And what’s the take-home message for investors?
Gold, as I write this in early September, is at $1361.30 per oz. You can see by this 10-year chart that Gold has had quite a run. It may not be over. This kind of information will create one of two reactions in people.
The first group, usually a larger one, will want to get on board. There has been a lot of gain. Many people were in Gold in 2004 and have made a lot of money. I want to make money. I want to buy gold. This is the thought process. My personality and bent is to react this way. I’M the youngest in my rather large family (out of 8 children) and if there’s a party, I don’t care if I’m late, but I don’t want to miss it!
The second group, not necessarily smarter than the first, said this in 2011: “I’m not buying yet because it’s just recently gone up. I’m going to wait until it comes down and then I’ll buy.” And this group will likely do just that. They are kind of ticked that they missed the first ride and they won’t miss the second. This recent dip in Gold from nearly $2,000 an ounce to $1361 is just what they were waiting for. Now they might buy.
I’d like to create a third group. A group that knows some things about investing, Gold specifically, and ignores this kind of information.
First and foremost, Gold is a commodity with zero expected long-term return over inflation. When all is said and done, Gold, over and over, proves to be a very volatile investment that averages less than 4.5% over the long term (which is precisely the 40-year average for inflation). For this reason alone, investors should not buy it.
Think about it another way though.
First question: Is there any more Gold in the world today, than there was in 2004 at the beginning of the above chart? No. There may be more in circulation today because of increased mining efforts brought about by this rise in price, but Gold is still a scarce resource.
Second question: Who are you buying the Gold from and why are they so happy to sell it to you? I’m not sure this question can even be answered today due to all of the middle men in the market place.
Which brings me to my third question: Who are the ones saying how good of an investment Gold is? You guessed it – the loudest ones are those who make a commission on the trade but remain neither buyer nor seller. They profit from the transaction and care little for the result of either side.
Would you really trust a seller of gold who told you how great an investment it was on the one hand and was willing to sell piles of it to you on the other?
And yet, keeping you from buying Gold is not the main reason for sending this email – although I hope I’ve done that. This speculative investment is simply a perfect example for so many unsuspecting investors of what can happen to you when you do not achieve Mind Over Money.
I want to invite you to our next World Class Coaching event titled – what else? – Mind Over Money.
See you there.