Why Gold is a Bad Investment

Whenever the economy is bad, you'll hear people pushing gold. (Actually, anytime you turn on talk radio, you'll hear people pushing gold). Gold is a great hedge against inflation, you'll hear, and when the government collapses and society is in ruins, money will be worthless and you'll need gold to pay for things.

Poppycock! First off, if the government collapses, nobody will be looking for gold; they'll want food, water, and a gun. Gold will have no practical use whatsoever.

Second, the economy isn't going to collapse (unless the Republicans win big at the polls, and even then it's iffy).

Third, gold makes a lousy hedge against inflation. No doubt you've heard about the incredibly high prices gold currently demands - close to $1300 per ounce! In fact, adjusting for inflation, gold is now worth only a few hundred dollars per ounce less than it was 30 years ago! The reality is, the price of gold fluctuates based on supply and demand; since the supply is fairly consistent, with a relatively predictable amount of gold being mined each year, the price basically goes up when more people are hoarding gold and drops when they come to their senses; on average, gold generally returns to around $400 per ounce. It would probably be a great buy at that price, if only you could get it just before the next panic...but for the most part, you'll do better with your money in the stock market. (Actually, over the long term, you'd have done better putting your money into low-interest bonds).

Don't get sucked in by the doomsayers. Gold is a commodity; you want to have your money in an investment. Put your money where it can actually do some good.