Should I Invest In Gold?
Once again, investors are reacting to the uncertainty in the stock market by investing in gold. Since the third quarter of 2010, the price of gold has jumped 40%, peaking at just over $1,900 an ounce. The "experts" are touting gold as the only "safe" investment in a volatile market.
So is now the time to buy gold?
Think about it: Why would you buy something at its all-time high? From 1833 to 2001, the compound growth rate of gold was 1.54%. Since September 11, gold has made record returns, averaging close to 16% a year. The gains that gold has made in the last 10 years can't make up for nearly two centuries of poor performance. There's nowhere to go but down—and history supports that.
Many people invest in gold out of fear. Think about how the value of gold has gone up as uncertainty in world economies has increased. With the ever-changing values of world currencies, some people see gold as more stable. But that's just not the case.
Today, like most commodities, the price of gold is driven by supply and demand, as well as speculation. The ongoing high political drama over the nation's debt and the media-driven spirit of fear have also encouraged this recent spike in gold prices.
When prices are driven to artificial lows or highs out of fear and greed, investors create a bubble. And bubbles will always burst. Investing is not buying something based on fear or greed. At best, investing in gold is speculation. And, at worst, it's gambling.
So investing in gold is a bad idea, but selling it is not! Now is a great time to capitalize on the inflated prices and sell your unused gold and silver. Open up your old jewelry box and pull out those pieces you will never wear again. Use that money for your emergency fund, dumping debt, or investing in a good mutual fund.
So don't waste your time by trying to invest in gold. Instead, make a little money off your long-forgotten gold pieces and take another step toward Financial Peace.