The recent hype about bullion and its rise to $1000/ounce has investors wondering if buying gold as an investment is a good idea.  Gold bugs argue that the price of gold can rise to $2000/ounce easily so there is room for growth and buying gold as an investment can be a great bet, although this may be true I am not big on gold as an investment. Wonder why? Here are 3 reasons why I don’t consider buying Gold bullion as a good investment.



1. Can not Value it.

There really is no logical value to gold, when purchasing stocks you can look at the companies’ earnings, P/E ratios, payout ratios, etc. There is no way one can logical attach a value to gold, gold just sits there doing nothing. Apparently gold bugs use a rule of thumb; an ounce of gold should equal a high-quality men’s suit. The most expensive suit I own cost me $850, I guess gold is over-valued for me at its current price.

2. No Income

If you have been following me for a while you are aware that I like income from my investments. I like companies that pay their shareholders healthy dividends and bonds with good yields. Although I don’t need the income from these investments, I reinvest them and enjoy a stable growth over time. Unlike stocks and bonds there is no income from bullion, there is no dividends or interest paid out.

3. Costs to Keep

Not only doesn’t gold provide an income stream, but it actually costs you money to keep. If you own bullion you are likely to pay safekeeping fees to your institution to store your gold. Unless you want to keep it at home; which is not the smartest thing to do.

Investors might be better off buying gold ETFs over the physical bullion. I’d rather stick with my dividend paying stocks and funds; at least there is an income stream.

What about you? Why do you like (or don’t like) gold? Is there a Gold bubble being formed?


Ray is an ex-financial adviser and the founder of Financial Highway. Currently working in the financial industry and working towards completing his Chartered Financial Analyst, CFA, designation.