# Is Gold Really a Good Investment? **URL:** \ **Category:** Great Debates\ **Created:** [July 18, 2011, 3:16pm UTC](https://boards.straightdope.com/t/is-gold-really-a-good-investment/589452 "2011-07-18T15:16:00Z")\ **Posts on this page:** 20\ **Page:** 3
**Author:** ![Quercus](https://avatars.discourse-cdn.com/v4/letter/q/7ab992/32.png) [@Quercus](https://boards.straightdope.com/u/Quercus)\ **Post date:** [July 18, 2011, 6:48pm UTC](https://boards.straightdope.com/t/is-gold-really-a-good-investment/589452/41 "2011-07-18T18:48:55Z")
> [@Susanann](#): > > I did not make anything. My gold is still essentially worth what it was. The only thing I accomplished was that my wealth was preserved while bush and obama were in office spending money like drunken sailors.. Ah, so, you’re a huge President Clinton fan I assume? He did preside over the only successive year budget surpluses in the last 50 years, after all ---
**Author:** ![Colibri](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/colibri/32/1841_2.png) [@Colibri](https://boards.straightdope.com/u/Colibri)\ **Post date:** [July 18, 2011, 6:53pm UTC](https://boards.straightdope.com/t/is-gold-really-a-good-investment/589452/42 "2011-07-18T18:53:14Z")
Moving to Great Debates from GQ. Colibri General Questions Moderator ---
**Author:** ![Susanann](https://avatars.discourse-cdn.com/v4/letter/s/7ab992/32.png) [@Susanann](https://boards.straightdope.com/u/Susanann)\ **Post date:** [July 18, 2011, 7:03pm UTC](https://boards.straightdope.com/t/is-gold-really-a-good-investment/589452/43 "2011-07-18T19:03:15Z")
> [@Machine\_Elf](#): > > Is this because of the numismatic value of a 50-year-old silver quarter, or because of the current market value of the mass of precious metal contained in the coin? It is because both gasoline and silver both held their value after 50 years. Gasoline is not really any more expensive than it used to be, it is the fiat money that has went down in value. [http://www.coinflation.com/silver\_coin\_values.html](http://www.coinflation.com/silver_coin_values.html) ---
**Author:** ![Der\_Trihs](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/der_trihs/32/233_2.png) [@Der\_Trihs](https://boards.straightdope.com/u/Der_Trihs)\ **Post date:** [July 18, 2011, 7:06pm UTC](https://boards.straightdope.com/t/is-gold-really-a-good-investment/589452/44 "2011-07-18T19:06:05Z")
> [@Susanann](#): > > I bought most of my gold at $300.00 when it became likely that bush would become president knowing him to be the liberal he was giving us huge deficits and inflation. He’s a _liberal?!_ What do you have to do to be a conservative, have Hitler worship made the official state religion? ---
**Author:** ![Jas09](https://avatars.discourse-cdn.com/v4/letter/j/d07c76/32.png) [@Jas09](https://boards.straightdope.com/u/Jas09)\ **Post date:** [July 18, 2011, 7:08pm UTC](https://boards.straightdope.com/t/is-gold-really-a-good-investment/589452/45 "2011-07-18T19:08:41Z")
> [@Der\_Trihs](#): > > He’s a _liberal?!_ What do you have to do to be a conservative, have Hitler worship made the official state religion? Return to the Gold Standard, obviously… have you not read the thread (or, really, any of her posts…)? ---
**Author:** ![Jake](https://avatars.discourse-cdn.com/v4/letter/j/f475e1/32.png) [@Jake](https://boards.straightdope.com/u/Jake)\ **Post date:** [July 18, 2011, 7:10pm UTC](https://boards.straightdope.com/t/is-gold-really-a-good-investment/589452/46 "2011-07-18T19:10:40Z")
> [@TriPolar](#): > > **Susanann** is giving you all a lecture in the difference between wealth and money. And I think she’s doing a damn good job! ---
**Author:** ![leahcim](https://avatars.discourse-cdn.com/v4/letter/l/b4bc9f/32.png) [@leahcim](https://boards.straightdope.com/u/leahcim)\ **Post date:** [July 18, 2011, 7:14pm UTC](https://boards.straightdope.com/t/is-gold-really-a-good-investment/589452/47 "2011-07-18T19:14:00Z")
> [@Der\_Trihs](#): > > He’s a _liberal?!_ What do you have to do to be a conservative, have Hitler worship made the official state religion? I’ve seen this claim in many a place. It boils down to, “if you spend money, you’re a liberal, because liberals have the all-consuming goal spending money solely for spending money’s sake”. Of course, the reality is that in his last few years in power, W became so unpopular that conservatives like to distance themselves from him by retroactively putting him on the other team and pretending they never liked him anyway. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [July 18, 2011, 7:36pm UTC](https://boards.straightdope.com/t/is-gold-really-a-good-investment/589452/48 "2011-07-18T19:36:40Z")
> [@Susanann](#): > > 1. Irrelevent. T-bills and 10-year bonds bought today in 2011 will be worthless after another 100 trillion in debt and after the US dollar collapes. Zero is your expected return today in US dollar denominated bonds. For those who are not familiar, this tells you essentially all you need to know about **Susanann** ’s outlook. Her beliefs are all based on the concept that the US government will default within the next ten years. You should of course feel free to follow her advice if you also think it will, although you might consider investing in canned soup, ammunition and a fallout shelter instead. :rolleyes: ---
**Author:** ![Chronos](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/chronos/32/134_2.png) [@Chronos](https://boards.straightdope.com/u/Chronos)\ **Post date:** [July 18, 2011, 7:48pm UTC](https://boards.straightdope.com/t/is-gold-really-a-good-investment/589452/49 "2011-07-18T19:48:44Z")
What I find interesting is that there’s such a high correlation between fundamentalist Christianity and the folks putting a significant portion of wealth in gold. It’s interesting because Jesus actually explicitly warned against putting wealth in static gold which doesn’t increase in value, and instead praises those who invest in businesses ventures that appreciate in value. ---
**Author:** ![merrick](https://avatars.discourse-cdn.com/v4/letter/m/58956e/32.png) [@merrick](https://boards.straightdope.com/u/merrick)\ **Post date:** [July 18, 2011, 7:50pm UTC](https://boards.straightdope.com/t/is-gold-really-a-good-investment/589452/50 "2011-07-18T19:50:40Z")
Going back to the OP for a moment, I’m with **NOLA Cajun** and **Machine Elf**. There’s no doubt gold _has been_ a storming investment over the past few years (compared to cash, or T-bills, or the stock index), but if you bought now you’d be buying at a historic high on the assumption that there would always be more buyers to drive the price even higher. Ask the people who bought California real estate around 2007 how that theory worked out for them… If you look at the [historic price of gold](http://money.usnews.com/money/personal-finance/mutual-funds/articles/2010/10/19/charting-the-historical-value-of-gold) (red line for prices in constant dollars), you’ll see it’s dominated by an almighty spike around 1980. There’s no doubt the people who bought at $500 (in today’s money) and watched it go to $1750 in three years had fun; the ones who bought at $1750 and watched it go back down to $700 in the next five, not so much. As to whether gold is an “investment” or a “store of value”, it really depends on where you’re standing. If you define everything in terms of gold, then the return on gold will by definition be zero. If you define it in terms of nominal dollars, or constant dollars, or the Dow Jones, or the price of beans, you’ll get different answers, and none of the them will be any more right. Gold has some advantages as a hedge against bad times - it doesn’t wear out or become obsolete, it’s rarely out of fashion and it’s less vulnerable than most paper investments to companies going bust or governments changing the rules. They can print another trillion dollars, they can’t create another thousand tons of gold. On the other hand, they can’t make any more land in California either, and look what happened to that. Ultimately, buying gold (or selling it) is betting that you know what the markets and the economy will be doing in five or ten years’ time - and if you can do that reliably, there’s plenty other ways to make money. ---
**Author:** ![code\_grey](https://avatars.discourse-cdn.com/v4/letter/c/f4b2a3/32.png) [@code\_grey](https://boards.straightdope.com/u/code_grey)\ **Post date:** [July 18, 2011, 7:53pm UTC](https://boards.straightdope.com/t/is-gold-really-a-good-investment/589452/51 "2011-07-18T19:53:23Z")
> [@pulykamell](#): > > If you really believe that, why don’t you just borrow as much as you possibly can in 2011 dollars at today’s low interest rate, put it into whatever inflationary hedge you’d like (like gold), and then, when we have our wild inflation, make out like a bandit? perhaps because gold prices can start falling from the current bubble levels while interest rates can be adjusted upwards, including by an “emergency” government decree overriding whatever promises made by the lenders beforehand? I think that such borrow and stockpile strategy would make sense in some situations, but not in the likely situation of American small scale investor. If you are a commercial outfit that knows what it is doing and are safely located outside American borders and legal system, maybe it would make sense to borrow money from Americans at, allegedly, excessively low rates and invest them in foreign assets that are not going to be directly damaged by Obama et al. Indeed, some types of assets may significantly benefit from an American collapse, e.g. much like the asset called “housing in Amman, Jordan” went up in price big time due to Iraqi collapse under CPA [del]mis[/del]rule. ---
**Author:** ![pulykamell](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/pulykamell/32/3166_2.png) [@pulykamell](https://boards.straightdope.com/u/pulykamell)\ **Post date:** [July 18, 2011, 8:07pm UTC](https://boards.straightdope.com/t/is-gold-really-a-good-investment/589452/52 "2011-07-18T20:07:15Z")
> [@code\_grey](#): > > perhaps because gold prices can start falling from the current bubble levels while interest rates can be adjusted upwards, including by an “emergency” government decree overriding whatever promises made by the lenders beforehand? It doesn’t have to be gold–it can be whatever you think is the proper inflationary hedge. Gold is just a common inflationary hedge. It could just as well be another currency. But if you really felt we were going into a high inflationary period, you can leverage that into your economic advantage. ---
**Author:** ![Gymnopithys](https://avatars.discourse-cdn.com/v4/letter/g/fbc32d/32.png) [@Gymnopithys](https://boards.straightdope.com/u/Gymnopithys)\ **Post date:** [July 18, 2011, 8:08pm UTC](https://boards.straightdope.com/t/is-gold-really-a-good-investment/589452/53 "2011-07-18T20:08:47Z")
> [@NOLA\_Cajun](#): > > However, you can’t eat it, burn it for fuel or use it for shelter. But you masy be able to use it to purchase those things. In India they put it on food on your plate. I’ve eaten gold! 🙂 ---
**Author:** ![treis](https://avatars.discourse-cdn.com/v4/letter/t/bc79bd/32.png) [@treis](https://boards.straightdope.com/u/treis)\ **Post date:** [July 18, 2011, 8:24pm UTC](https://boards.straightdope.com/t/is-gold-really-a-good-investment/589452/54 "2011-07-18T20:24:17Z")
> [@Susanann](#): > > Gold is a terrible investment. It pays no interest, and its value(after taking out short term fluctuations) has been essentially constant for hundreds, thousands, of years. An ounce of gold bought 1 nice rifle 100 years ago, it bought a nice rifle 200 years ago, and today it still just buys 1 nice rifle today, gold has not appreciated at all. 5 ounces of gold would buy one new nice car in the Roaring 1920’s, and today , 90 years later, 5 ounces of gold will still only buy one new car. Gold never changes. Gold is an investment dud. This isn’t true. I couldn’t find rifle prices, so I used shotguns. [Here](http://www.smithandwessonforums.com/forum/armory/2366-1903-sears-catalog-always-cool-gun-stuff-view.html) is a 1903 sears catalog, and [here (PDF)](http://www.nma.org/pdf/gold/his_gold_prices.pdf) are historic prices of gold. The shotguns cost about $18, and gold sold for about $19 an ounce. So that’s slightly more than one shotgun per ounce of gold. [This site](http://www.midwesthuntersoutlet.com/Items-5752-1-shotguns_all.aspx?Order=1) has shotguns for about $200. That’s about 8 shotguns per ounce of gold. ---
**Author:** ![Der\_Trihs](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/der_trihs/32/233_2.png) [@Der\_Trihs](https://boards.straightdope.com/u/Der_Trihs)\ **Post date:** [July 18, 2011, 8:25pm UTC](https://boards.straightdope.com/t/is-gold-really-a-good-investment/589452/55 "2011-07-18T20:25:49Z")
> [@Gymnopithys](#): > > In India they put it on food on your plate. I recall seeing a news story back in the 80s about an American restaurant that did that. They served entire meals coated in a thin gold layer, like gold steaks. ---
**Author:** ![Roderick\_Femm](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/roderick_femm/32/14875_2.png) [@Roderick\_Femm](https://boards.straightdope.com/u/Roderick_Femm)\ **Post date:** [July 18, 2011, 11:25pm UTC](https://boards.straightdope.com/t/is-gold-really-a-good-investment/589452/56 "2011-07-18T23:25:29Z")
> [@merrick](#): > > Going back to the OP for a moment, I’m with **NOLA Cajun** and **Machine Elf**. There’s no doubt gold _has been_ a storming investment over the past few years (compared to cash, or T-bills, or the stock index), but if you bought now you’d be buying at a historic high on the assumption that there would always be more buyers to drive the price even higher. Ask the people who bought California real estate around 2007 how that theory worked out for them… > > If you look at the [historic price of gold](http://money.usnews.com/money/personal-finance/mutual-funds/articles/2010/10/19/charting-the-historical-value-of-gold) (red line for prices in constant dollars), you’ll see it’s dominated by an almighty spike around 1980. There’s no doubt the people who bought at $500 (in today’s money) and watched it go to $1750 in three years had fun; the ones who bought at $1750 and watched it go back down to $700 in the next five, not so much. > > As to whether gold is an “investment” or a “store of value”, it really depends on where you’re standing. If you define everything in terms of gold, then the return on gold will by definition be zero. If you define it in terms of nominal dollars, or constant dollars, or the Dow Jones, or the price of beans, you’ll get different answers, and none of the them will be any more right. > > Gold has some advantages as a hedge against bad times - it doesn’t wear out or become obsolete, it’s rarely out of fashion and it’s less vulnerable than most paper investments to companies going bust or governments changing the rules. They can print another trillion dollars, they can’t create another thousand tons of gold. On the other hand, they can’t make any more land in California either, and look what happened to that. > > Ultimately, buying gold (or selling it) is betting that you know what the markets and the economy will be doing in five or ten years’ time - and if you can do that reliably, there’s plenty other ways to make money. Interesting chart; it is about a year out of date, and in that year the price of gold in dollars has gone up about 35%, while inflation was nominally below 5% (see charts [here](http://www.kitco.com/charts/livegold.html) for current-dollar prices of gold over the past 10 years). My back-of-matchbook math makes the current constant-dollar price around $1600 (interestingly this is about where the price is in current dollars, I wonder what that means?). If you do the math on these charts, you can see that the price of gold has kept well ahead of inflation. Over 10 years the price has gone up around 500%; over 5 years about 180%; and as I mentioned, it has gone up about 35% in the past year. I think Susannan is right that gold is primarily useful as a store of value; it can also benefit, at least temporarily, from panicky investors facing an uncertain future. If the definition of a “good” investment is one that increases your actual wealth (ability to buy things) then gold has done pretty well over the past 10 years, but not so well over the past 30 years. Roddy ---
**Author:** ![patagonia](https://avatars.discourse-cdn.com/v4/letter/p/c4cdca/32.png) [@patagonia](https://boards.straightdope.com/u/patagonia)\ **Post date:** [July 18, 2011, 11:55pm UTC](https://boards.straightdope.com/t/is-gold-really-a-good-investment/589452/57 "2011-07-18T23:55:19Z")
Anyone thinking about investing in gold really needs to be wary of the amount of speculation in commodities right now. I’m not opposed to anyone putting a small sliver of their investments in alternative strategies such as commodities, but anyone who ties their retirement to such a volatile product is really playing with fire. Gold seems to clearly be within a bubble, and institutional investors are likely to start selling their positions once the markets become clearer and bonds start delivering better yields. Are there short-term gains to be had now? Perhaps. But eventually the music will stop and a lot of people are going to be left without a chair. ---
**Author:** ![Martin\_Hyde](https://avatars.discourse-cdn.com/v4/letter/m/47e85d/32.png) [@Martin\_Hyde](https://boards.straightdope.com/u/Martin_Hyde)\ **Post date:** [July 19, 2011, 12:54am UTC](https://boards.straightdope.com/t/is-gold-really-a-good-investment/589452/58 "2011-07-19T00:54:37Z")
For what purpose are you investing? Until you ask and answer that question asking whether a specific _anything_ is a good investment is folly. If you’re investing for retirement and you’re an ordinary American you need a few things to be true: 1. You need your ROI to be in the 5-10% range over your working life if you are contributing around 10-20% starting in your 20s. This is because most people who are not wealthy, if you took 20% of their gross every year and put it in a magic cash box that automatically made the cash replicate exactly at the rate of inflation, that individual would still not have enough money come retirement age to live comfortably on. (Gold does not satisfy this requirement.) 2. You need an investment that is highly likely to not be totally wiped out. (Gold satisfies this.) 3. You need an investment portfolio that is diversified enough so that when **you personally** hit retirement age, you do not end up in the situation where the savings in your retirement fund are at a low point because of market fluctuations, to such a degree that you cannot afford to retire. (Gold absolutely does not satisfy this requirement.) For retirement purposes you should only invest in proven, diversified ways. Typically lots of index funds of major indexes, some international funds, some bonds, and maybe some commodities like gold and silver if you want. But never put all your eggs in one basket. ---
**Author:** ![SCSimmons](https://avatars.discourse-cdn.com/v4/letter/s/e495f1/32.png) [@SCSimmons](https://boards.straightdope.com/u/SCSimmons)\ **Post date:** [July 19, 2011, 4:02pm UTC](https://boards.straightdope.com/t/is-gold-really-a-good-investment/589452/59 "2011-07-19T16:02:10Z")
> [@Machine\_Elf](#): > > Is this because of the numismatic value of a 50-year-old silver quarter, or because of the current market value of the mass of precious metal contained in the coin? The [melt value](http://www.coinflation.com/coins/1932-1964-Silver-Washington-Quarter-Value.html) of a 1962 quarter will actually buy you _two_ gallons of gasoline, at my local market prices! ---
**Author:** ![Folacin](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/folacin/32/3195_2.png) [@Folacin](https://boards.straightdope.com/u/Folacin)\ **Post date:** [July 19, 2011, 5:26pm UTC](https://boards.straightdope.com/t/is-gold-really-a-good-investment/589452/60 "2011-07-19T17:26:22Z")
You should also carefully consider \how\ you invest in gold. No cite (sorry), but on a different board, there is a lot of talk about how precious metal depositories may be issuing certificates for metal (specifically silver as I recall) that they don’t have. The truly worried would take physical delivery (which I guess saves you storage costs, but then you have to have a safe place to store it). [Previous page](https://boards.straightdope.com/t/is-gold-really-a-good-investment/589452.md?page=2) [Next page](https://boards.straightdope.com/t/is-gold-really-a-good-investment/589452.md?page=4)