Commercials hawking gold as a sound investment are once again littering the airwaves. Gold is neither sound nor an actual investment. It is a mere commodity, comparable to wheat, oil, and pork bellies. Its price, in the long run, is most impacted by global demand for jewelry. It is not, nor will it ever become a currency.
Unlike stocks, which can grow through profitable operations, and bonds, which provide income, gold has no intrinsic quality through which you should expect some form of secular or steady performance. Over time, gold has provided returns vastly worse than stocks and bonds. It has spiked up during times of panic, only to fall right back down thereafter. In fact, it is during such times of panic and uncertainty that you see the dealers and their paid spokespeople the most. Wall Street uses your fear as a catalyst to get you to pay fees and turn cash and good securities in for inferior assets.
Poor performance aside, what about using gold as a safe haven – a protector of value? In bad financial times, a safe haven should be stable and liquid. When times are good, a safe haven may not have much upside but it should still be safe. In the early 1980s, when fears of hyperinflation ebbed, gold lost over half its value. More recently, once the crisis following the 2008 financial meltdown calmed, gold plummeted about 40%. These losses are worse than most stock market crashes. Over the past 50 years, gold has been almost twice as volatile as stocks and four times more volatile than bonds.
Sure, gold rose dramatically as often as it fell. But this is the behavior of a speculative instrument – not a safe haven. Reiterating an earlier point, even if speculation is what you seek, in the long run gold is pathetically worse than stocks and bonds.
You can confidently ignore misleading ads and know you are investing well at minimized cost. Get Wall Street Is Legally Scamming You, available at Amazon and Barnes & Noble.