The Truth About Gold

You've probably heard the following sales pitch on TV, "Protect yourself, buy gold, what's in your safe?" So how good investment has gold really been over the long term? Here's a chart showing the price of gold going all the way back to 1980. Gold prices spiked to $850 an ounce as it became a popular hedge against inflation. The bad news. If you were one of those unfortunate investors who bought gold at $850 an ounce, it took 27 years for your investment to break even. Gold did have a strong up move from 2005 to 2012. After peaking at $1,800 an ounce, it has since fallen 30% in the last five years. It's been quite a roller-coaster ride on the gold train.

Let's compare the longterm price of gold to the S&P 500 over the same timeframe. The price of gold has roughly doubled over this 37 year period. An annual return of about 1.9%. Over the same time period, the S&P 500 has produced an annual return of about 11.6%. Another factor as Warren Buffet rightly points out there is often an annual cost to holding gold, mainly storage and insurance costs. Good investments in stocks, bonds, and real estate, on the other hand, pay interest and dividends as you all know. So what's the takeaway here? Gold can be a profitable, short term investment from time to time, but its longterm record is poor and subject to significant risk. We hope you found this information helpful. If you have any comments or questions, please let us know.

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