Editor’s note: This article was first published in September 2010, when gold was at a record high. Its forecasts should be read against what followed: gold kept rising until 2011, fell sharply until around 2015 and later set new records. The reference to Obama and the US economy reflects 2010.
It has always been said that investing in gold is the most profitable and safest investment. As we all know, gold has reached a record high, so up to now it has indeed been the most profitable and safest investment. However, investing in gold is a business as simple as buying something at a low price and selling it at a high one, so right now we’re no longer buying it cheap: we’re buying it at a very high price in the hope that it keeps rising.
Analysts can no longer agree on whether to advise you to invest in gold. Their opinions are divided, so for a start we’re no longer talking about the safe investment it has been in recent years.
Some say that, historically, gold fell when the stock market rose, and until a few years ago that was the case. The problem is that the stock market will enter a bull market very soon, so gold could start losing value.
On the other hand, gold is tied to currencies, specifically the dollar. When the dollar is ailing, gold rises, and we don’t know how long it will take Obama to get the US economy back on its feet.
But the biggest problem is that every asset has a ceiling, and there’s a good chance that gold is approaching its peak.
My personal advice, in line with half of the analysts, is that gold may still be a good investment in the very short term. In the long term, you could be in for an unpleasant surprise. One way or another, it’s no longer an investment with guaranteed returns.
Further reading
- Why the stock market is the most profitable investment
- Common investor mistakes
- Warren Buffett’s 12 best quotes
- How to analyze stocks before you invest
Featured image: Mark Herpel, CC BY 2.0, via Flickr.
