If you are investor, eventually you will hear or read that some of your assets should be in gold. If the economy is collapsing and it some countries it does, then having gold will allow you to take some of your assets and help you get out of the country into another one with money to start again. Every time something bad happens, people look to gold as safety and generally people always will. However is it a good investment?

In an article by Ken Fisher of Fisher Investments, gold is more volatile than stocks with lower long-term returns than bonds.

Since 1974, when the gold standard’s vanished, it has an annualized 5% gain. The S&P is up 11.9% and US 10 year government bond is up 6.7%.

Low returns with high volatility display a stark truth: to glitter with gold, market timing is the key. Gold’s gains can run big but are sporadic, with long periods of stagnation and whopping declines in between. Gold was at $2,067 in August 2020, since then it has been flat, meanwhile the S&P 500 is up 28.6%.

In Jan 21, 1980 gold peaked at $850, then went down and reached that peak again in Jan3, 2008 or 28 years later. Gold dropped in price 65% over 2 years, gained it back in 8 months, fell 44% in 2 years, rose 76% over 2 years, before falling 49% over the next 12 years. Could you time the market? or would gold become a long term hold?

Gold is a coin flip. Its fluctuations stem mostly from sentiment swings, which defy timing. Once the sentiment changes gold falls in price and then you have to wait till the next sentiment swing.

Linking to dividend paying stocks, there are choices involving gold which include buying gold stocks which pay dividends however the history is they are more volatile than the broader markets and typical rise in early equity bull markets and typically act as smaller value stocks. Mr. Fisher understands why you will consider buying gold, but if you own too much in your portfolio you will not do as well as owning the stocks and bonds index portfolio. There are many alternatives in investing, and only in hindsight do you know if you made the best solution, however if you ensure you own profitable companies which can pay a dividend, over the long term you will likely do better with less risk and volatility.

There are more questions than answers, till the next time – to raising questions.