Why Gold Is a Bad Investment

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Gold has proven to be a golden investment for many investors. The price of gold has increased in value over the years. However, gold is not always as golden as many investors have learned. Gold does glitter, but it also can tarnish as an investment.

Significance

  • Gold has been used as a safe haven in the United States when the dollar is falling against other currencies. It is used as a hedge against inflation, and as a way to diversify a portfolio. Conversely, when the dollar is rising and there is no threat of inflation, gold prices can fall.

Considerations

  • Holding gold can be expensive. There are storage fees involved, delivery charges, commissions and safe keeping to consider.

Income

  • Gold does not pay a dividend, provide income or interest payments. Money is made by price appreciation, and the return on the initial investment comes only when gold is sold.

Volatile

  • Gold can be a volatile investment. It may be driven by fear, hype, demand and speculation. Price swings in gold can be dramatic.

Long Term

  • Over the long term, money invested or tied up in gold could have done better and returned more in other investments. It is possible to have missed out on bull market runs or great performing stocks.

Cycles

  • History has shown that gold often moves in cycles. Big spikes upwards may be followed by declines or sideways movement.

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