Why Gold is a Terrible Investment (Unless You’re Giving It to a Lady Friend)

Stop buying gold people. Gold is not the world’s hard currency. It is not a permanent store of value, in fact it is one of the most speculative, and crooked markets out there.

The only true world currencies are fossil fuels, fresh water, and trust. Now when I say trust I don’t mean it in an ABC family special sort of way. I mean it in a credit rating type of way. For instance, many people do not Trust that Greece will give them back the money they borrow from them, therefore, their trust currency is worth very little and creditors ask for arms, legs and other things to compensate them for the risk of not getting their money back. In places like Argentina a few years ago people did not Trust that the paper money they held would be honored by their grocer and therefore it became worth very little (a la hyper-inflation).

We know that people will need to consume energy, and therefore, there will always be a market for fossil fuels (sorry to people who think we can live in a world of solar powered cars). And there is a growing and alarming limit on the amounts of accessible and potable (read, drinkable) water in the world. Investing in companies that provide this may prove a wise move in the long term…just sayin.

Which brings us back to gold. Gold is used for earrings, necklaces, rings, coins, small amounts in fighter plane windshields, and the big bars you would find in Fort Knox…nothing else. (I am sure that if more people read this I could get challenged on this point by numerous other uses, but they don’t so I’m not worried) Other than that it is something pretty that only became popular as a currency because of its malleability. They could make it into bars and coins easier than things like iron and bronze. (That’s why you see pirates bite the coins they barter with, to see it leaves a mark.)

Bottom line, gold is a terrible investment. 1) There is no way to determine a fair-value on something that has no practical use. 2) At $1200 an ounce, however, I am almost ready to raid my wife’s jewelry box (if the people buying it at the “Gold Stores” weren’t all crooks) 3) You can tell when asset has hit the bubble stage when you start seeing EVERYONE trying to get in on it. I dont know about everyone else, but I listen to the radio and hear fifteen commercials about Buy Gold Now! Sell us your Unwanted Gold! Does anyone remember shows like Flip This House, and commercials to buy houses with NO MONEY DOWN. I think we all know how that story ended. I cant say that gold prices will plummet tomorrow, hell, they could double if a state or two in the US start issuing IOU’s. What I am saying is that buying gold is like buying Beanie Babies in the 90’s. Your kinda rollin’ the dice.

Do like my buddy John and put down for a house. That is something with a practical purpose and real demand.

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