With how often gold is touted in the major media outlets you’d think it could be a good investment, or at least should be part of your investment portfolio, right? WRONG. Gold is an absolutely horrid investment. Today, the price of gold is over $1,300 per oz. That’s the highest ever, right? Well…only if you ignore inflation. In 1980, gold peaked at $887. Adjusted for inflation, that’s $2,350 in today’s dollars. That means that since 2010, Gold has lost 40% of its value. And this is what people are claiming is a great investment?
For some graphical proof, check out this chart in Jeremy Siegel’s Stocks for the Long Run:
$1 invested in stocks in 1802 would be $755k. Both of these are in real dollars. This completely takes away inflation. If the chart didn’t take away inflation, the $1 in 1802 dollars would be worth over $10 million in today’s dollars. Now, let’s look at gold. $1 invested in gold in 1802 would not even be worth $2 today in real dollars. I don’t know about you, but I don’t want to wait 200 years to double my money.
You can’t argue with the long run returns of gold; they’re horrible. However, some people will let their emotions get the better of them. Some will say: “That’s nice Will, but what about if the economy collapses? Everybody will use gold as currency.” That argument is a myth. Please show me any recent economy that has failed and reverted to using gold as a method of exchange. Don’t waste too much time looking, because you’re not going to find one.
So, if gold has delivered a terrible return over time and if it isn’t going to be used in an economic collapse, why should you buy it? Well…you shouldn’t. I won’t lie and say that people haven’t gotten rich off of gold. People who time gold correctly have done well. However, people who time stocks correctly do even better. And investing for the long-haul really isn’t about timing. If you’re a trader, this really isn’t the blog for you. I’m all about investing.
I have to argue with you about this one. Gold is a great investment in inflationary times(over a 2-3yr)period. As you can see on the charts it has performed well during the inflation in 1970. I know you may consider investments to last 5 years, and anything less would be considered just a trade. However, this chart shows investments/gold over the last 2oo years. Times have changed, and the markets for stocks and gold are much more volatile than they were decades ago because of increased volume. I like gold, I also like stocks, but it all depends on timing.
Gold has appreciated well over some periods, I definitely can’t argue with that. But the purchase of assets held in the short term is really just speculation masquerading as investing. I learned this the hard way with my old stock investing ways. There’s no guarantee of any return, and stocks can absolutely be used as speculative assets too if purchased with short-term intent. If you’re a true trader, gold can be used as an alternative asset in a portfolio. I still don’t think it has any place in the investments of a mainstream investor, though.
Great way to protect spending power but unless you’re saving half your income each year, you need some real purchasing power gains. Gold won’t get you there, and in my opinion, there are better plays on zero-real interest policy.
I do not agree with you. Gold is a very good investment option. As gold prices get increases day by day, you can get a good return on your gold investments.
That’s nice Will, but what about if the economy collapses? Everybody will use gold as currency. That argument is a myth. Please show me any recent economy that has failed and reverted to using gold as a method of exchange. Don’t waste too much time looking, because you’re not going to find one.
http://www.youtube.com/watch?v=7ubJp6rmUYM
Perhaps that is rigged/faked. The market will determine what people use if a currency collapses. Gold/silver/food/oil/wood/etc.
Gold is the only one secure thing to invest ALWAYS. Always keeps it price. Gold dont care about wars or recessions. Gold doesn’t care who is the current president in IRAN.
I love the doom based theories for investing in gold. Preparing for the collapse of the economy and move to another form of currency is the investing equivalent of preparing for the zombie apocalypse. Even IF that scenario plays out, you’re going to have much larger problems than where you\\\’re going to get your hands on some gold to spend. It can have its place as part of a well balanced portfolio, but most of the talk about gold takes it to extremes.
Guns and tanks would be a lot more useful for a zombie apocalypse. Maybe the people on Doomsday Preppers have it right? haha. I can’t think of any country in modern times that has collapsed and then made the switch to hold as their currency (whether officially or unofficially).