We are bombarded by advertisements urging us to buy gold. We are told it is a safe haven for investments. But is gold really a good investment?

In periods of crisis and economic uncertainty, gold rises in value. It happened in the seventies during the oil embargo and escalating inflation. In 1976 an ounce of gold was worth $400. By 1980 gold was selling for $1,500 an ounce. It happened again in the great recession of 2008. Gold went from $400 an ounce in the year 2000 to $1,600 an ounce in 2010. Had you bought gold in 1976 or 2000, it would have been your friend. Had you bought it in 1980 or 2010, it would have been your foe.

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When the crisis is over, the value of gold falls just as fast as it rose.

Safe Haven

If we believe the mystique, owning gold is a wise choice. As a wise gold owner, someday when pandemonium breaks out you will laugh at all the clueless losers still clutching to their worthless stocks and paper money. You will roll around in your gold coins like a greedy hobgoblin. That is a fantasy; it will never happen that way.

Imagine for a moment some type of major calamity does take place. The nation is gripped with panic and civilization is thrown into utter chaos. There is a complete collapse of the stock market or civil war breaks out or we are invaded by another country or there’s a nuclear war or a zombie apocalypse. Something of biblical proportions takes place resulting in the total breakdown of society. Terrorized people scream as bullets spray from automatic rifles with reckless abandon, there's no food or water, and neighbors turn on each other. Basically it’s Thunderdome.

What do you think is going to happen? Are farmers going to dust off the scales they’ve been saving for this moment and start weighing gold coins in exchange for corn and chickens? If society ever does collapse, maybe instead of owning gold you may wish you had invested in survival gear instead. Things like batteries and gasoline and guns and a doomsday retreat out in the woods somewhere. And even that is fantasy because roving bands of marauders would come in the night and take everything you own. You would have succeeded in storing up supplies for the roughest of the rough.

Not all that Glitters is Gold

The fact is, buying gold is highly speculative. If you want to buy a gold coin so you can take it out and look at it once in a while, good for you. Everyone needs a hobby. But if you are considering shifting a significant portion of your retirement savings into gold, that is probably not a good idea.

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