If you've been living under a rock the last several months then you might not have noticed the constant financial media bombardment of the virtues of gold good and bad.
Problems with Gold as an Investment
Unlike other commodities, gold does not get used up. Once it is mined, it stays with you. Oil is turned into gas and other products that are used up. Another example are grains which are used to feed us. Gold's chemical composition is such that it cannot be used up only used to make other things such as jewelry and art or just plain stored in a vault.
The usual supply demand argument that is made for other commodities like oil, copper, grains and so forth does not hold up for gold. Another big issue with gold is that it does not pay interest or dividends like stocks and bonds do.
History Overcomes This Problem
Gold, unlike other commodities, has been with human societies since the beginning of time. History books will tell of Empires and Kingdoms built and destroyed over gold. As societies developed, gold was universally accepted as an accepted form of payment. Centuries of history and use has given gold an amazing power that no other commodity has.
It was only until recent history that the U.S. monetary system was based on the gold standard (1970s). Proponents of the gold standard argue that a monetary system based on the gold standard effectively controls the expansion of credit and enforces lending standards since the amount of credit is linked to the physical supply of gold. Does anyone remember the credit explosion of 2008?
Here we are now with the stock market near all time highs, real estate back to pre-crash levels and banks dolling out credit once again. To me, this all seems eerily familiar. The last time around I wasn't quite as prepared as I am today as I was heavily invested in the stock market and bought a house at peak level pricing. Then the crash came and my retirement savings and house value plummeted along with most of Americans. Only recently has the value of my portfolio returned to its pre-crash highs. The main difference today is that I have diversified and insured my portfolio with gold.
There's insurance for everything these days... auto, house, boats, and life to name a few, why not insure your wealth as well?