Thoughts on Investing in Gold¶
Applies to other precious metals, as well.
“You could take all the gold that’s ever been mined, and it would fill a cube 67 feet in each direction. For what that’s worth at current gold prices, you could buy all, not some, of the farmland in the United States. Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?” ―Warren Buffett
“Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again, and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.” ―Warren Buffett
“Gold isn't an investment at all, it just sits there. It doesn't produce anything.” -Nick Murray
“Gold is colored rock which has no intrinsic value. Its value is arbitrary and derived from speculation ― whatever someone else is willing to buy, or sell it, for.”
“The only two things that actually make money are printing presses and the great companies of the world ― and the first is illegal.”
“Companies, on the other hand, make money on their own, regardless of the irrational value someone bestows upon them. Gold cannot - it just sits there.” ―Michael Thomas
“Whatever hedging property gold possesses, this precious metal will likely exert a considerable drag on the return of a long-term investor’s portfolio.” ―Jeremy Siegel
Listen to Tim Ferriss interviews Peter Mallouk — Gold, Bitcoin, stock market AUDIO
Read Nick's NMS 52 - Is gold a good investment right now? PDF
Read Nick Murray's Client's Corner 2023-09 - The Persistent Illusion of Gold PDF
This question usually comes from clients with one of two philosophies:
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They think armageddon is imminent and only gold is "safe"; or
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They actually think it is a good investment.
To overcome the first belief is more difficult as it requires a shift in fundamental philosophy. You must persuade your prospect that the world will continue, as it always has, and they must have faith in the future. In addition, if civilization truly does end, gold won't help either.
The second belief is what the scripts below will focus on.
Script 1¶
Watch Investing in Gold VIDEO
Prospect: I think I would like to invest in Gold.
Advisor: May I give you my view on gold, and other precious metals? Gold is just a colored rock with no intrinsic value. The price rises and falls arbitrarily and artificially based upon how many people are buying or selling it. This goes for coin collections, baseball card collection etc. They don't actually generate cash on their own. Companies, on the other hand, actually earn money and pay dividends. You see, there are only two things that actually make money if left alone: printing presses and companies. The first is illegal and the second has proven to be the best long-term investment and hedge against the rising cost of living.
Ultimately, gold has money-market type returns with the volatility of the S&P 500.
If you insist on investing in gold, I recommend finding a mutual fund that invests in a company that deals with gold.
Script 2¶
Turn it around and ask them "If gold is such a great investment and these gold-selling companies are telling you gold is going to increase so much in value - why in the world would they sell it to you?! Why wouldn't they just hold onto this "great investment?"