4 Arguments Against Gold & Why They’re Wrong

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November 08, 2013
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Four reasons to waste your time with the deeply historic, deeply human value ascribed to gold.

 

[This article previously appeared on BullionVault.com and is republished here with permission.]

 

People love to debate, but sadly sometimes it crosses a line and turns argumentative. That's what is happening right now with the debate over gold.

There have been several high-profile articles, most recently in the Wall Street Journal, saying you should eliminate gold as a worthwhile part of your portfolio, primarily because of this year's lower price.

Against that idea, many bloggers and private investors, wondering why gold prices have fallen, say that it shouldn't have dropped, that there must be some conspiracy driving down prices when money-printing and our still-weak economy should be driving gold higher. But that still puts current price performance front and center in the debate over whether it should or shouldn't feature in your portfolio. So it misses several key points about why gold is uniquely valuable as an investable asset.

We'd like to look here at some of the common arguments now offered for why gold should not figure in your investment strategy. Yes, working at BullionVault, the physical gold and silver exchange, we're biased. But there are also people who always say gold doesn't warrant your investment dollars.

To have any intelligent understanding of your own position, you need to welcome debate. That way you can challenge your own opinions and, if you find they're correct, improve your arguments, too, such as whether gold investing continues to warrant attention.

1. Gold Does Not Yield Anything

When you buy any commodity outright. you can no longer deposit it with a bank or investment company to earn interest. If you are looking to yield a dividend or interest, then physical gold ownership will not yield anything. Yet that is only half the story.

Gold ownership yields security for the investor, the type of security a person seeks from insurance. It is the only physical form of insurance that exists to counterweight your investments in bonds and stocks, and that is also a liquid, easily traded asset. Gold is also noncorrelated with those more "mainstream" markets, meaning that its price moves independently of where other investment prices are heading. So the goal for most investors in holding gold is first as a safety net for their other assets. This metal has held value for thousands of years, and will hold value for thousands more.


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