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Is Gold The Investment It Once Was?

Summary

In 1971, the United States stopped using gold as insurance against our dollar.

Compared to the S&P 500 index of the top stocks on the market, gold has underperformed for the last 10 years.

When you purchase stocks in a company, you are showing that you have faith in that investment and company to perform in the future. However, gold doesn’t work that way.

Whenever financial advisers discuss investments, they almost always want a diversified portfolio. Often, those advisers steer their clients to invest in gold. Is this good advice? Can investing in gold provide the best avenue for success. Although investing in gold several years ago was the thing to do, it might not be the best move today.

Pros

  1. Protects Against Uncertainty -- With gold, you don’t have to know the gold rate in Chennai because it doesn’t fluctuate like other investments. However, it would be good to know what the current price is today. Because gold always has value, that makes it a good investment. For instance, twice in recent memory, when the United States was on the brink of financial ruin, stocks dropped, but gold had gained.

  2. Gold Has Value -- For thousands of years, leaders have valued gold. Egyptian pharaohs were buried with gold; Chinese emperors used gold; Myans made items from gold; Romans used gold, and even Europeans and Americans have valued gold throughout history. Kings and political leaders all value gold. Because of its precious metal status, people will always want gold. You would have no trouble selling your gold if you needed cash quickly. Will you get more than you paid or even what you paid? That is the question that has to be asked.

  3. Is Still Important for Global Economy -- In 1971, the United States stopped using gold as insurance against our dollar. In fact, most countries that used to use gold to back their currency, don’t anymore. Despite these moves, gold remains a vital part of the global economy. To see the truth in this, you have to consider that the International Monetary Fund and central banks control one-fifth of the world’s supply of above-ground gold.

  4. Gold Preserves Wealth -- Unlike paper currency and other forms of investments, gold has preserved wealth for generations. It can be passed from one person to another. Because it doesn’t need certifications, you can grab it after a person dies. You don’t have to have a will to claim it. The wealth passes to the next generation.

Cons

  1. Underperformed -- Compared to the S&P 500 index of the top stocks on the market, gold has underperformed for the last 10 years. Because it prevents against inflation, it doesn’t go up in value as easily as other investments. Gold gained a little more than 3 percent over the last 10 years. However, from 2002 to 2012, it gained 18 percent. Like all investments, you want to purchase gold when it is low and not high.

  2. What Goes Up Must Come Down -- c. However, since then, gold prices have dropped considerably. It now is worth about one-third less the amount than at its peak. When something rises rapidly, as in the case of gold, it also falls just as dramatically.

It Is Not Like Other Investments -- When you purchase stocks in a company, you are showing that you have faith in that investment and company to perform in the future. However, gold doesn’t work that way. It mostly sits in a vault and does nothing. You don’t know if you have a good investment until you go to sell it. Stocks and other investments you get an idea through following the company or market values.