Why Not Buy Gold?

It was not that long ago that I can remember everyone being interested in investing in Real Estate. It did not seem to matter if you were going to buy rental properties or invest in a Real Estate Investment Trust (or REIT for short) everyone was saying that it was a sure thing and you just could not lose. Then I read an interesting article online that said "if your 18 year old dental assistant leans over your chair and tells you it's time to buy Real Estate maybe the bubble is about to burst". That phrase stuck with me for along time and as I watched the Real Estate market collapse right in front of me I realized that the wisdom in that adage could be true for lots of "sure things".

Today everyone seems to be talking about Gold and what a sure thing it is. But is Gold a sure thing? Is it possible to buy gold and still lose your shirt? Is it too late to buy Gold? Let's take a look at some of the facts...

Gold is a Speculation not an Investment. Gold is not like stocks and bonds as it pays no interest, it pays no dividends, it has no earnings or income. The price of gold goes up because people are buying more gold, and people are buying more gold because the price of gold is going up. That is called speculation and Mark Twain once said, " There are two times when a man should not speculate; when he can't afford it, and when he can!"

You can lose money in Gold. All you have to do is look back to 1980 when gold spiked from about $560 per once to $850 over 3 short weeks but by the end of the year it was back below $600.00. The price of gold did not go past $850 again until two years ago. If you had bought gold in 1980 at $850 you would have had to wait until two years ago just to get your money back. That's the same as taking about a 30% loss and having to wait 28 years just to break even.

Might buying gold still be a good idea in our current economy? Perhaps. Could gold continue to sore through the roof and hit $2,500 per ounce or more? I guess, but before you buy remember what your dental assistant said about Real Estate.