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The Challenges of Investing in Gold

Anthony Allen Anderson

Updated: March 21, 2022

Fed Bank Accounts
Editor’s Note:

For precious metals investors who are serious about investing in gold or silver it is important to have a long-term perspective and a reasonable time horizon for realizing a meaningful return on investment. For stock market investors, that long-term perspective is a hundred years or so. For gold and silver, that long-term perspective is nearly 3000 years, which gives more than a little comfort to those putting their full faith and credit into precious metals.

Gold and Its Challenges:

Like any commodities investment, gold has seen its share of ups and downs.  Gold hit “rock-bottom” 10-different times – the worst commodities fiasco ever, according to Bullionvault.  Why does this happen?  Experts point to the challenges of mining gold with supplies often coming up short.

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In 1994 through to 2001, gold lagged CPI inflation and cash interest rates lagged behind 16 times since 1975. The worst year for gold in recorded history was 1981 – and investors lost a rousing 32-percent.  Likewise, in 2008, the REITs and US stock and overseas commodities market fell 37-percent – a hard time for gold equities, although bullion fared particularly well during the Great Recession.

Credit Crunch

Bullionvault reports that many trends in growth of both debit and credit affected economies worldwide including the housing and durable goods.  However, many gold investment analysts also point to the huge growth in credit and debt in the West as factors that had profound effects on all commodities and markets.

Oil is Golden

Investors have traditionally watched the oil market  to determine the advisability of a gold investment.  Experts noted that crude oil prices have largely marched in lockstep with gold prices since 2003. However, Bullionvalut notes that investors who believe in gold investing should be encouraged by the “…surge in world food prices, the boom in base metals such as copper, and the current all-time highs in the cost of shipping.”


Remember The Golden Rule - Gold is a Stable Investment in an Increasingly Complex World

Gold is a remarkably simple and straightforward investment and sets investors free from the risk of credit default or banking failures. Gold has always played an important role in the international monetary system. Gold coins were first minted on the order of King Croesus of Lydia (Turkey), around 550 BC. Gold circulated all over the world as currency before the introduction of paper money and even after paper money was introduced, the Gold Standard meant that many national currencies still maintained a direct correlation to gold (the currency being exchangeable for gold on demand).

Even after the nations of the world left the gold standard, gold retains its historic status as a safe haven against inflation, deflation, geopolitical, macroeconomic and systemic economic risk. It is for this reason that investors in the United States are putting their faith in physical and tangible investments for their retirement and the Internal Revenue Service recognizes the tax-advantaged status of a physical gold IRA  or silver backed IRA in an individual retirement account.

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