Why Gold Might Not Be the Shiny Investment You Think

Gold often gets a reputation as a “safe asset.” It's touted as protection against inflation and a handy tool for diversifying your portfolio. Plus, there's a certain emotional allure to owning gold. But does it deserve a spot in your long-term investment strategy? In today’s blog, I'll break down why gold might not be as golden as it seems.

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Gold's Performance Over the Long Run

If we look at gold's performance since 1920, a clear pattern emerges. Gold peaked in 1980 at $155 (inflation-adjusted), but it hasn't managed to reach those heights again even after more than 40 years. In 2024, gold is worth less in inflation-adjusted terms than it was in 1980.

An investment that takes over four decades to recover from an all-time high should raise some eyebrows.

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To illustrate this further, let’s compare gold to US large-cap stocks. Between 1972 and 2022, the S&P 500 had an average annual total return of 11%, while gold lagged behind at 7.7%. These numbers make it clear: gold is a poor long-term investment compared to stocks, which generally serve as a better growth engine for your portfolio.‍

The Emotional Trap of Gold Coins

Let’s talk about the emotional appeal of buying gold. You’ve probably seen those ads on TV or heard them on the radio, playing on your fears by suggesting that the world is on the brink of disaster and the only safe haven is gold or silver coins.

When fear is the main selling point, it’s a big red flag.

And then what? Where do you store your gold coins? Do you bury them in your backyard? How do you sell them? Are you planning to barter with gold coins for groceries?

These practical concerns highlight why gold coins might not be the savvy investment some make them out to be. Don’t fall for fear tactics.

Final Thoughts

Gold's long-term returns are lackluster at best. If you own gold, ask yourself: Are you letting your emotions dictate your investment decisions? Could this be jeopardizing your retirement?

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This blog article is for informational and educational purposes only. ‍

Sources: 
‍Ritholtz Wealth Management

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