For centuries gold has been an asset that many have used as their basis for wealth.
Ownership of gold also means you own a direct relationship to volatility. No other asset in the past hundred years has reflected volatility more than gold. If you are concerned about volatility, especially with your important retirement funds that must remain safe and secure, gold might not be your recommended asset.
Many consider gold the ultimate asset and a possible answer to inflation. The United States was on the gold standard for nearly 200 years until President Richard Nixon in 1971 moved our monetary system to our dollar, not being convertible to gold. The US Treasury became the guarantor, not physical gold.
Let’s look at the pros and cons:
Pros of Owning Gold:
1) Gold is tangible. You can see it, hold it, and possess it. Gold doesn’t tarnish like other metals. The gold you own now will look the same 1,000 years from now. Gold is a currency, an alternative currency, however. You can trade it for other forms of currency, whether cash, or use it to barter for other goods.
2) Jewelry. Gold is stylish. From gold rings to necklaces, gold looks great. The gift of gold jewelry is often an expression of love in nearly every part of the world.
3) Peace of mind: Gold is seen as a safeguard against a financial collapse: something that will hold value. Prices have soared and declined as market volatility has gripped and affected the investment world.
The Cons of Owning Gold
1) Stress of ownership. While it’s often a pro to have a tangible asset, it can be a double-edged sword. Storing gold takes space, but you must also secure the asset in a safe or simply hide it. If you should experience a break into your home, you can lose this asset in minutes, and it’s nearly untraceable. You’ll have to manage a certain level of paranoia securing and managing your gold.
2) Gold can be a dead asset. This is true simply because it has minimal commercial use, unlike silver, copper, or other precious metals widely used in industrial applications. Gold is not utilitarian as other tangible assets such as real estate. You can’t rent it out as you can a home. Gold has no earning power outside of selling it when prices rise, and you no longer have gold.
3) Hidden costs. People often forget about the costs of buying and selling gold, not to mention storage costs, insurance costs, and transportation costs. Investing in gold costs more than most people realize.
Should you own gold?
It depends on you. What primarily drives gold ownership is fear of the future. If gold helps assuage your concerns, then it may be for you. If the future looks bright to you, other investments may make more sense than stockpiling gold.
To own gold, you should work with an established source with a documented track record. Some guard against gold scams by purchasing only gold coins.
Whatever you decide, do your due diligence.
