The Case Against Gold in My Portfolio

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I refuse to invest in gold.

I know two people who invest in gold. They believe that one day our financial system will collapse, anarchy will follow, and somehow their gold investments will be converted into shiny gold coins delivered to their homes and If that happens, they they’ll be among the privileged few who will be able go to the local store and buy groceries with gold coins.

One of my friends used to tell me that the financial collapse would happen “next year,” and he was ready for it. Well, that was over 20 years ago, and I’m still waiting for that economic collapse. Meanwhile gold has underperformed the stock market, at least for the past 20 years.

The common thread between my two friends is their deep mistrust of the government and the belief that everything can be manipulated in the economy—except the price of gold. Or maybe they’ve just watched too many post-apocalyptic movies.

I, on the other hand, am a big believer in our current financial system. All my savings are in the stock market. At this stage of my life, I’m beginning to cash out my investments to fund my retirement. If society doesn’t collapse in the next 40 years, I’ll have made a good bet.

To be honest, gold has never made sense to me. Investors spend billions of dollars to dig gold out of the ground, only to store it underground in underground vaults. Gold It has no intrinsic value, it doesn’t pay interest or dividends, and, in fact, incurs storage and insurance costs—so it has negative intrinsic value.

Perhaps gold’s greatest value is that it’s the best example of the “Greater Fool Theory,” which is the concept that the price can be justified as long as there’s a greater fool willing to pay the same price (or higher) regardless of any intrinsic value.

As you can guess, my stance on not owning gold is quite firm.