Is Gold a Foolish Investment?

Interesting and cheeky article about gold by Tim Middleton: Fool’s Gold for your Valentine:

Gold enjoys a perverse and self-reinforcing advantage over every other product in the known universe. When the price of anything goes up, demand for it goes down — except for gold. Investment demand for gold actually rises in line with the price.

For that reason alone, I know you want to buy it, because the big collective “you” is already buying it. Plus, it’s your romantic duty. Gold does not tarnish; it does not break; nobody ever throws it out. It is indestructible, too: Some of your wedding ring could have come from a coin that Socrates gave as a token of love.

So go ahead. Buy gold. I own a bit of it myself. It’s not much of an investment: In inflation-adjusted terms, today’s price is less than half of what it was at its peak. But seen through that lens, last week’s price of $904 per ounce is a bargain. The old record of $850 in January 1980 would be $2,143 in today’s dollars.

I agree with Middleton’s main points here except that I have never considered gold to be an investment. Sure its price goes up and down, but throughout history, gold has always held its purchasing power. It doesn’t make or lose you money because it is money.

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