3 Myths about Investing in Gold that Need to Die

10 Jul
myths about investing in gold

3 Myths about Investing in Gold that Need to Die

More than ever, you can’t believe everything you read. What has been hailed as “the Information Age” might as well be renamed “the Misinformation age,” as fake news continues to dominate social media and newspaper headlines around the world.

Not surprisingly, myths about gold have made their rounds in the mainstream media. From the comically misinformed to the moronically smug, every blogger thinks they know the real value of gold. When it comes to investing in gold, everyone has a strong opinion, and most of them aren’t based in reality.

Here are three myths about investing in gold that need to die.

Myth #1: The Gold Bubble Has Popped

This myth is a two-part myth. In 2010, George Soros famously said, “Gold is the ultimate bubble.” First of all, gold is not a bubble. Although several alarmist headlines followed suit, and warned of a bubble burst in 2009 when gold spot prices hit $1000 per ounce, the “pop” never happened.

Precious metals, and especially gold, don’t devalue and inflate like mass-printed, free-floating currency. 

“Increasingly, the wealth of the modern world has come to be represented by financial assets rather than real assets, and this to me is a very unhealthy situation, because financial assets are inherently unstable. Financial assets (currencies, bonds, mortgages, stocks, bank credit, etc.) can be quickly and violently reduced in value, or destroyed completely by inflation or deflation.” 

-Donald J. Hoppe, How to Invest in Gold Coins

Though demand for gold may rise and fall with the volatility of the market, gold is a real asset. It is a physical commodity that maintains its value, despite the unrelenting devaluation of the American dollar and the fickle fluctuations of the financial markets. The Fed has destroyed 96% of the US dollar’s purchasing power since its establishment in 1913, while an ounce of gold has maintained its value. 

Anyone calling the gold and precious metals market a “bubble” is in direct need of a reality check.

Myth #2: You Shouldn’t Buy Gold when the Economy is Doing Well

Anyone riding a stock market bull run might scoff at the prospect of buying gold. Time and time again, investors are so elated with their momentary profits that they ignore the very real signs of collapse. 

In 1928, shortly before the Wall Street Crash of 1929, president Calvin Coolidge said, “No Congress of the United States ever assembled, on surveying the state of the Union, has met with a more pleasing prospect than that which appears at the present time. In the domestic field there is tranquility and contentment…and the highest record of years of prosperity.” Needless to say, the president had to eat his words when the market imploded and a 10-year depression went into effect.

From amateur investors to the highest echelons of financial acumen, no one knows precisely what the market will do. You’d be amazed at how many “financial experts” get it wrong, year after year. Despite the yammering from financial blowhards, the market is more precarious than you think…especially so with the skyrocketing deficit, unthinkable national debt, and several warning signs of an imminent recession.

As stated before, it’s not precious metals’ value you need to worry about; it’s everything else.

Myth #3: Gold’s Return-on-Investment is Poor 

There’s no shortage of blogs bemoaning gold as a weak investment, complete with all the earmarks of fake news: 

  • Cherry-picked data
  • Questionable sources
  • Misleading headlines

These blogs show year-over-year growth of gold compared to other investments, with very skewed charts and specific time frames that back up their points, without any consideration for alternative points of view.

Let’s look at the past 20 years. In 1999, the closing spot price of gold was $290.25 per ounce. In 2019, the price per ounce has been hovering around $1,300 per ounce. Compare this to the DOW’s gains since 1999, from 16,496.44 to 26,543.33. The S&P 500 has grown from 2,041 to 2,939 over the same period.

Though the DOW’s gains are not negligible at 160%, they pale in comparison to gold’s growth at 460%. The same applies to the S&P 500, at 144% growth. Though investing in gold isn’t a get-rich-quick scheme, investors have made significant profits from gold. 

If gold and precious metals don’t get you a decent ROI, you’re doing it wrong.

In Conclusion

Everyone thinks they’re an expert until a catastrophe. Every wannabe financial guru is forced to eat crow when the markets shift and the world enters panic mode. Those that scoff at gold as an investment option are likely to lose everything the next time the market goes belly-up. For sound investment advice on protecting your financial future with gold and precious metals, consult with Republic Monetary Exchange today. Call 602-955-6500 or 877-354-4040.