Gold Speculation vs Investment
The commercials touting gold are all over the talk radio stations. Not everyone says that gold is a good investment.
I was listening to the Sound Investing podcast and they were discussing different investments. They mentioned that they are constantly asked, “Why are you putting gold down? I have been in gold since it was $450 and it is up to $600 now?”
Their response?
Well I know people who have been in gold since it was $800 - Wow, its all the way back down to 6!”
Over the last 20 years the compound rate of return in gold mutual funds has actually been a loss on an annual basis.
Gold is not an investment. It is a speculative vehicle. Investment vehicles grow, their value increases, gold remains the same forever.
If you put a chunk of gold in a room and come back 20 years later, that same chunk of gold is there. It has not grown. If you take it out and buy something with it, it will buy the same thing it did 20 years prior.
Well, I agree with this post that gold remains the same. However, what if you invest in gold mining companies stocks? Those are investments that give gearing on top of gold price increases.
Thanks Anil Passi http://www.anilpassi.com
Comment by Anil Passi — May 1, 2006 @ 12:10 pm
Stock in a gold mining company would be better than buying just gold, especially if there is a chance for growth - ie, finding new mines. I know nothing about gold mining stocks though, since the only ones I own are part of my index funds. I am not sure why I would want to own an individual gold mining stock company.
Comment by Gary Paulson — May 1, 2006 @ 1:09 pm
Gary,
You can invest in “Merrill lynch gold fund”, it has returned over 400% in last 5 years. This proves the gearing factor as Gold itself has’nt risen by 400% in that timespan.
However, my advice is to dip into a gold fund only if you can lock your money for Longterm, because this fund have a decent spread.
Thanks Anil passi
Comment by Anil Passi — May 17, 2006 @ 3:22 am
Like you, I’ve been hearing a lot about gold as well. I don’t know enough about it to determine whether or not ir actually counts as an “investment,” so I’ll leave that to other people to argue about :) . Nevertheless, it will be interesting to see which direction the price goes from here on out.
Comment by panasianbiz — May 25, 2006 @ 7:03 pm
lets face it, gold investing is not fot the short term feint of heart, these latest drops will certainly scare off a lot of less committed investors. Gold stocks are of course a safer way to go
Comment by Ted Liwinqs — June 12, 2006 @ 11:41 pm