Re-shaping the Golden Rule: Say No to Gold

by salman on 11/04/2011 · 0 comments

If you’re looking to shore up your investments and diversify your stock portfolio, think twice before investing in Gold and other precious metals. The market has done very poorly in the last several years, due to the decrease in average investors and the dollar value.

Currently, precious metals have a stable value on the stock market, but investors should remember that commodities, such as gold and silver, tend to do well when the economy is in a downturn, due to the liquidity of precious metal and other assets. Therefore for investment purpose, “gold is better as a short-term investment, because of it volatility in the long-term,” Charles Bulger from RetirementCalculator.com told me.

The last big peak in gold prices was in 1980 at $850 an ounce. In 2009, gold prices reached a record $1226 an ounce. If you purchased gold in 1980 you would have seen a major return, but you also have to take into account that between these two periods gold dropped in value greatly and many never made the money back. They bought into fad stocks predicated on an economic crisis and scare/scam tactics. Precious metals are only worth the value that investors place in them. Gold’s value isn’t based on its worth but on the mood investors. If there’s a demand, the cost will go up, aligned to simple economics.

Precious metals are being advertised to consumers as a great retirement investment, yet the evidence shows that gold and other precious metals are neither a stable nor sustainable long-term investment option. Ideally, you should only be buying on good news and selling on bad news. Though it may seem like a good idea to buy gold, it’s more for speculators than for long-term investors.

If you want to invest in your retirement, then look at diverse stocks and funds that will cover you over a wide range and protect you from economic downturns. Don’t buy into fad stocks that will end up doing damage to your future financial security. There is a certain amount of risk involved with any investment, however you’re better off than those who are still waiting to get their initial investment back after buying wholesale into gold and other precious commodities.

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