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Myths About Investing in Gold

Myths About Investing in Gold

Investment myths are muddying the market, and clouding the judgment of investors. Unfortunately, these myths spread like wildfire, and are believed by many investors who don't deal with professionals. To save investors from creating certain financial blunders regarding gold, WealthHow enlists some of the most popular myths about gold investment.
Kulbhushaan Raghuvanshi
Why Own Gold?
  • Gold will always remain the ultimate form of payment with no associated risk.
  • Gold has always outperformed and outlasted paper currency.
  • Gold will remain a safe investment in times of international crisis.

Gold has turned out to be one of the best investments since decades, and investors have made nearly five times the money they spent purchasing it. Yes, prices did fall a little during the recent economic crises, but the shining metal has come out strongly since then. However, due to its popularity, there are many ridiculous myths associated with gold, which keep investors away.

Despite a 1 oz. gold bar going for more than USD 1,000, gold is still missing from many individual and institutional investment portfolios. There is no need to be scared of the yellow metal, and hopefully, potential investors should be ready to invest in gold after they read the following myths and facts associated with gold investment.

Popular Myths about Gold Investment

Myth: Investing in gold is too risky.

Every investment comes with a certain amount of risk, and it is often observed that people club precious metals like gold and silver with other 'paper investments'. This isn't healthy. Not only has gold been termed as one of the least risky investments, it is also one of the safest ways to maximize yield. Also, people who consider gold ownership risky should remember that there are various financial institutions that provide vaults where the yellow metal can be kept safe.

Myth: Invest all savings in gold.

Although gold is considered a safe investment, investing all your money in gold is not a smart move. Looking at the recent surge in the prices, buying gold at such high rates might not be the best financial option. However, if the gold was purchased long ago at a lower rate, then it would make sense to hold on to it for a little while. Before investing a huge chunk of money in physical gold, investors should realize that gold doesn't yield dividends like other investments. To get money, it has to be sold.

Myth: There are better investments than gold.

It is possible that tomorrow an investment might perform better than gold. Hence, impatient investors are advised to stay away from the yellow metal. Gold is something that should be held on to for a while. It should be treated as an asset, whose value increases with time. Gold has performed well for decades, but it takes time. Investors looking for sooner returns can opt for stocks and other funds.

Myth: Gold can be confiscated during crises.

Yes, gold was confiscated during the Great Depression of 1933. This extreme step was taken by President Franklin D. Roosevelt to stabilize the falling US dollar. However, there is a section of investors who still believe and fear another government confiscation. Now, let's understand the facts. Remember that not all physical gold was subjected to confiscation in 1933. The President's order clearly said to exclude gold coins having special value to collectors or rare and unusual coins. This means that numismatic coins were safe. Hence, even if government confiscates gold in the future, numismatic gold coins will always remain safe.

Myth: Always invest in bullion.

There are more than a dozen gold bullion advertisements that can be seen on TV and heard on radio. Also, many vintage gold investors believe that bullion is a smart way to enter the gold investment market. However, bullion isn't the only way to enter the gold market. Numismatic coins are also quite worthy.

An important aspect to remember is that the worth of bullion is only based on its weight, while a numismatic coin has an additional value premium with its weight. These coins are limited in number, and hence, are quite valuable. While the worth of a bullion has only increased with time, it can't be compared to the worth of numismatic coins. A USD 1,000 basket of rare gold numismatic coins from 1970 are worth USD 105,995.99 today. Unlike gold bullion, these coins are a non-reportable asset, and hence, are one of the few remaining investments that can be accumulated confidentially.

Myth: Gold only suits collectors, not investors.

A widely believed myth that has kept many investors away from gold. It is true that many develop an emotional attachment with the yellow metal, and like to preserve it for a long time. However, this doesn't make gold a collector's item, it can be what the buyer wants it to be. Yes, good returns can only be expected if the buyer holds on to it for a while, and sells it when the market is favorable for selling.

Myth: Gold stocks are a better investment than the metal.

Gold stocks have generated impressive returns in the past, especially when there is a rise in the metal prices. However, to assume that these stocks can perform better than gold bullion or coins is a long shot. Mining stocks did perform better than bullion for a while in 1970s, but at present, bullion has outperformed almost every major mining index. Mining stocks tend to be volatile, and hence, are not advised to those who prefer safe investments.

These are some of the most popular myths about gold investment that have been instrumental in keeping investors at bay. Hence, it is always beneficial to seek the advice of a professional, rather than believing in false rumors.