Gold as an invesment?

If in a previous post, pencils were treated as a supposedly safe haven in case of a recession. In this post I just wanted to mention that I don’t see anything more value in gold or silver than I see in pencils.

That may sound shocking, as we are used to have gold items in great praise. Well, as a commodity, as an asset, I don’t see much difference between gold and other materials. What it is valuable is the company that continues to produce goods out of those commodities, with ever greater productivity and value added to its products.

Gold by itself is just like a pencil, assuming that you continue to find someone in the future willing to pay something for both commodities (certainly not more than it is worth at any given moment).

It is easy to say this now that both silver and gold have seen its prices plummet after the summer, but more than using the recent fall as basis for the argument, I have in mind these other long-term (as in centuries’ trend) graphics below:

Gold price fluctuations since 1800. Source: The Economist.

From the previous graphic, gold went up to 1,900 in the summer of 2011 and then fell again to around 1,600$ per ounce, in September. Well, I see no reason why it shouldn’t be around 300-600$ again, as it has always been.

Gold as an "investment"... Source: Jeremy Siegel

In this other graphic you may see how much gold is worth as an investment… well, it is more valuable than cash, but we already discredited cash in a previous post.

And still, you’ll find people running towards gold when there is a crisis… I never understood that. What are the gold price fluctuations based on?

Personally, I prefer to go to the Casino in Torrelodones once a year, lose at most some 50€, if that is the case, and kill altogether the speculative behaviours until the next year.

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Filed under Economy, Investing

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