I bought this gold coin back in 2009…
It’s a gold buffalo that’s an ounce of 99.99% pure gold. At the time, I picked it up for $992 dollars. This and a few other precious metal investments took a good chunk of my savings back then. It took many long hours lifeguarding, working in an ice-cream cone factory, doing magic shows and detasseling corn, back in Iowa.
Instead of buying all the new video games and other luxuries with my paychecks, I looked to the future. Now this single gold coin is worth about $2000. That’s a 100% gain.
A good chunk of this gain has come in the past few months. The government’s virtual printing press is running hot and the value of the U.S. dollar is dropping. This, along with fearmongers and gold bugs are pushing gold prices higher. And some of these fearmongers make Murphy look like an optimist 😊.
Some analysts are now predicting gold prices will climb to $3,000, $4,000, and even $10,000 an ounce. Although, many of these same analysts have been claiming this for the last decade. And eventually they’ll be right. When that happens, they’ll make sure to tell us about their “correct” prediction for the following decade – ignoring the timing of course, along with any opportunity costs, which I’ll explain in a moment.
So, with the chance of gold prices continuing to climb…
Why do I plan on selling my gold in 2020?
In short, I’d rather sell when public demand is high for buying gold. And Google Trends shows search volume for “how to buy gold” has spiked this year…
Demand might continue to climb, along with gold prices… but timing the top – consistently at least – is impossible. And you’ve maybe heard, let your winners ride… but in this case, I see too steep of an opportunity cost. In other words, if I kept my money in gold, what other opportunities might I miss?
For example, I’ve had just over a 100% gain in gold over the last 11 years… but the stock market has returned a 235% gain over that same timeframe. And this isn’t a one-off. Over the long-term, the stock market outperforms gold.
Of course, you can find longer timeframes where gold has outperformed stocks. A few of my past viewers have pointed this out… but those instances are few and far between. So, as a long-term investor – with history as a guide – I like my odds in stocks instead.
Investing in Stocks vs. Gold
Gold by no means is the worst investment out there, but when compared to value-creating businesses, it pales in comparison, pun intended. That’s why I shared some of my favorite research last year on why gold is a bad investment.
Contrary to popular belief, gold isn’t a good inflation hedge. Also, it wouldn’t likely save you during an apocalypse. The probability of seeing a doomsday collapse in your lifetime – and gold turning into a top means of trade – is close to zero. Still, I cover these points along with four others, in a past article and video which I’ve linked above.