Simple Cents University: Investing in Gold?

If you have watched the news recently, you have certainly been made aware that within the next 12 days the world will end and the entire U.S. Economy will be shattered like Michael Jackson's hopes of a "comeback." (scary pic, sorry.) But, if you have a decent memory, you can remember the last 27 times the world ended and the US Economy shattered. As certainly as all major news corporations boost drama to improve ratings, those selling gold (investments) are quickly put into the spotlight whenever we face "economic downturns." Investing in gold can be, but rarely is, a profitable venture. For example, from 2002-2004 an investor in gold could have realized a 10+% return on investment (Better than the stock market over the same period.) This is due to the fact that during economic uncertainty (like post- 9/11), people always flock to gold. The rationale for this is actually quite ludicrous (a separate post all together), but either way, it still happens. So if you want to try to "time" these occasional spikes in the price of gold, that's fine, just know what you are doing...gambling..speculating. Over the long-term gold is a horrible investment, barely outperforming inflation. In many "sector" reviews it ranks dead last as an investment category. And to make matters worse, it usually ranks at the top of the risk chart. So there you have it. It is extremely risky, and not very profitable. Stay away from it. IF you want to take a few bucks (less than 5% of your total investments) and gamble with gold...fine...but nothing more than that.

Usually, the "gold rush" phenomenom describe above has similar results to the infamous San Francisco Gold Rush of 1849. Most miners made little to no money...but the people selling lots/tools/equipment/permits made a killing. Sounds familiar?!?