Do Not Buy Precious Metals if You are Looking for a Good Return on Your Investment
January 28, 2010 by JT Philips
Filed under Stock Market
You learned in basic economics that the business environment goes in cycles. You have seen a tremendous increase in the price of precious metals over the past decade. These peak prices, over $1200 for gold, show tremendous increases over the past decade.
The price gains in gold as well as some other commodities were dramatic during the past decade, over the past 30 years, with gold more than quadrupling in value (from less than $300 per ounce).
However, despite these large price gains, you wouldn’t have gotten rich buying gold when you consider the increases in the cost living and low overall inflation rate over the same period. The investment would have been like treading water. The investment in gold would have essentially stagnated over the past 30 years compared to your average stock gains. Precious metals investing over the past 30 years has not yielded returns anywhere near those returned by the stock market.
Gold will always have value being that it is a rare commodity, just like diamonds. There will always be value in precious metals because they are rare.
Investments in precious metals has always have been used as a backstop during times of economic duress.For example, from 1972 to 1980, when inflation peaked in the double-digit range stocks and bonds plummeted while gold and silver prices exploded by more than 500 percent. With gold prices heading upwards at an alarming rate in the late 2000s many expect a return of inflation.But with the economic collapse the recently surging prices seem to be driven fear, not inflation, which is not a good basis for investment.
Investing in gold and silver, over the long term, has not produced any significant benefit.Precious metals don’t issue dividends and the average prices do not even match the cost of living.If you are keeping your cash in your sock drawer, investing in precious metals would be a good idea, otherwise invest in stocks. However you can get better returns in stocks and realestate. Buying mutual funds or stocks can provide a better return if you truly want to invest in precious metals.
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