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moneysense.ca, 15/06/05
Gold Bugs
The New York Times has an interesting story on our fascination with gold and how some “gold bugs” still consider it as the true money. While gold is a beautiful metal that can be used to create stunning jewellery, it has little appeal from an investment point of view. The devastating case against gold can be found in the Chart in Page 11 of Stocks for the Long Run (Third Edition). One dollar invested in gold in 1801, adjusted for inflation would have been worth 98 cents in 2001. Ouch!
moneysense.ca, 15/06/05
So assuming a successful storage period of 200 years gold has given a 98% protection from inflation, war, failed banks, governments and other upheavals during that time.
That is 2% from a perfect score as a store of wealth, and far better than dollar bills, coins or even a regular bank account. Gold is indeed true money, whereas stocks, bonds etc. are true investments.
Gold basically keeps pace with inflation and that’s it. Actually, the same chart says $1 in bills would be worth $304 in 200 years. Inflation meanwhile would have eroded a dollar into 7 cents. Since as a long-term investor I am hoping to grow my investments, gold would be a poor choice.
I guess I meant to say gold is better than bank notes, coins or a checking account…There is always the possibility people will jump onto gold as a speculation and drive the price up, but it is basically not an investment. Going 2000 years back, in the Bible is supposedly mentioned a certain amount of gold would buy a certain suit, and today the same amount of gold will still buy a decent suit, so gold works, but it’s become antiquated and not very practical..