A warning about Investing in Gold…



Investing in Gold can be one of the worst investments out there, and I’ll explain why this isn’t quite the “Golden Opportunity” people think it is…and why this investment won’t always “Pan Out.” Enjoy. Add me on Snapchat/Instagram: GPStephan

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How does Gold look from an INVESTMENT standpoint? And is this even an investment to begin with? Since gold was a fairly fixed price prior to 1970, we can really only look back at the last 45 years of data to determine the average price of gold, and adjust that for inflation. If we take the price in 1978 of $208 an ounce, we can reasonable determine that would be $838 in today’s money. As we know, gold right NOW is $1200 an ounce. This means that effectively your gold went up in value 45% adjusted for inflation…over 40 YEARS. Just as a comparison, the SP500 index went up in value 630% during that same period, adjusted for inflation.

So given that…in 40 YEARS, gold only went up – on average – of about 1% annually, adjusted for inflation. Versus the SP500, which went up in value 5x MORE during that same period.

First, Gold is also just really, REALLY inefficient to invest in. Owning PHYSICAL gold has many drawbacks…first, there’s a wide spread between bid and ask prices to ensure that the moment you purchase gold, you are IMMEDIATELY underwater on your so-called “investment.” Then you have shipping costs for an expensive metal that you’ll have to include, as well. Then once you get your gold investment, you’ll have to figure out how you’ll store it. Other companies charge you for storing your gold.

Another important distinction when it comes to gold is that gold doesn’t throw off cash, much like a stock’s ability to produce income for the share holder. It doesn’t give you interest…it just kinda sits there, looking pretty.

So why do people even consider this an investment? Or why is this even called a hedge against an inflation? Well…the reality, is that it’s neither. It’s a hedge against FEAR. The more people FEAR about inflation, economic issues, or defaults…the higher the price of gold climbs. The thought process is that while paper currency can’t be trusted, GOLD will also retain value. But U.S. Treasuries Securities have never been defaulted upon in anyone’s lifetime.

So here’s the moral of the story…golds prices are correlated with our fear in the economy, whether or not it’s warranted. After its peak in 2011, when was pretty much the BEST and lowest times to buy just about anything in the markets, gold was at its highest…and has been on a slow decline since then. And remember Warren Buffets “Golden” Rule? Be GREEDY when others are FEARFUL…and FEARFUL people are the ones buying GOLD.

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36 thoughts on “A warning about Investing in Gold…”

  1. You only quoted half of that Warren Buffet quote to fit you false narrative. The full quote is "Be fearful when others are greedy and be greedy when others are fearful" in your example of 2010-2011 gold markets were at an all time high and for those who collected gold years before it was the time to be fearful and sell to others who were greedy and willing to pay the inflated price. Now the smart investors would've used the money they made from selling gold and went greedy on stocks when the price was low and those who bought gold were fearful of the stock market. The term "hedge against inflation" just means that anytime the rest of the economy is in trouble gold and arguably silver will go up in value.

  2. 8:07 Graham: "So why do people think that gold is an investment, or even a hedge against inflation?" Graham 10 seconds earlier: "Gold has gone up 1% per year for 40 years adjusted for inflation" Seriously dude? You are contradicting yourself with this mumbo jumbo. It clearly just proved you wrong, as it has maintained its value over the decades.

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  4. "Why The Value of FIAT Money Will Always Go to Zero. Almost all paper money today is fiat money. Since 1971, real assets have not backed the dollars that Americans spend. Paper dollars have value by government fiat – the government has declared that these printed dollars are legal money".

  5. He is right in a way. Gold and silver is a terrible investment if you want to make money of it like a traditional buissnesman. But in case of a doomsday gold is the best. I belive that we will have an inflation someday. And then morons like him will be hit the most.

  6. The idea of gold investment is it keeps increasing over long periods of time especially when there is a recession in America. It also is that it has such a limited amount and it is used so often in rings, watches, and necklaces that get lost somewhere that having physical gold stored somewhere has good backing. Along so the reason people by gold instead of land is because, you can buy land in a neighborhood, but if there is a gun shot once by some dude every so often, that land is going to plumit in value, making many hesitant to hold on to it but that land may later regain its value or not. There are certain people prefer certain investments

  7. The govt has printed trillions and trillions of dollars over the last 10 years. This is one of the best time in history of America to buy silver and gold. Your dollar is being devalued every single day. Gold's value will be maintained and increase against the dollar in the coming years.

  8. If you ALREADY have gold, what you should do is use it as a security collateral when you make loans.. then you get a better deal on your interest and THEY HAVE TO STORE IT FOR YOU.. you're basically getting payed to store your gold

  9. You are correct you man, gold should not be looked at as an investment. Gold should, however, be part of everyone's portfolio as a hedge against inflation. Simple as that.

  10. it's good to buy gold as a bear market occurs in the dow. commodities (gold) and paper assets (dow) are inversely related so when gold is in a bull market dow is in a bear market and vise versa. look at 100 year chart of both you'll see

  11. Don’t care. Still buying gold for when the robots take over and my great grandkids need something to bargain with to get into the underground colony.

    Giving them life skills would be better, but I don’t have any of those to spare

  12. Me and my father invested 1978 in gold and sold it in 1980 with 200%, and I invested in 2002 and sold it in 2009 with 300%…found that good investments…gg! btw…invested 4 months ago again in gold 😉

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