There is something innate in humans around our obsession with gold. I remember growing up and watching pirate movies about buried treasure and just thinking that gold was the coolest. My brother and I would go on treasure hunts in our backyard and I would dream of finding a gold coin. When I would go to my grandparents house I would ask them about gold and sadly they didn’t really have any (a few silver coins but no gold) but they would always have a story or two about someone they knew that did. 

There’s just something about gold; it looks pretty, it’s shiny and if you see it you instantly know deep down that it’s worth a lot of money. It doesn’t matter where you are in the world, this obsession exists in most countries even today. As I advance a little into my YoungMoneyFinance years, I have been thinking more about gold and if I should own some. I did own a gold coin in college – I bought 1/10 of an ounce of gold and kept it for a few year until I realized as a poor college student that I could use the cash more than the gold. It was about the size of a dime but wow it was cool. If you read the news at all it sometimes feels that we’re about to have a crash of some sort – politically, socially, economically etc and you wonder – if things did take a drastic turn for the worse would it be helpful to have gold?

As I talk myself through buying a gold coin or not here are some of the argument for and against it!

Gold is a bad investment. Or is it?

Warren Buffet – one of the greatest inventors ever has this quote, “Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.” Dave Ramsey – a popular personal finance guru has this quote, “So, when you decide to invest in gold thinking you’re going to be “one of the smart ones” if the dollar tanks, you may actually have just flushed your money down the toilet.” On the other side there are experts that recommend 5-15% of your net worth in gold.

Ok so there are lots of smart people saying opposite things, lol isn’t that always the case? So let’s go to a chart (gold in orange) and see how gold has performed vs the stock market. Yikes, not well. 

Gold also doesn’t produce income – i.e. it doesn’t pay dividends. It can even cost you money depending on where you store it – i.e. at a bank safety deposit box. It just sits there. Of course there was the time during March/April of 2020 when gold jumped from $1,400 to $2,000 – i.e. in a time of panic people flocked to gold and it rose in value. But that’s an anomaly and I don’t think it’s wise to invest in anomaly as they are hard to predict and instead it’s better to invest on averages. 

So, I suppose we could say that over the long run, it’s smarter to put your money in stocks vs. gold as stocks will provide you with a better return and you’ll make more money.

But what if…

For a 6 month period right out of college while I waited to start my first job in the corporate world, I took a job at an army navy surplus store. They did virtually all of their business online so I learned a ton about ecommerce and also met a lot of interesting characters. I met preppers that took prepping to the next level but I also met a lot of people that just liked to be prepared. 

I took with me that mentality and do like to be prepared. We’ve got 3 KiddoMoneyFinances running around and I’d like to ensure I’m doing what I can to prepare us for most anything. I know I said previously I invest based on averages not anomalies but there’s still a part of me that thinks “what if” and wants to be a little prepared. We’ve got a zombie kit in the car – i.e. a few meals, water, matches, first aid, blanket etc that’s ready at all times. I’ve got a few gallons of water. There was a time last year our water was off, so hey that came in handy vs. panic buying at the store. There’s a lot to worry about in this world, and I like to think I’d don’t fret over it, I just like to be a little prepared. 

I like to say that if things really went south, ala zombie apocoplyse that gold wouldn’t really help you – things like water, food, first aid and apparently alcohol based on what a hardcore prepper told me – those things will help keep you alive / would be currency to trade with. I don’t think you’d care about gold.

But, maybe not that extreme, things like inflation is definitely something we can relate to – it sucked. Things like a recession or even a depression are always being fear mongered by pundits on TV or the internet and although I don’t think those things will happen, I don’t know. A buddy once asked me if I could stomach my portfolio dropping 40% in a recession. I told him yes – I know it’s a long term game, on average stocks are best and that things would bounce back. But sheeshe 40% doesn’t feel good. Gold often performs well when the economy does not – simply because the market is run by people and when people get scared they sometimes turn to gold as it’s considered a safe haven. You could take it virtually anywhere in the world and sure you might need to prove it’s real but gold is gold! 

So is gold worth it?

I think the rational answer is no, it doesn’t make sense to own gold in your portfolio. It just on average doesn’t perform like stocks. But – I’ve also learned that personal finance doesn’t always make sense and you have to go with your gut. It doesn’t make sense to pay off your house early if your mortgage rate is super low, but there are emotional and mental benefits that come with it that are often more valuable than the money. I think gold is the same – a little peace of mind for a variety of situations. 

In my own personal finance life I try to indulge the extremes a bit to help me ‘scratch that itch’ so that I can most of the time act rationally. That might have been weird statement but what I mean by that is the best course of action in personal finance is boring. Personal finance is simple, it’s just hard to stay ‘bored’ for so long. I know that index funds are the best place for me to park my money, I just like stocks a lot. So to still allow me to indulge myself in thinking and following stocks, I keep <5% of my stock money in individual stocks. 95% is in index funds but that 5% keeps me entertained, excited and staying informed. 

I think the same goes for gold – sure it doesn’t make sense but why not indulge it a bit. Perhaps it’ll allow me to sleep better knowing I’ve got a safe haven asset that I could use in a what if situation. Perhaps if inflation does continue to roar gold will do better. Perhaps if the zombie apocalypse happens it’ll come in handy…lol let’s just hope I take the time to remember to grab it! 

Summary

Gold is shiny, sexy and fun to think about. It’s not a good investment and may or may not be that safe of a safe haven asset to park your money. But it’s not not a safe haven asset and the one nice thing about an asset is if people always want it and I don’t think people will want to stop buying gold anytime soon. So, as I called out in my 2024 personal finance goals, I am saving up a little each month to buy 1 oz of gold! It’s around $2,000…so not cheap but also not going to break the bank!