Why Gold is a good investment in the future
Updated Jan 2025
We will delve into this topic against a historical backdrop for two significant reasons. Firstly, the adage that those who fail to learn from history are destined to repeat it holds in investments. Secondly, examining the past allows us to showcase the position we took in real-time. As of August 2023, we have an optimistic view of Gold and the entire commodities sector as a promising long-term investment.
Several sectors exhibit notable strength, including Uranium, Aluminium, and Coal. These sectors have caught our attention due to increased demand, supply dynamics, and global economic trends. As we explore these historical contexts and investment positions, we aim to provide valuable insights that can assist investors in making informed decisions and capitalizing on the opportunities presented by these sectors.
Before we delve into the subject of Why gold is a good investment, let us first consider the chart presented below. A cursory examination reveals that the stock’s value remained stagnant from 95 to 96. However, a close inspection shows that it underwent a remarkable 500% ascent from a modest 50 cents to an impressive high of around 2.50 during the early months of 1996. Regrettably, by August of the same year, it had surrendered a substantial portion of these earnings.
The stock had plummeted to approximately 96 cents, and by December 1996, it had surrendered practically all its profits, languishing at a mere 64 cents. From then on, the stock lingered in this range, peaking at 1.80 and never reaching the high it had attained in 1996.
Notably, most technical analysts would have deemed this failure to breach the previous high as a negative indicator and advised you to offload this stock. One can wager that most investors deserted the stock, declaring it dead, given that it had failed to surpass its previous highs and was destined for oblivion.
Why gold is a good investment: The Story Continues
Following a year of sideways activity, the stock finally sprang to life in 1998, soaring from 1.50 in December of 1997 to a high of about 10.90 in August 1998. However, this joy was short-lived, and the stock experienced a painful 50% drop, hitting a low of 5 dollars in April of 1998.
Yet, it soon bounced back with a vengeance, soaring without interruption until it peaked at 71 dollars in August 1999. A gut-wrenching correction followed as the stock plummeted 50% to approximately 37 dollars in June of 1999, reaching a lower high in July at 63 before descending to a lower low of 35 in August 1999.
Most technical analysts would have interpreted this as a sign that the stock was headed for a downturn, but they were wrong. Instead, we entered a super hyper bull phase, and the stock soared to a high of 162 on 1/04/2000. Even when the major uptrend was clearly broken in 2000, the penguins, who were expert analysts, clamoured that it was time to buy on the dip.
They continued to do so even after the stock made a much lower high of 135 in March of 2000. These same individuals who had declared the store dead in 96, 97, 98, and even 99 were now pounding the table, urging people to buy on the dip. However, history has shown that following the crowd is often a losing proposition, and the so-called experts are frequently wrong.
Do or Die: The Choice Is Clear
Suppose you had invested in this stock during its first run-up and made a 500% gain. In that case, you may have been delighted with yourself and may have even considered bailing out on the advice of an advisor who urged you to hold on to the position for a more extended period.
However, if you take a moment to reflect on what you missed out on, you may have found yourself weeping silently until the wee hours of the morning. By selling too soon, you may have relinquished a gain of over 101,212%, from the stock’s low of approximately 16 cents to its high of 162 dollars (admittedly, most people would not have purchased it at such a low price).
Nonetheless, even if you had bought it when trading in the range of 1.50-1.62, which lasted for over a year, you could have gained 10,000%. So, ask yourself this question: did you genuinely win? Suddenly, that 500% gain appears to be relatively paltry. Why is gold a good investment? The dollar is about to put in a multi-year top, and investors view it as an ancient relic, and Inflation is just waiting to roar.
Most Investors Fold as they are not Bold.
Verily, the ones who held on until the very end and sold at the opportune moment have reaped the most significant rewards, albeit their numbers are few and far between, ranging from a mere 2 to 5 per cent. Furthermore, those who timed the market with precision, navigating its ebbs and flows with talent and skill, comprise a scant 0.5 to 2 per cent of the populace, and the accurate figure likely lies closer to 1 per cent.
This stark reality underscores investors’ challenges in staying the course during volatile times. The majority tend to succumb to fear and uncertainty, making hasty decisions that may not align with their long-term goals. It’s a testament to the emotional rollercoaster that often characterizes investment journeys.
For the 95 to 99 per cent who exit the market prematurely or fail to seize the right opportunities, there’s a valuable lesson to be learned. Successful investing demands patience, discipline, and a long-term perspective. It necessitates the fortitude to weather storms and the wisdom to recognize when to act.
The journey of the bold and patient investor serves as a reminder that wealth accumulation through investments is often a marathon rather than a sprint. Those who remain steadfast and informed can position themselves to be part of the select few who achieve lasting financial success. In the following sections, we will delve into the attributes that set these investors apart and how their strategies can be emulated for improved investment outcomes.
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Now let’s look at the second stock.
Ladies and Gentlemen: If you bail out now, you will miss out on the biggest gains. The history of these types of stocks has shown that those who have the patience to hold on and weather the storms are the ones who reap the most significant rewards. Don’t be swayed by the short-term ups and downs; focus on the big picture and remember that investing in gold is a long-term game. So hold on tight and don’t let go because the future of this stock is bright, and the rewards will be immense for those who have the fortitude to stick it out.
A Trip Down Memory Lane
For the sake of the records, the initial stock bore the name CMGI, while the latter was gold, known as GSS.
It’s worth noting that the gold market is rife with manipulation, far more so than the internet market, perhaps by a factor of a hundred or more. This necessitates a higher level of scrutiny and analysis than the dot-com bubble era ever required. Furthermore, the gold market has its unique stage – one of mass fear and panic.
The choice before you is clear: to listen to those who advise abandoning ship immediately and investing elsewhere or to ignore their warnings and instead focus on the charts, which reveal the truth, especially long-term charts. The trend should always be your ally; don’t let it slip from your memory.
These historical examples can provide valuable insights for today’s investors. It’s a reminder that markets, whether in the past or present, are driven by a combination of factors, including sentiment, fundamentals, and external events. Understanding these dynamics can help investors make more informed decisions and navigate the complexities of the financial world. So, let’s journey through time and explore how these insights from the past can guide us in the present.
Originally published 11/15/2003, and consistently updated over the years, with the latest update in Jan 2025
FAQ: Why Gold is a Good Investment
Q: Why is gold considered a good investment in the future?
A: Gold has demonstrated remarkable historical performance, offering substantial gains over time. It has shown resilience even during economic downturns and periods of uncertainty, making it a reliable hedge against inflation and currency fluctuations.
Q: How has gold performed historically?
A: Gold has witnessed significant price surges, such as a 500% ascent during early 1996. Despite occasional corrections, gold’s value has surged exponentially over the years, providing substantial long-term returns.
Q: What key factors drive gold’s attractiveness as an investment?
A: Factors such as the dollar’s potential multi-year top, concerns about inflation, and gold being perceived as a store of value have contributed to its appeal among investors.
Q: Should I worry about short-term ups and downs in gold?
A: Short-term fluctuations are common in any market, including gold. It is essential to focus on the bigger picture and consider gold as a long-term investment, with its value likely to appreciate over time.
Q: How do gold investments compare to other types of assets?
A: Gold investments have outperformed various other assets over time, showcasing its potential as a reliable investment option, especially during economic uncertainty.
Q: What are some of the challenges associated with investing in gold?
A: Gold markets are subject to manipulation, requiring careful analysis and scrutiny. Additionally, gold price fluctuations can trigger fear and panic among investors, necessitating a steadfast approach to holding on to investments.
Q: What is the overall outlook for gold as an investment?
A: Long-term charts suggest holding onto gold investments and following the trend can yield significant rewards. Patience and focus on the bigger picture are crucial in navigating the gold market effectively.
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