Why gold is a bad investment 2016 - financial-equity.com

## Why Gold Is a Bad Investment: A 10,000-Character Analysis

**Introduction**

Gold has long been considered a safe haven asset, a store of value that can protect investors from inflation and economic uncertainty. However, in recent years, the case for gold as an investment has become increasingly weak. In this article, we will explore the reasons why gold is now a bad investment.

**Inflation Hedge Fallacy**

One of the main reasons that investors have traditionally invested in gold is its perceived ability to hedge against inflation. However, this perception is largely based on a misunderstanding. Gold may increase in value during periods of high inflation, but it does not always keep pace with the rate of inflation. In fact, there have been several periods in history when gold actually lost value during periods of high inflation.

For example, during the 1970s, the inflation rate in the United States averaged 7.5%. However, the price of gold only increased by an average of 5% per year during that period. This means that investors who bought gold as an inflation hedge actually lost money in real terms.

**Slow Appreciation**

Another disadvantage of gold is that it appreciates very slowly. Over the past 10 years, the price of gold has only increased by an average of 2% per year. This is much slower than the average return on stocks, which have increased by an average of 7% per year over the same period.

The slow appreciation of gold means that it is not a good investment for investors who are looking for short-term gains. It may take many years for gold to increase in value enough to justify the cost of investing in it.

**High Volatility**

Gold is also a very volatile investment. The price of gold can fluctuate wildly, even on a day-to-day basis. This volatility makes it difficult to predict the future value of gold, and it can lead to significant losses for investors.

For example, in 2011, the price of gold reached a record high of $1,900 per ounce. However, just two years later, the price of gold had fallen to $1,200 per ounce. This represents a loss of over 30% for investors who bought gold at the peak.

**Lack of Productivity**

Unlike other investments, such as stocks and bonds, gold does not produce any income. This means that investors who buy gold are not entitled to any dividends or interest payments. This lack of productivity makes gold a less attractive investment for investors who are looking for a source of passive income.

**Storage and Insurance Costs**

Gold is a physical asset, so it must be stored and insured. These costs can add up over time, and they can reduce the overall return on investment.

For example, the cost of storing gold in a safe deposit box can range from $50 to $100 per year. The cost of insuring gold can also be significant, especially for large amounts of gold.

**Alternative Investments**

There are many other investments that offer better returns than gold. For example, stocks and bonds have historically outperformed gold over the long term. Real estate can also be a good investment, especially for investors who are looking for a source of passive income.

**Conclusion**

Gold is a bad investment for a number of reasons. It does not provide a reliable hedge against inflation, it appreciates slowly, it is highly volatile, it does not produce any income, and it has high storage and insurance costs. There are many other investments that offer better returns than gold, and investors are advised to avoid investing in gold.

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