The recent economic recession forced society to relook at what we consider to be financial norms. What was considered reasonable several years ago is now unjustifiable based on today’s new standard.
The comfort of having money in an actual wallet is greater than having a pricey purse to carry it in.
It is possible that the same fear that shifted people’s spending habits is what has driven the price of gold to an all-time high.
In my book, “Financial Intelligence,” I show the historical volatility of the price of gold per ounce. Ten years ago this July, gold was trading at approximately $288 per ounce. Today, gold is now trading just shy of $1,200 per ounce. That is a near 15 percent compound rate of return per year over the last 10 years, while the stock market has gained no ground.
Now that the economy is slowly stabilizing, will gold continue to be a profitable investment? Only time will tell, but history suggests that there most likely will be a decline in price. Everything in this modern economic world is cyclical and vulnerable to corrections.
I am amazed about how many people assume that because gold is a tangible asset, it does not carry any risk. Despite what the late-night infomercials say, there is risk in gold and you should consider that risk before investing in it.
In my opinion, when you start to see repetitive get rich quick TV commercials, you should begin to doubt that “investment.” Remember in the late 1990s when TV commercials were touting that through day-trading stocks you could retire in your 4’s? Or the real estate gurus that told you that you could make millions in real estate if you attended their workshops? Today you can’t watch TV without seeing some type of commercial encouraging you to buy gold.
Given the economic environment that we just experienced, it makes sense that gold appreciated in value. Gold historically has increased in value during times of great uncertainty, but the tide is slowly changing. If the global economy can avoid a double-dip recession, we may see the price of gold revert back to its historical mean.
Apart from winning the lottery, there is no such thing as a get rich quick strategy. It always takes longer that you originally hoped and there are always setbacks.
It is always a wise move to invest in an asset that you feel meets your long-term investment objective and that enhances your diversification. Don’t try to time the market or try to get in on the next big thing; you could do more damage than good.
Bottom line, if you had a crystal ball, you should have invested in gold 10 years ago. Now it may be too late.