Is gold safe?

Short answer: No.

Longer answer: No. To buy gold is to speculate.

Long answer:

I think there is a general desire for the one safe way to store value. And many people seem to think that gold might be the one safe way to store value. If this was the case, then we could simply accumulate wealth, store it in the form of gold, and stop worrying about it. This would be great, because it would mean that we didn't have to speculate. Unfortunately, just like any other good, gold gets its value from speculation. And that means that it is not safe. Because speculators, a.k.a. market participants, can and will change their mind.

Yes, gold has been appreciated for about 6000 years now. At no time was gold worthless and most of the time the price of gold rose. But it is easy to find out that you could have lost a lot of money, if you had invested in gold. Just search for gold price charts of the last 50 years or so. Gold is considered a safe haven. That means that people tend to buy it in times of crisis. So, usually, when there is a crisis, the gold price will rise. But that also means that the gold price will usually go down, once a crisis is over.

The 6000 years are not really an argument. No matter how healthy you are: You will not live 6000 years. And you should also take into consideration that there may be many reasons because of which you might have to sell your gold earlier than you planned. So, you will probably have to think in decades, years or months. And: While the past is all we have and while looking at the past of a trading instrument makes a lot of sense, we cannot use it to predict a trading instrument's future with certainty. In the future, gold might be appreciated less by the market participants, a.k.a. speculators, for many reasons:

  • Another instrument, such as crypto money, platinum, diamonds, lithium or basically anything else, may become the new gold.
  • Gold may become less scarce, because of technological progress in the realm of mining or because new deposits, which may or may not be on the earth, are discovered.
  • Private possession of gold has already been illegal, e.g. in the United States, and it may become illegal again, e.g. because the state wants more control over the citizens' wealth.
  • Gold jewellery may become unfashionable in the whole world.
  • ...

That being said, it will be very difficult find a trading instrument with a history as great as the history of gold. So there are probably worse ideas than buying gold. Just be aware of the fact that to buy gold is to speculate. Speculate is all we can do.

 

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