As you are currently well aware – the economy and markets are cyclic. In the past decade the value of metal based commodities have soared. Gold, the most popular precious metal has exceeded $1200 in the most recent run up.
Precious metals have gained tremendous value over the last few decades – but it has not been in a straight line.
While gold and other precious metals seem to have exploded in value – there would be no gold in your pot at the end of the rainbow since the value has not kept up with the cost of living. The investment would have been like treading water. The investment in gold would have essentially stagnated over the past 30 years compared to your average stock gains. Precious metals investing over the past 30 years has not yielded returns anywhere near those returned by the stock market.
Gold has been a basis for many currencies around the world due to its intrinsic value. As the ad on TV says – gold has never been worth zero. There will always be value in precious metals because they are rare.
Investments in precious metals has always have been used as a backstop during times of economic duress.For example, from 1972 to 1980, when inflation peaked in the double-digit range stocks and bonds plummeted while gold and silver prices exploded by more than 500 percent. Gold has appeared to hit a bubble during this latest economic downturn.But with the economic collapse the recently surging prices seem to be driven fear, not inflation, which is not a good basis for investment.
Let’s face it, over the long haul, precious metals are bad investments. There aren’t any dividends and their price increases barely keep up with the cost of living. If you are keeping your cash in your sock drawer, investing in precious metals would be a good idea, otherwise invest in stocks. However you can get better returns in stocks and realestate. If you truly want to invest in gold and silver, then you can earn a better long-term return by investing in a mutual fund of stocks of gold and precious metals companies.
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