Gold, like any currency, only has value if someone is willing to pay for it. In 2001, the value of gold was around $250. That was its lowest it has been in the . In 1980, gold was around $850. This morning it was trading at $798, down from its July high of when it nearly approached $1000. But the noise made by gold merchants is overwhelming. They want us to buy, and to buy a lot now.Gold lovers argue that it will be worth more as the dollar crumbles. That it will go up when the economy goes down and people lose faith in the stocks, the dollar, and other forms of investment.
I remember people saying that you can't lose if you buy stocks, real estate, sports cards, and even comic books. We see where that got them. Never join in on the "can't lose" bandwagon unless you are getting in at a good deal before the peak. Gold has peaked. Everyone is still saying buy, but you should never listen to people screaming buy when you are on the downward side of the peak, especially when those people screaming are the ones who will profit from your buying. Wait for the valley to return if you are interested in gold.
Gold's value is dependent upon fear. The more scared people get about their economies, the better gold supposedly does. However, that is not proving to be the case. We have seen recent days where gold, stocks, and bonds have all gone down. Deflation will hit gold just as it will hit every market if it is to come. Gold has an artificial value just like any other item. Its value derives from people giving it value. Gold's advantage is that it has a longer history of people giving it value. Next year, the hot thing could be tulips like it was during "tulip mania" in Denmark in 1636-37.The funny thing about writing this is I am sure Google will start popping ads up for you to buy gold. Ignore those gold ads. I wouldn't buy gold at this point. It was time to sell when it was over $900. The price appears inflated at the current time when it is looked at through its price in history (historical prices of gold from 1833 to present). The time to really have bought into gold and have made a killing has long passed.
Updated to add that everything plummeted the day I wrote this. The next morning when I checked gold was selling at $755.90, down from the $798 the day before. Stocks were down around 5%, oil was down 9%. The only thing immune was government bonds. They were up. Gold is not immune from deflation. It might be a good buy to secure against inflation, but deflation is another matter altogether.
