Gold as an investment !

It doesn’t matter how much it glitters, it’s not a good investment. The recent slide in the price of gold is making some us think if it’s the right time to buy.

if there is  an investment objective, then understanding Its price behavior historically makes sense in making better investment choices. Generally, the

investment demand for the yellow metal rises during times of economic uncertainty,like the financial crisis of 2008, it’s considered a safe haven in such times.

This belief in gold as a store of value has persisted over centuries of human history and will likely continue to do so far into the future. In the next financial panic ,

of some sort, whenever it occurs, may be 10 or 20 years from now,   the demand could spike again. But, if all the headwinds facing the global economy

are dissipating and if growth is poised to take off, gold’s record is terrible in such a scenario. In  1980 gold touched $ 850.00, and adjusted for inflation it is equal to

over $ 2300.00 in today’s dollars. So, the high water mark reached in 1981 has not been surpassed yet. Thus, the  notion that it holds its value with inflation is just

a fallacy. There are several reasons why the price took off starting early 2000s, one of them being the inception of Gold ETFs, and this has

made investing in this metal much easier than buying physical gold and storing it. Also, when Global central banks began printing money at a frenetic pace

to fight the financial crisis, the ongoing bull market in gold got supercharged and took off. Not only the usual gold bulls, but also many high profile hedge funds / investors who

usually were not  gold bugs got into the game. This made some of  the financial world’s talking heads touting gold as a must have investment and that it’s direction is only up, with predictions

of  $ 5000 to $10000 few years.  But, nothing can defy gravity for long without the staying power.  As always, the Wall street big wigs started dumping gold knowing well  the party couldn’t last long.

Now with the imminent  interest rate hike on the horizon, a big drag on this shiny metal, the downward pull could intensify.  Jewelry, some industrial utility and investor

preference as an asset class are the primary drivers of demand in the bullion market. With the fading investor demand,

 

 

Investing in productive assets handily  beats gold over the long term. These investment could  be private businesses, public company stocks etc.

that have some intrinsic value based on revenues, future cash flows etc.  On the other hand, gold doesn’t have any intrinsic value,  and its value is what the other person

willing to pay. It doesn’t produce anything, if we have x amount of gold today, we’ll have the same amount on eternity, nothing more nothing less. In recent years, especially after

the financial crisis and with the huge run up in gold prices, there were some ads saying “ paper currencies were created by man, and  that god created gold “.

There is a commercial  in Bloomberg on weekends that says, buy gold now and it’ll double in future, no specific time frame about that future. Currently, the price

Slid below $ 1100 and the general expectation is  that it’ll drop below $ 1000 anytime. No one can predict how far below it can go, but there is definitely no reason

why it cannot go much below from the current levels. If economic growth picks up  later this year, that could further accelerate the slide and it may be reminiscent of the

1980-2000 bear cycle.