Is Gold a Good Investment?
In my opinion, gold is not a good investment, but it does have its uses. Generally, the price of gold muddles along at a fairly steady price with occasional spikes up and down. For example, gold cost about $200 an ounce in 1975. In 1980 there was a big spike and the price rose to about $850, but quickly sank to about $400. It stayed at about $400 with minor fluctuations for the next 20 years, and now we have another spike. Will the price continue to go up or will it come back to earth? Only time will tell.
So, if you had bought gold in 1975 and held it for 30 years you would have doubled your money - not even enough to keep up with inflation. If you bought in 1985 and held for 20 years you would have broken even. If you bought in 2005 and sold in 2010, you would have made a very good return on your investment. If you buy gold this year, who knows? Of course, all these dollar amounts represent less purchasing power due to inflation. If you break even over 20 years, you are really a big loser because of inflation.
Gold is getting a lot of attention and hype now because of the spike in price. Most of the people who recommend gold as an investment are the ones selling it. The more they sell, the more they make, so of course, they recommend gold. Remember, gold doesn't pay a dividend, and it can be stolen or lost. When you buy gold you might have to pay more than the spot gold price and also sales tax.
So, if your goal is to buy gold, hold it for a while and then sell, this is a very risky proposition. How can you tell if the price is low enough to buy or high enough to sell? I can't tell the future, can you?
Uses of gold investment: Protection: Some people buy gold as a means of protecting themselves against the uncertainties of the future, things like market declines, growing national debt, currency failure, inflation, war and revolutions. It is unlikely that gold will ever lose all its value. Throughout history, gold has been valuable, and that will probably never change. So, if there is a revolution and you have to leave the country, then your paper money won't be much good, but gold coins will be as they say, "good as gold." For example, when the boat people of Vietnam wanted to leave their country and sail someplace safer, it was gold that would get them where thy wanted to go not Vietnamese currency. When Germany suffered hyper-inflation after World War I, the Germany currency was worth very little, but the people who had gold could use it to get food and other goods. This is why some people feel they should have a certain number of gold coins - to protect themselves if worse comes to worse.
Diversification: Many people don't like to put all their eggs in one basket. They like to diversify their wealth, to spread it over several different kinds of investments, possibly including gold.
Speculation: If you can see into the future or if you have good reason to believe that gold will go up in value, maybe you will take a gamble and buy some gold with the idea of reselling after the price is higher. Don't be surprised if you lose.
Personal enjoyment: In addition to the monetary value of gold, some people get enjoyment out of owning gold jewelry and coins. They like to wear the jewelry and they also know that the gold content will hold value over time. Some people like to collect gold coins and may also hope that the coins will appreciate because of their value as coinage in addition to the gold content. Some people like to get a bunch of gold coins and run them through their fingers.
An idea: Look into buying stock in gold mining companies. Aren't they in a position to profit from the spike in gold prices?
So, if you had bought gold in 1975 and held it for 30 years you would have doubled your money - not even enough to keep up with inflation. If you bought in 1985 and held for 20 years you would have broken even. If you bought in 2005 and sold in 2010, you would have made a very good return on your investment. If you buy gold this year, who knows? Of course, all these dollar amounts represent less purchasing power due to inflation. If you break even over 20 years, you are really a big loser because of inflation.
Gold is getting a lot of attention and hype now because of the spike in price. Most of the people who recommend gold as an investment are the ones selling it. The more they sell, the more they make, so of course, they recommend gold. Remember, gold doesn't pay a dividend, and it can be stolen or lost. When you buy gold you might have to pay more than the spot gold price and also sales tax.
So, if your goal is to buy gold, hold it for a while and then sell, this is a very risky proposition. How can you tell if the price is low enough to buy or high enough to sell? I can't tell the future, can you?
Uses of gold investment: Protection: Some people buy gold as a means of protecting themselves against the uncertainties of the future, things like market declines, growing national debt, currency failure, inflation, war and revolutions. It is unlikely that gold will ever lose all its value. Throughout history, gold has been valuable, and that will probably never change. So, if there is a revolution and you have to leave the country, then your paper money won't be much good, but gold coins will be as they say, "good as gold." For example, when the boat people of Vietnam wanted to leave their country and sail someplace safer, it was gold that would get them where thy wanted to go not Vietnamese currency. When Germany suffered hyper-inflation after World War I, the Germany currency was worth very little, but the people who had gold could use it to get food and other goods. This is why some people feel they should have a certain number of gold coins - to protect themselves if worse comes to worse.
Diversification: Many people don't like to put all their eggs in one basket. They like to diversify their wealth, to spread it over several different kinds of investments, possibly including gold.
Speculation: If you can see into the future or if you have good reason to believe that gold will go up in value, maybe you will take a gamble and buy some gold with the idea of reselling after the price is higher. Don't be surprised if you lose.
Personal enjoyment: In addition to the monetary value of gold, some people get enjoyment out of owning gold jewelry and coins. They like to wear the jewelry and they also know that the gold content will hold value over time. Some people like to collect gold coins and may also hope that the coins will appreciate because of their value as coinage in addition to the gold content. Some people like to get a bunch of gold coins and run them through their fingers.
An idea: Look into buying stock in gold mining companies. Aren't they in a position to profit from the spike in gold prices?