Gold Doesn't Fuel Your American Dream

Gold Doesn't Fuel Your American Dream, Cash Does!!

                 by: Brendan Magee


I got a couple of calls the other day. One client is getting ready to take a trip over seas. One client needs a couple of dollars to pay the taxes on her beach house. The trip and the beach house are significant parts of both these ladies' dreams. One is a devout woman of faith and she is taking a trip to the Holy Land. The other lady has had the beach house in her family for more then 50 years. Her children, her children's children, and her great grandchildren have spent a significant part of their lives at that house. The taxes and the air fare both need to be paid in cash, nothing else will be taken for payment.

This may seem like a bit of an oversimplification, but I recently received an e mail asking me if I would like to attend a seminar where I would learn about the benefits of investing gold. I would learn about how gold will perform when inflation, interest rates, and debt levels go up. Plus, I would learn how a trade war will affect the stock market. First and foremost, how do they stand their with a straight face and tell anyone they know how an investment will perform in the future? 



I ask myself, "Even if I know how gold will perform in the future and how a trade war is going to affect the stock market, "So what!" Like my two clients, I have dreams and things I want to do in life, but they can only be paid for in dollars. I cannot take a gold bar to the college my boys choose to attend and pay the tuition with a gold bar or certificate. They will want cash. The trip my wife and I want to take to Hawaii will require cash as well, not gold.

As an exercise, for a few minutes, write down all the things in life that you want to do, see, experience, or have. How many of them do not require cash to pay for? So one problem is I need  cash to fulfill on my dreams. The other problem is that gold has been a terrible long-term investment.

Historically, the long-term rate of return of gold is about even with T-bills. The amount of volatility is about equal with stocks. In fact, according to Longtermtrends over the past 100 years the S&;P 500 is up over 36,000 %, the Dow Jones is up over 31,000 % while gold is up only 6,568%. So as an investment, gold has me taking stock market risk but only getting T-bill returns. Not a recipe for investment success.

So yes, buy your wife that gold necklace or watch. She deserves it and will look great in it, but as far as investing and coming up with enough cash to fuel your American Dream you would be wise to stay away from gold.

Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions or comments e mail brendan@coachgee.com or call 610-446-4322