Gold Really Isn’t All That Special

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Photo credit: jirotrom

I shared my thoughts on gold with Jeff Reeves for his recent article in USA Today.

 

You’ve seen the ads for gold in your Internet browser or during commercial breaks on cable news. “Gold is the ultimate safe haven,” they claim, or “Gold is the only true currency in the world.”

And in a year like this one, those marketing messages seem to add up. After all, gold prices are up more than 25% so far in 2016 amid plenty of uncertainty — including, most recently, the United Kingdom’s groundbreaking Brexit vote to leave the European Union, which has thrown the economic alliance and its shared currency into turmoil.

But is gold really a must-own investment in 2016, or just a glittery fad?

“The mystique around gold can get a little kooky, actually resembling a fundamentalist religion. ‘Gold is the one true currency’ is something I hear often, and I roll my eyes every time,” says Charles Sizemore, principal of Sizemore Capital Management in Dallas. “Gold is just a commodity like any other. It’s better suited as a store of value than, say, cattle or corn, because it is imperishable. But it’s still just a shiny metal.”

Sizemore acknowledges gold’s long-term underperformance but says the precious metal still can serve a useful purpose for investors making more tactical trades — say, those hedging against the risk of inflation or looking for an alternative investment to stocks in the very short term.

“I say this mostly joking, but I consider gold a little like a handgun,” Sizemore says. “It’s something that is good to have, just in case. But you hope you never have to use it.”

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