Even though I’m the editor of some of the most popular precious metals websites on the Internet, I’m not a “gold bug”. What I mean by that is I’m not constantly telling people they’ll make money in the next year or so if they pile their life savings into gold.
That’s a horrible idea, and chances are any normal person who is trying to “get rich” or “make money” in a market boom is going to lose money, because they’re probably a day late and a dollar short. It’s how the economy works, has worked, and always will work.
Normal people who invest without expertise or research are also known as “suckers”. The entire gold market is making a killing with these poor folks. Below I’ll be explaining some facts about gold that you won’t read many places online, especially not on websites that are actually about gold.
Note that I’m also a huge, huge fan of everyone having precious metals in their portfolio. Precious metals are extremely important to a balanced portfolio. I’m just responding to the “buy and get rich” crowd that’s giving gold a slight artificially inflated price right now.
I’m not saying gold is bad investment — I’m just explaining how gold investing should work, without the hype of people who are just trying to peddle gold to uneducated investors.
- Gold isn’t a safe investment. Gold is volatile. It has major swings. For every bull market there’s an equal bear market — that’s the entire idea of gold… it stays roughly the same value over time. So while gold is rising now, it’ll have a drop later. Gold bull markets will never last forever.
- Gold is a safe insurance. Gold isn’t a safe investment because the gold market often is pretty rough, and people can lose a little if they’re speculating. But gold is an amazing financial insurance over time. In other words, it allows you to make sure you have wealth no matter what. If you had 1,000 ounces of gold in the Roman days you would have been rich. If you have 1,000 ounces of gold now, you’re a millionaire. Gold has survived the test of time. Stocks and currencies… not so much.
- Supply and demand control gold. No matter what happens, gold isn’t above the laws of supply and demand. If no one wants it, it could become worthless. This has never happened consistently throughout history — it’s always been worth something. But this does mean that it could drop in price drastically, meaning you shouldn’t try to make money with speculation — it’s too risky. Read more above.
- Gold is taxed differently. Something most gold dealers don’t explain is that even the IRS doesn’t consider gold an investment that’s like a dividend-paying stock. Mostly because it’s different than most investments. It’s taxed as a collectible, which means higher taxes in the end. This makes it harder to find profit, though it’s not a big deal in the long-game against inflation.
- Gold is a long-term buy. Speaking of the long game, gold is a long investment just like silver. If inflation rises 4%, gold and silver prices won’t necessarily increase by 4% instantly. Gold doesn’t track short term inflation — it tracks long-term inflation. So people who are buying gold to survive a few years of inflation and will sell it later are kind of missing the point. The only way to profit in the short run is to time the market and speculate… that’s different than hedging against inflation.
- Gold is not easy to liquidate. This is something most people don’t explain. It’s hard to liquidate gold for exact market prices. You usually buy over spot and sell under spot … meaning making profit in the short run requires a major bull market. Gold is a long-term investment unless you’re working with millions or billions worth of bullion and have industry connections. Even then it’s still risky speculation.
In the end, I’m a huge supporter of gold. If you don’t own gold and silver, that’s a big mistake and could cost you in the long run or in case of economic calamity. Just keep in mind that the real consistent value of gold isn’t getting rich, but about preserving wealth.