Gold is Not a Golden Investment

That's right. Gold is NOT the golden investment that many people assume it be.

I am not saying that gold will not go up. Then again, I am not saying that gold will not go down, either.

In fact, I am making absolutely NO predictions about the future price of gold.

Why do some people place more value in gold than money, specifically the US Dollar?

There are plenty of reasons that people are interested in buying gold, especially now. The US Currency is becoming an obscene display of toy money, as the US keeps printing money, like it comes from the sky.

It actually doesn't come from the sky. It comes from the presses.

Money is nothing but a piece of paper. The currency depends upon people simply trusting that it will continue to bring them value of products or services when they exchange their money.

Once enough people stop believing that, then money will become worthless. So money will lose its value when people stop placing value on it.

On a bigger scale, several countries are questioning whether they should continue tying their currency to the US Dollar. Once enough countries stop placing a value on the US Dollar, the US Dollar will lose its value.

If this happens, the world will be operating much differently. Right now, most of the world is not willing to tackle this unknown change. Nobody knows for sure, but these decision makers might very well be correct not to face these problems head-on.

Why is Gold so popular?

Simply put, people value gold, because it is very steady. One ounce (1 oz.) of gold today was 1 oz. of gold yesterday. Tomorrow, it will still be 1 oz. of gold.

You can't just print gold. There is only a finite amount on the earth. Of course, we might find more if we mine it, but no politically powerful group can simply summon more gold by printing it. So the supply is steady, also.

The biggest reason that so many people are excited by gold is that the more money the US prints, the more money it will take to buy that same piece of gold. So the value of gold almost certainly will rise.

Why is gold not a golden investment?

So far, everything seems to point toward gold being a smart purchase, especially with the government continuing to make more money, making each existing dollar less valuable (and each piece of gold more valuable).

Let's take a look at what makes good investments.

A good investment provides future value grater than today's value. Sometimes, this is easier to predict than other times. One example of this is when you know that a breakthrough product is coming into the marketplace soon. Another example is when a key manager was recruited from a successful organization, and you can see this person positively affecting the entire new organization.

One way or another, a good investment will be more valuable today than tomorrow.

Another feature of a good investment is when it provides a regular stream of passive income. Even if the value stays the same, if this investment puts more money into your pocket every year than another investment, you can label this to be a good investment.

The most important feature of a good investment is that it, somehow, generates money. Sometimes, it might generate less money than it spent during a certain time period, but a good company will generate more money than it spends over an extended time period.

Let's look at gold against each of these:

• Greater value tomorrow? Perhaps, but it will not change. The value of gold increases only when the value of surrounding investments lose value.
• Provide Passive Income? No, gold does not pay you anything until you sell it, unless you find some sucker that will rent it from you and pay you regularly.
• Generate money? No, gold does not generate money. It just sits there and produces nothing.
  

What is the biggest flaw in buying gold?

I've listed, what I think are, some big flaws to investing in gold.

However, the biggest flaw that I see that there is no difference between using gold to value things and using money to value things. Both money and gold were selected by someone in the past, almost certainly very powerful, that rock called gold (or this piece of paper called money) would be the thing that was valuable.

Think about it!

If people stopped placing value on money, it would lose its value.

If people stopped placing value on gold, it, too, would lose its value.

There is barely any difference, except for the perception.

So is it impossible to make money by investing in gold?

Some people will point to the fact that the price of gold keeps rising, and the US government keeps providing more reasons for the gold price to keep rising.

So it is certainly possible that people will make money by investing in gold. In fact, it is entirely possible that people will make a LOT of money by investing in gold.

What am I doing?

However, you will not see me using gold as the foundation of my investing strategy anytime soon.

I cannot see any patterns that allows me to predict any future value based upon anything specific to gold. The price seems to be affected by EVERYTHING else, and I'm just not smart enough to value everything else. I am only one person--not everyone. I'll let everyone else watch these other things that affect gold.

Ending question...How do you know that the price of gold does not already account for these other things? People have been discussion this for decades. What are the chances that it continues to be undervalues, even if it really did have value?