Invest in gold, they say. It never loses its value, they say. It’s a sure-thing, they say. Stop right there – nothing in this industry is guaranteed. Statements like this, then, should make you think “is the hype surrounding gold a myth?” Of course, to look at it, there doesn’t seem to be anything wrong. Indeed, precious metals don’t lose their value, whereas paper money does, quite significantly. As Warren Buffett says, people are right to run away from currency, unless it’s Bitcoin, obviously.
However, where you turn to is as important as deciding to flee in the first place. Sadly, as shiny and attractive as it seems, gold isn’t the new home for which you are searching. The sad truth is that it’s Buffett, as always is right, which is why he’s a billionaire. Unlike some, he isn’t here to celebrate but to help. With that in mind, below are the reasons why a personal investment in gold isn’t a fail-safe backup plan.
***Caution: read with an open mind. The following may not sync with your current thoughts and beliefs.
Not A Gamble Against Inflation
14% compared to 8%. 8.5% compared to 4.8%. 10.6% compared to 8.6%. Looking at these figures, you’d think the higher amounts are attributable to gold and not stock options. However, prepare to feel shocked because it’s the other way around. In the “Invest with the Fed” book, the author points out that gold isn’t the hedge against inflation people like to imagine. In comparison to 1972 rates, Robert Johnson shows that gold performs poorly against stocks and shares. Investors like to say don’t use past performances as indicators of future results, but the stats are in and they are comprehensive. Yes, gold may not revert to its normal position over time, yet it fails to outscore the options which do this exact thing. In the handbook entitled “Investment 101,” the first rule is always to pick a project with a high ROI. It’s never easy to tell, but history suggests gold isn’t the smart choice if you’re searching for profits.
Difficult To Value
How companies are valued is entirely different to how gold gets its retail price. In simple terms, the experts use forecasts, such as past performance and market strength, to come to a final amount. Although it’s by no means scientific, the estimates do tend to be right or at least in the correct ballpark. Gold, by comparison, isn’t relatable. According to the people in the know, this metal doesn’t have earnings or anything else, and that makes it an emotional investment. Quite simply, people will pay for it what they fancy on the day. And, this makes it an incredibly volatile project. For example, fear-mongering about paper currencies could swing it in your favor. But, if fear is at an all-time low, then no one is going to splash out anytime soon. Because there is no way to tell, the logical move is to stick with an option that has a value.
Let’s start by saying there are millions of investment scams out there and that you have to be careful. The problem with gold is the fact it works off fear. When you think traditional currencies are going to fall flat, gold seems like a steady option. Forget about the fact it’s not a lucrative option because it’s better than losing everything. Scammers use this attitude and the atmosphere to their advantage by playing on your heart strings. “Why stick with the government-sanctioned investment and trust your country? Trust us instead!” The reason they are unreliable is that of commission. By selling gold products and services, they make a killing and accumulate a vast level of wealth. You, on the other hand, are stuck with an investment which isn’t going to flourish even if there is a crash. Unfortunately, it’s hard to tell when gold is real or fake.
No one is saying Bitcoin and Co. will last forever. Indeed, it would be a terrible prediction as there is only a finite amount of servers around the world. One thing that is for sure is the push towards cryptocurrencies at this moment in time. Even with the value at $10,000 give or take, and that from $20,000 last year, average investors want in. When you visit Xcoins.io, it is now possible to use PayPal to get paid in Bitcoins. Saying that this doesn’t impact the gold industry isn’t the reality. Investments in gold are already on the decline, and the new technology has a big role to play. As people shift from traditional forms to new age methods, it is going to impact the price negatively. In time, the industry may calibrate and everything could go back to normal. For now, cryptocurrencies make the prospect of investing in gold and other precious metals pretty scary.
The US Treasury
Paper monies are guaranteed by the Treasury, and that is why people are running for the hills. If the US government decides to devalue the amount, then what you have in the bank is worthless. And, this isn’t a shady loan shark who is at fault – if it happens, it would be the country of your birth. The pertinent word to keep in mind is “if”. Okay, past performance isn’t an indicator of future gains, but let’s put one thing out there: the US government has never defaulted. At least, it hasn’t in anyone’s lifetime among this readership. Because the pressure of millions of citizens is on their shoulders, they do their best to stay in business. You may think this is a perilous position but think about a couple of decades previously. There have been wars, trade disputes, and a global recession in 2010 which isn’t completely over. Through it all, the Treasuries Services department never once faltered. It could happen in the future; however, it is going to take an unforeseen circumstance of massive proportions.
Do you think gold is losing its shine, or is it savvier than trusting currencies?