Is gold a good investment? Seems like that depends on who you ask. But I think it depends on how you define what an investment is. Generally, an investment is an asset that produces income or increases in value over time. Gold doesn’t produce any income and the price has been volatile over the last few years, just like everything else. The current gold price is the same as 2 years ago and if you go back 12 years, it’s only up about 10%. The price of gold didn’t increase at all from 1980-2007, but also experienced periods with significant increase in value, e.g. 1976-1980 and 2008-2011. While Financial Markets have always outperformed gold over longer term, there are some characteristics of the precious metal that has attracted investors in the past and will continue to do so. Gold has always been perceived as a symbol of wealth, power and majesty. Then there is the disconnect from the common banking system which is attractive to some and of course the fact that gold is rare and difficult to extract.

Another aspect is the believe that the gold price is artificially held back. While this may not be as dramatic as in some conspiracy theories, there is prove that central banks have been manipulating (suppressed) the price of gold and silver. You will find endless ads and YouTube videos on how gold and silver are ready to explode because of that and other reasons. Keep in mind that these ads and videos have been around for a long time. While nothing is impossible, it is very unlikely that this would happen anytime soon.

There is also some practical use of gold in electronics, aerospace, the automotive industry and dentistry but it is mostly used as a status symbol and in the jewelry industry. The largest consumers of gold are China and India which is clearly correlated to their population size. Should something change in one of these countries culture and attitude towards gold, it could have a tremendous impact on the price. It's important to note that gold prices have historically been volatile and have fluctuated quite a bit over time. The price of gold, like any other commodity, is subject to the laws of supply and demand. It may continue to trend upward over the long run, but will surely be interrupted by pullbacks and bear markets.

Gold will always have some value and attractiveness to it. It doesn’t pay interest or dividends but it’s not really supposed to do that, and that is also somewhat of a benefit. It means gold investors don’t have to worry about earnings reports, changes in dividends or unhappy shareholders. It’s a good storage of value and can be a great addition to your diversified assets as long as you have reasonable expectations about it.

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