Gold should be an important part of a diversified investment portfolio because its price increases in response to events that cause the value of paper investments, such as stocks and bonds, to fall. Although the price of gold may be volatile in the short term, it has always maintained its value over the long term. Gold is the metal we'll turn to when other forms of currency don't work, which means that gold will always have value in difficult and good times. I have a mini-market and a shotgun to defend my actions from looters.
If we're in some kind of post-crisis world where dinosaurs roam the earth, I doubt I want your gold. It will be as useless (or as valuable) as paper money. Why? Because, in reality, gold is also fundamentally a fiat currency. That is, people have assigned it an arbitrary value.
That value fades in a crisis, as does the value of paper money. We need it for too many things to lose its luster as a raw material and as an investment. Both scenarios lower the price because the first requires companies to innovate and design an alternative to gold. And real security costs money, so storing gold comes at a real cost, not to mention your actual physical weight.
As economies and nations evolved, many countries used gold to build trust and support paper currencies. Now, after fifteen years of reading and writing about money, I know enough about economic history and I know enough about gold as an investment to have what I think is a (somewhat) polite answer to this topic. Especially on Facebook forums, there's a lot of talk about how gold is a great long-term investment. Under the gold standard, you can ask a bank to convert your paper money into gold at the legal rate (whatever).
However, history has shown that, in most cases, there is a positive correlation between gold and interest rates, that is, when interest rates rise, so does the price of gold. The most important is that you cannot claim the underlying gold held by the fund, which, according to some investors, is contrary to the purpose of owning gold. The most important thing that investors need to understand about gold is that it should be seen as a store of value and not just as an investment, such as stocks. The expert investor who belongs to that 14 percent knows that, due to the large number of uses of gold and the mining required to acquire it, its value fluctuates greatly.
There are a few things that those looking to invest in gold should remember and some misconceptions that every investor should be aware of. Gold doesn't corrode, providing a sustainable store of value, and humans are physically and emotionally attracted to it. A better option for most investors is to simply invest in gold-related stocks and exchange-traded funds. Gold can stimulate a subjective personal experience, but it can also be objectified if adopted as an exchange system.
Ironically, despite the inflationary basis of a paper money system, well-preserved paper money from the early 19th century is often worth its nominal value in the collector market, far surpassing gold bars as a long-term investment. At the other end of the spectrum are those who claim that gold is an asset with several intrinsic qualities that make it unique and necessary for investors to keep it in their portfolios.
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