The price of gold has hit a staggering $1,550 an ounce. Just looking at gold’s price chart is enough to make you want to:
A) Clean out your jewelry box (rings, who needs ‘em!)
B) Rip your cash out of that tepid S&P fund and buy solid gold bricks
Here’s hoping you don’t pick B. Gold is not an investment. It’s a speculation, as I wrote about on the New York Times Bucks Blog.
Investments are made by evaluating underlying value. Speculative bets are made by looking at the price of something and hoping the price goes up.
Gold has no real underlying value except the one assigned by a herd of speculators.
This is true for most commodities. They don’t actually produce anything. They are raw material—oil, copper, corn. No value. No dividend. No cash flow.
Investing in gold is a dangerous game right now. There are huge institutional players in the gold market right now.
When they decide the run is over, there won’t be time for you to pack up all your coins and gold bars, run to the local pawn shop and get rid of the stuff.
Yes, it’s hard to sit tight when you think you could “get in on a sure thing.” But that was the word about buying real estate back in 2005: You couldn’t lose.
And how did that work out?
Carl Richards, aka "the napkin guy", and father to three daughters and one son, is renowned for his weekly sketches on the NY Times Bucks Blog and is now a DailyWorth contributor.
photo source: rogerjporter's shop on etsy