It might be true that gold has been a phenomenal investment over the last 7 years or so. As you can see in the chart below (from the cost of gold has gone up dramatically starting at about 2005 to the present. But how about the 14 years prior to that?

In the 14 years from 1991 to 2005, you can also see in the chart that gold went almost nowhere. At many points in that time span, any investor in gold would have lost money because the price went down about 6 of those years.

So while gold is soaring now, it hasn't always been that way and anyone that has put money in it and held for 20, 30, or 40 years hasn't really done as well as the experts would have you believe. You hear ads all the time on the radio and see them on television: gold is going to $2000 per ounce or even $4000 and ounce and you better get in right now! But this is all hype and speculation made a bit more believable because of the recent run up.

But investors should know that gold can go down and has gone down in its history. Advertisers want you to believe that gold only goes up and you better jump on the bandwagon to protect yourself from inflation and anything else that is bad out there. Of course these peddlers of gold coins and gold bars will profit if you go to them and that is why they are advertising to get your business.

I am not saying that gold will go down from here: I am just saying that it CAN go down and sometimes it is hard to remember that through all the hype. The longer you have held the gold you have now, the worse the investment has been for you. Only those people that have bought gold in the last 7 or so years have done exceptionally well. Also remember that you should have balance in your portfolio and that means a variety of different investment types and industries you are betting on. Don't put everything in gold unless you really want to gamble.

No comments: