Is Gold Really Golden?
Sometimes I get a question about investing in gold. Usually it is after a tumultuous time in the stock market or a geopolitical crisis de jour.
But thinking of gold as an investment to my mind is wrong. Gold is not an investment it is something to speculate in. An investment grows apart from any need for price appreciation, although price appreciation is often a consequence of a good investment.
An investment might pay you interest or dividends. Gold does neither. An investment could be converted into an income stream at some future date, like your house if you were to rent it out. Gold cannot be converted to an income stream.
The only thing positive about gold is the hope that someday someone else will pay you more for it than you purchased it for. Maybe, Maybe not. In the meantime, you have to store gold in a secure location, which will likely cost your money. The difference in the bid (what someone will pay you for your gold) and the ask (what someone will be willing to sell their gold to you for) can be substantial for small investors.
Most small investors are better off owning a bind or CD that will pay them income or a common stock of a company that is growing and will one day pay a dividend or generate rising net income to justify a higher market price.
Warren Buffet, the legendary investor, had this to say about gold. “"I will say this about gold. If you took all the gold in the world, it would roughly make a cube 67 feet on a side…Now for that same cube of gold, it would be worth at today's market prices about $7 trillion – that's probably about a third of the value of all the stocks in the United States…For $7 trillion…you could have all the farmland in the United States, you could have about seven Exxon Mobils and you could have a trillion dollars of walking-around money…And if you offered me the choice of looking at some 67 foot cube of gold and looking at it all day, and you know me touching it and fondling it occasionally…Call me crazy, but I'll take the farmland and the Exxon Mobils."
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