Is gold the right thing to buy when interest rates keep going lower and lower or as a hedge when the stock market crashes?
Gold is seen as a safe investment and it's true that over the years the price of gold has been much more stable than bonds or stocks.
Gold has been known to man for thousands of years and humans have always loved it. From the Maya Indians who are said to have whole temples built out of pure gold to the Europeans endless wars over it.
Gold brings out the best of man in the pursuit of it, but also the worst.
Gold has ever been useful as a currency during the last 2000 years I can´t argue with that. But what can you really do with gold practically?
Can you build a house with it? No, you have to pay someone for the materials and work with it.
Can you protect yourself with it? No, once again, you need to pay someone to protect you with it.
Can you grow food with it? No, same answer as above.
Made my point?
Gold is beautiful to look at and it is used in the industry, but the industry stands for only a small part of the whole world consumption of gold. It is mostly used as a means to show status.
In the western world gold is slowly loosing its status as a marker of wealth. In older societies its still used frequently though.
But if everything comes crashing down what good is gold? If the world economic system really burns down to the ground what will gold really be that useful?
Humans need first and foremost water, then food, then shelter and protection I don't see gold fulfilling any of those basic needs. Gold as a currency is only good if there is a marketplace for it. Gold's only value is what other humans put on it, what others are willing to pay for it.
Don't get me wrong, a small portion of the savings portfolio should be in physical gold. (More on the importance of physical gold in another post).
But I believe about 5 % if enough. The rest is better put somewhere where it produces something.
If one has the money, farmland and forests are an excellent hedge if the world economy crashes.
Farms will produce food, food that can always be traded in for other goods or services. Forest do the same, wood is an excellent material for building homes and hunting.
Land have always been the most stable asset that exist, they don't make any more land! But gold is ever dug up from the ground 24/7 in a higher and higher pace.
But the world´s population keeps expanding at an exponential rate and they will always require food and a place to sleep (NASDAQ:LAND).
Go back a thousand years ago and you will find that the most powerful lords and kings have often been the ones with the most land not the most gold.
The bottom line is, keep 5-10% of your assets in physical gold, but the rest is probably more useful where it produces something.
What is your take on gold?