal Reserve Banking System is the endpoint for the evolution of money. Obviously, it is not. >>



I agree that in the long run all Fiat currencies are headed for zero. However, that does not mean it will be a smooth upward ride for gold. Sentiment is a powerful thing in the invisible hand of the market. Markets move in cycles. When the crowd starts chanting "gold, gold, gold," it means something, and it isn't a good thing for long term gold bulls. I wish there were more data points for the Gallup survey, because then it would give it some context. Still, it is worth thinking about how popular gold has become. If one only reads the gold sites, and this site, it is like talking to "yes men" all day. The term is "confirmation bias," when a person tends to read only what they agree with, that person rarely gets any real world perspective. Again, in bubble tops, 80% of the crowd, tends to ride the rocket all the way back down. It will likely happen the same in gold, if and when there is a bubble phase.

I edited the op to give my personal perspective, and I am not calling top. I am not selling any physical, still see $3000 as a target price, as I have since day one on the PCGS forums, still net long on GLD via options. That said, I repeat, I observe some smart money that got in at the lows, taking some off the table. I see that as a well reasoned decision after making 500% or 600%, and seeing how popular gold is now vs. 1999.

pmcollectour

<< <i> When the crowd starts chanting "gold, gold, gold," it means something, and it isn't a good thing for long term gold bulls.. >>



It's a great thing when the crowd starts chanting gold. If public pressure caused the governments to adopt some form of gold
standard, then gold shoots right up to 7000 per ounce just to connect gold to the available money supply. So chant away !

percyb

Fewer people in the general public will be buying gold as the price rises beyond their purchasing price comfort zone.

BBN

<< <i>Fewer people in the general public will be buying gold as the price rises beyond their purchasing price comfort zone. >>




exactly what I've been saying. Much of the public is being priced out of it. I think it'll reach a certain point to where people will go with the more affordable silver.

Baley

Investment categories that have done well recently always rank high in polls.

It's like hearing a great party is in full swing across town, "let's head over!"

by the time you get there, the beer is flat, the grub is stale, and all the hot chicks have already gone

jmski52

I am not selling any physical, still see $3000 as a target price, as I have since day one on the PCGS forums, still net long on GLD via options. That said, I repeat, I observe some smart money that got in at the lows, taking some off the table. I see that as a well reasoned decision after making 500% or 600%, and seeing how popular gold is now vs. 1999.

I wake up every day like Bill Murray's character in "Groundhog Day", hoping to see some other options on the horizon into which I can justify some diversification out of precious metals.

Real Estate - very situational, site-specific and ultimately dependent upon the government's direction.

Stocks - very situational, company-specific and ultimately dependent upon the government's direction.

Bonds - would not touch them right now with a 10 ft. pole.

Cash - worth having, but not at more than 10% or so, as it tends to depreciate these days.

Guns, Ammo, Food Stocks, Supplies - yeah, why in the world not?

Family-run business - very situational and ultimately dependent upon the government's direction.

Education - always a good investment if the money is available to do so.


Help me out here - what are the superior alternatives, once you decide to "take some off the table"?

I'm still not seeing it. Not a whiff. Too many governmental "initiatives" to make a dumb move now.

I want to diversify out. I want to take some off the table. I want to know that the economy is working the way it normally does. I want to think that the government isn't going to get into every niche and cranny of my personal business and expect to tax the crap out of me (twice or 3 times) just for doing something productive.

I still don't see it. Help me out. Where is the better alternative?

MilesWaits

I too struggle with same quandry Jmski.

I look at my Sacs, non-silver Kennedys, Ikes and wonder why I would sell silver instead of cashing those "fiats" in?

At times I get an itch for a particular pistol; then, think, I have enough. But do I have enough PM? Is there such a thing?

I want to be a better consumer. I want to add to the fire....yet; alas, I stack.......Heigh, Ho.

Miles

RedTiger

<< <i>
...

I want to diversify out. I want to take some off the table. I want to know that the economy is working the way it normally does. I want to think that the government isn't going to get into every niche and cranny of my personal business and expect to tax the crap out of me (twice or 3 times) just for doing something productive.

I still don't see it. Help me out. Where is the better alternative? >>



Don't let fundamentals blind you. You are educated enough to know better. The best time in recent memory to buy gold was when the fundamentals for gold were the absolute worst in 1999. A similar Gallup poll in 1999 would likely have had gold in low single digits and many of those would be polling errors that misheard the question (instead of best, they hear worst). For the younger readers, back in 1999 the U.S. government had a nominal surplus, employment was near a theoretical "full employment," home ownership was headed for record highs, as was the U.S. stock market and real estate market. Foreign central banks were selling gold, and there were many academic papers and articles in the financial press, about gold being a dead asset, that no one should invest in gold. My my, how times have changed for gold to rank #1 for every age group, every income group, every political group, in a scientific Gallup poll. That everyone agrees is a bit frightening to me, I would much rather it be like 1999 still, when maybe 5% would have voted for gold.

Sentiment is powerful and one of the best indicators for calling market turns. If you don't know where to put the money, diversify. Heck go back to the survey and move 5% from gold (the highest ranked) to the lowest rated investment(s) no matter how stupid that move may seem to you. Repeat again next year, if gold is still being ranked #1. You might do terrible on those other investments, but as a finance guy, you know all about efficient markets, and modern portfolio theory. 10% or 20% here and there in non-correlated markets does wonders, when a person guesses wrong on future market direction. If the person guesses right, the bulk of their money is still going up like a rocket ship. What is the other choice for an exit plan? Is the plan to stay "all in" on gold until someone rings a bell telling you to get out? That doesn't sound like a plan, more like a fantasy, because virtually no one gets out at the top, certainly not from 100% all-in to 100% all-out at a major market top. It just doesn't happen that way for average people. People with that kind of plan usually get out way too early, with a few riding the rocket all the way down.

There are also black swans out there for gold, just as there are for other asset classes. Additional regulation, taxation, confiscation are the big three, but not the only three that might make it difficult to sell any gold, or wipe out much of the value of gold holdings, in a short time period.

mrearlygold

Om............Om..................Om.................

renman95

Gold's wide spread acceptance? Wednesday I sent a text to a friend...."Did u buy gold?" It was the day gold dropped $92. He's the friend I have mentioned before that if he buys we all need to sell. He still doesn't get it. It's like teaching a foreign language.

jmski52

Red Tiger, it isn't that I don't agree with you. In fact, I agree with most of what you've said. Speaking of Black Swans, I'm reading that book right now, and in case anyone is interested - it is one heck of a book, about perceptions and mathematics. I would recommend it to anyone and everyone who has the patience to settle in for a good read.

In fact, I'd never heard the term "confirmational bias" until reading about it in "The Black Swan". However, in speaking of confirmational bias you may be making that very mistake in assuming that gold has peaked just because positive sentiment towards gold is at impressive levels.

Just because sentiment has shifted in favor of gold does not mean that gold has become a bad idea. Having a confirmational bias would interpret that very shift in sentiment as being extremely negative toward gold, when in fact - there is no other basis for thinking that, fundamentally.

In my view, yes - there are some potential pitfalls for gold. However in my opinion, the lists of pitfalls for the dollar, social security and free market capitalism look much worse than the list of the pitfalls that may be stalking gold.

I've always assumed that I am playing in a game where the entire set of rules are not published, or even known. That's the conclusion I reach whenever I get surprised by a governmental decision to change them in mid-game. It's true for every fly over state, little guy, and politically-unconnected outsider such as myself.

Who would have ever thought that the FASB would change their accounting standards to accommodate a bunch of failed banks? Who would've thought that the Attorney General's office would ever rule against legal precedent in corporate law and destroy the rights of bondholders in favor of a union payoff for political favor? Those are not trivial issues.

That being the case, I discount alot of conventional investing wisdoms. Frankly, those guys who think gold is so great now ought to go out and buy some.

secondrepublic

RedTiger raises some very valid points.

I would be curious to see the time lag, if any, between public perception and the market peak/beginning of decline for other asset classes. I seem to recall that for real estate, the public thought real estate was the best investment ever starting in about 2003-2004, more than a year or two before the prices peaked.

RedTiger

<< <i>

In fact, I'd never heard the term "confirmational bias" until reading about it in "The Black Swan". However, in speaking of confirmational bias you may be making that very mistake in assuming that gold has peaked just because positive sentiment towards gold is at impressive levels.
...

That being the case, I discount alot of conventional investing wisdoms. Frankly, those guys who think gold is so great now ought to go out and buy some. >>



Who said gold has peaked? I'll repeat for the third time on this thread: I'm still targeting $3000. I haven't sold any physical. I'm still long GLD via options. All I said, is that for long term investors that got in a long time ago, taking some off the table after a 500% gain makes sense to me, and some of the people I observe doing that I would classify as "smart money."

I did mention the point, that this Gallup poll was about thoughts only, not actions, that people are likely putting their actual money somewhere else. That is if they have any money, about half the U.S. population doesn't have any money to invest in gold or anything else.

jmski52

Who said gold has peaked?

It was a rhetorical "you" and I said that you *may* be making a mistake in assuming that gold has peaked, or is close to it. I'm going to pull a Bill Clinton, and say that it depends on what "you" means.

I was going to post an interesting chart on the average yearly price of gold since 1950 or so, but I couldn't find it when I started looking for it. Anyway, I could pick out a couple of consecutive runs where gold quintupled and then quintupled again. On the other hand, I could also pick out a 20-year stretch where gold sat stagnant and was pretty uninspiring.

And, yes it is too late to get in on the ground floor in gold. But I maintain that this isn't about gold at all. It's about the dollar and the risk of a sovereign debt default. The reason I mentioned that I never go so far as to say that "it's different this time" is because we won't know if it really is something different this time until after the fact.

I understand diversification. We can all do the sensitivity analyses for various scenarios using different mixtures of asset classes. I simply don't believe that it's time to start diversifying because I think gold (and other pms) are safer than everything else. I also think that diversification was greatly oversold for so long that everyone takes it as a given in terms of "wisdom". I don't.

We've had a fiat dollar since 1913 and we've had electronic funds transfers since when, about 1977? I think it's pretty much out of control. I'd rather have gold.

1970SilverArt

The kiss of death for gold.

fishcooker

I am surprised by gold's popularity among all groups, especially young people.

Not to me. The young are the easiest to direct to any investment.

RedTiger

<< <i>
I was going to post an interesting chart on the average yearly price of gold since 1950 or so, but I couldn't find it when I started looking for it. Anyway, I could pick out a couple of consecutive runs where gold quintupled and then quintupled again. On the other hand, I could also pick out a 20-year stretch where gold sat stagnant and was pretty uninspiring.
. >>



Here is a chart from 1975 to present.

comes from this link

Every educated long term gold investor knows the basic outline. Gold was fixed from 1950 to 1971 at $35 per ounce. Charts are meaningless when prices are fixed by politicians. Nixon closed the gold window (40 years ago Aug 1971), and gold was allowed to float. Looks like it quintupled by 1975 before falling back and then quintupling again as gold goes up to a high of about $800 in Jan 1980 (nine years, vs the current bull run of twelve up years). Reagan comes in, interest rates go through the roof (14% on 30 year Treasuries). Gold crumples like a cheap suit and spends about two decades in the wilderness, bottoming at about $250 in 1999.

The loss from $800 to $250 is humbling enough at ~70%, but to pile that on top of the alternative of 14% in Treasuries that were available in 1980 (doubling every five years) or stocks at 1000 Dow, or real estate, and the loss is a staggering ~95% when compared to alternative investments for 20 years. A dollar put into zero coupon 30-year Treasuries at 14% in 1980 would have been worth $16 by 2000, and $64 by $2010 and maturity. Virtually no one was buying those zero coupon bonds back in 1980 because the fundamentals for long term bonds looked their worst and a person could get 18% on one-year paper.

derryb

I'm expecting gold to correct to 1650-1700 before it advances to 2000

Baley

The loss from $800 to $250 is humbling enough at ~70%, but to pile that on top of the alternative of 14% in Treasuries that were available in 1980 (doubling every five years) or stocks at 1000 Dow, or real estate, and the loss is a staggering ~95% when compared to alternative investments for 20 years

it takes about a generation for a bubble to recede into the public memory. The current gold mania will leave a huge, nasty hangover someday, unless, of course, "this time it's different"

Baley

<< <i>Fewer people in the general public will be buying gold as the price rises beyond their purchasing price comfort zone. >>



That's a really good point.

streeter

Baley,

You are wise beyond your years even if you did manage to kill the thread THREE & a HALF years ago.

Didn't Gallup predict Romney?

Ed: speeling

hopsin

Gold is a terrible investment compared to the stock market. $10,000 invested today in the S&P 500 will end up being worth more than $10,000 "invested" in gold or silver or platinum in 20 years from now...and it will continue to grow in value and proportion to the price performance of precious metals. Stocks pay dividends, metals don't. The price performance of a stock is based on how much money the company earns, not fear. The price of metals is based on fear/uncertainty.

bluelobster

Hopsin, you may be new around here?
When this thread was made, gold was hot (over three years ago), if they took the same poll today, it would be vastly different.
If you have been reading this board a while and following everyone's predictions, no one knows what an asset is going to be worth in 20 years...no matter how sure they are, probably inversely related , actually

Musky1011

Actually a tractor and some land to grow your own food is the best investment.. You can not eat gold my friends

StanTheManMusial

<< <i>Actually a tractor and some land to grow your own food is the best investment.. You can not eat gold my friends >>

derryb

<< <i>

<< <i>Actually a tractor and some land to grow your own food is the best investment.. You can not eat gold my friends >>



>>


Can't eat the tractor either. But like gold you can use it to get what you can eat. Much easier to do with the gold.

derryb

<< <i>$10,000 invested today in the S&P 500 will end up being worth more than $10,000 "invested" in gold or silver or platinum in 20 years from now...and it will continue to grow in value and proportion to the price performance of precious metals. >>


20 years from now? Now that's some powerful insight!



<< <i>Stocks pay dividends, metals don't. The price performance of a stock is based on how much money the company earns, not fear. The price of metals is based on fear/uncertainty. >>


Stocks carry counterparty risk, metals don't. The price performance of gold is based on the strength of the currency being used to purchase it. Gold purchase decisions should be based on a good forecast of the currency, not the metal.

StanTheManMusial

<< <i>

<< <i>

<< <i>Actually a tractor and some land to grow your own food is the best investment.. You can not eat gold my friends >>



>>


Can't eat the tractor either. But like gold you can use it to get what you can eat. Much easier to do with the gold. >>



I don't disagree with you that gold is good if a person has some. The tractor and land are important resources if you happen to have them too.

roadrunner

<< <i>Gold is a terrible investment compared to the stock market. $10,000 invested today in the S&P 500 will end up being worth more than $10,000 "invested" in gold or silver or platinum in 20 years from now...and it will continue to grow in value and proportion to the price performance of precious metals. Stocks pay dividends, metals don't. The price performance of a stock is based on how much money the company earns, not fear. The price of metals is based on fear/uncertainty. >>



Depends on what time frames you are comparing stocks to the gold market. From 1966 to 1980 gold was a far better performer than the stock market (gold up 25X, stock market basically FLAT). How about from 1998-2011? There are number of 10-15 year periods where gold did much better than the stock market, dividends included. Stocks can be terrible investments depending on what 10-25 year period you are defining. A term life insurance policy doesn't pay you any dividend or interest. But, it sure comes in handy when a bread-winner suddenly passes on. Insurance policies are invaluable when they are required to perform. That's what gold's role is in a monetary system. Gold's performance against the Ruble is doing wonders for those Russians who had gold as insurance against a weakening Ruble. Most of the gains in a stock market these days are based on greed, the opposite of fear. Crashes from excessive greed occurred in 1929, 1973-1975, 1987, 2000, 2008-2009, 2011. The stock market is hardly a market based on growth "certainty." I would not be the least surprised if the period from 2000-2020 shows gold outperforming the stock market (currently gold is way ahead with 57,000 DOW needed to even things up). The next 5 yrs has yet to be written.

it takes about a generation for a bubble to recede into the public memory......

This has not quite been the case for stocks which either suggests the times are quite variable or the SM has never been in a bubble since 1929. The 2000 Nasdaq bubble has only taken 14-15 years to come close to the 2000 highs. The Dow's 2000 "bubble" run of 18 years only took 5-7 years to be forgotten. And the 2007-2009 bubble/crash has only taken 4-5 years to be completely forgotten. Seems like bubble memory is getting shorter and shorter. It took 25 years for the 1929 stock crash to be forgotten.

StanTheManMusial

<< <i>

<< <i>Gold is a terrible investment compared to the stock market. $10,000 invested today in the S&P 500 will end up being worth more than $10,000 "invested" in gold or silver or platinum in 20 years from now...and it will continue to grow in value and proportion to the price performance of precious metals. Stocks pay dividends, metals don't. The price performance of a stock is based on how much money the company earns, not fear. The price of metals is based on fear/uncertainty. >>



Depends on what time frames you are comparing stocks to the gold market. From 1966 to 1980 gold was a far better performer than the stock market (gold up 25X, stock market basically FLAT). How about from 1998-2011? There are number of 10-15 year periods where gold did much better than the stock market, dividends included. Stocks can be terrible investments depending on what 10-25 year period you are defining. A term life insurance policy doesn't pay you any dividend or interest. But, it sure comes in handy when a bread-winner suddenly passes on. Insurance policies are invaluable when they are required to perform. That's what gold's role is in a monetary system. Gold's performance against the Ruble is doing wonders for those Russians who had gold as insurance against a weakening Ruble. Most of the gains in a stock market these days are based on greed, the opposite of fear. Crashes from excessive greed occurred in 1929, 1973-1975, 1987, 2000, 2009, 2011. The stock market is hardly a market based on growth "certainty." I would not be the least surprised if the period from 2000-2020 shows gold outperforming the stock market. The next 5 yrs has yet to be written. >>



Pretty spot on with this analysis, imo.

jmski52

it takes about a generation for a bubble to recede into the public memory. The current gold mania will leave a huge, nasty hangover someday, unless, of course, "this time it's different"

When I consider 1980 vs. 2011 there was no mania in 2011 compared to 1980. The two periods are completely different in just about every way.

The Fed's toolbox is a lot different now, the debt is much larger, the unfunded liabilities are now a major factor, the response by the Fed is 180 degrees opposite of before, the economies of China, India and Eurozone carry different weights than in 1980..............I could go on. But don't kid yourself that it's not different now. It's different in ways that we probably know nothing about.

Gold is a hedge against mismanagement, and I see a lot of mismanagement going on.

Musky1011

If the boat was sinking i would rather have a life preserver than all of the gold in the world