Ah, gold. For thousands of years this metal has been prized by countless civilizations as a symbol of wealth, both as a store of value and a glittering personal adornment. Given the recent upheaval in our financial system, many people are wondering if gold is perhaps a more prudent investment than the stock market. My colleague Barbara wrote a recent blog article comparing the returns of gold versus those of stocks and bonds, and showed them to be not only inferior over the long term, but an ineffective hedge against inflation, as well.
Let’s not forget, however, that you can wear gold, and it looks a whole lot better around your neck than a statement from your advisor. I heard an interesting story on NPR’s All Things Considered about the cultural significance of gold in Iraq and its importance in the marriage ceremony. Apparently, there is an Iraqi saying that gold is both a decoration and a treasury (and in a war-torn country, the fact that it is portable is no small consideration). I also read an interesting commentary on CNN.com by economist Ben Stein (who in my mind will ever remain Ferris Bueller’s boring econ teacher in the 80s movie by John Hughes). Stein has always been a huge proponent of saving for retirement, so this article was a slight departure from the usual rhetoric when he said – get this – “Economics tells us to enjoy the life we have. Maybe sometimes the best investment is buying something you want.” Now, mind you he does NOT advocate spending money frivolously if it will mean eating cat food in retirement, but if you have saved and invested prudently it is OK to have a little fun because, in his words, “the life we have right now is the only sure thing we’ve got.”
So, you want to invest in gold? If you have a little to spend and you’re otherwise invested prudently, buy it in the form of jewelry (though the prices are at an all-time high right now). Don’t be a Silas Marner and bury it all under your floorboards – live a little, buy something pretty. ‘Tis the season for giving, after all. In fact, wasn’t it one of the gifts brought by the wise men on the very first Christmas? (Of course, they also brought frankincense and myrrh, which appear to be tree sap. Sounds to me like one was a wise man, and the other two were wise guys.)
P.S. My ring size is 5.
Sarah DerGarabedian, Research and Trading Associate