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Gold fever seems to be everywhere at the moment. My grandson asked me the other day, “Do you own any gold, Pops?”
I said no and asked why he was curious. Apparently, even ten-year-olds know that gold is having quite a run. Pushing through the $5,000 mark had captured his imagination.
There’s something amusing about being financially questioned by a ten-year-old who only recently discovered the tooth fairy isn’t real. I’ve been investing for decades, and I’m getting the third degree from a kid whose worldly wealth consists entirely of football cards and a bag of loose change.
“So you don’t have any?” he pressed, with a disappointed tone. “Afraid not,” I admitted. He shook his head with the wisdom of someone who’s watched three YouTube videos on the subject. “You should probably get some, Pops. Everyone’s talking about it.” Everyone, meaning him, his buddy, and presumably their classmates who watched the same three videos.
I know the usual advice is probably true: gold has historically moved differently from stocks and bonds and all that stuff. I also realise many investors hold a modest amount through a low-cost ETF, treating it as a bit of fun.
But I don’t own any. Not because I think it’s foolish, but because I’ve never gotten around to it. My portfolio does fine as it is. The only gold I possess is a wedding ring. Could I be better diversified with some gold exposure? Goodness knows. But do I care? Not enough to have done anything about it over the last forty years.
To my mind, gold doesn’t pay dividends or interest. It doesn’t grow earnings. Its only return comes from price appreciation, which depends on some eejit being willing to pay more for it later. I just like stocks and bonds, which generate actual cash flows; I’m a bit boring that way.
The fact that precious metals speculation has now trickled down to the playground might mean it’s entering the “everyone knows” phase of the rally. That old investment story about the shoeshine boy might have a grain of truth. I can’t help but wonder: if a ten-year-old is asking about gold, is this the time when the rest of us should be more cautious?
As you might suspect, I’m not taking investment advice from a ten-year-old…yet. But my grandson’s question does ring of that old truism: when an investment starts popping up in normal conversation, it’s maybe not a good time to buy.
Now, I could delve into dollar depreciation, central banks buying gold because of global uncertainty, US policy direction, and general market unease with world events. But I think I’ll stick to playground gossip on this one.
As for my grandson, I suggested he stick with his football cards for now. But it has to be said, if I owned some of the damned yellow shiny stuff, he really would think I’m cool… maybe I should melt down some of that old jewellery in the back of the safe.
I’m sure these kids are having the same discussions about cryptocurrency given the hype around it. That’s all my nephew talks about!
Strangely enough, a while back I purchased a very small position in Bitcoin ($5,000). I did so more as an educational exercise to understand the whole cryptocurrency ecosystem and how it all works. Maybe I should have told my grandson about that.
Of course, the return on gold is all about the time window of investment — and just like any other asset, has no guarantee of an upward trajectory. Having been gifted around $3K of gold double eagles in 1992, I held on to them both out of sentimentality and also because of the small amount and the hassle to sell. Ditto for another like amount inherited in 2008. Has holding been worthwhile? In my case, yes: a 38% annual return for the gifted amount, and a 26% annual return for the inherited gold, albeit not compounded. Not bad for dragging my feet about selling, and for waiting out flat or falling prices.
I’d take it with a grain of salt. I was about that age in 1980, and I remember it being in the news that gold hit around $800 per ounce. Of course, I would have thought that we should own some if it was getting to be so valuable. Like your grandson, I accumulated a ton of sports cards in the 1980s. I assumed they would keep appreciating in value, way more than any dumb old stock would.
A while back I read an article about the 1980-81 Topps Bird / Erving / Johnson basketball card that sold for $500,000 last year. I wonder if you ever had one of those in your childhood collection? It would certainly have blown gold out of the water if you hadn’t split the three images!
I’d say the Playground Indicator is far more useful than the VIX
Adam might take issue with that 😂
A great article and timely. Thanks for writing. I purchased about a 5% position in a gold ETF after seeing the polls last September. I have trimmed twice since and placed the profits in TIPS. The WSJ has had an article fairly recently suggesting one should own some gold as portfolio insurance. I will probably keep my position as insurance given the current geopolitical climate.
This week’s Barron’s interestingly has a timely article on gold by Jack Hough and points out that: “Deutsche Bank recently calculated that gold has outpaced inflation by 279% over 235 years. That’s barely a half-point a year, compounded, including the recent runup. On shorter timelines, gold looks great. It has beaten the U.S. stock market over the past 20 years.
Time will tell…
Taking your profits was a smart move. I guess you’ve already got yourself a 30% gain in five months—not bad at all.
I should clarify that the time of my investing in the gold ETF was after the September of 2024. I had considered taking additional profits on Wednesday but missed the opportunity.
Great story. If your grandson had asked this question 12 months ago, it would have made an even better story!
Ah, but that’s the thing. It wasn’t on his radar then lol
Gold is a shiny item, but it is not a good investment. The only time I purchased Gold, was when I was saving coins, that is a hobby, and not investing.
I checked with Artificial Intelligence, Mark, and found this result.
1980–GOLD–$850 per ounce
2026– GOLD–$5,000 per ounce
1980—$ 800 invested in S & P 500, like Vanguard VOO– recent value $152,000.
If $850 then about $163,000. Gold is for the Hedge people, not for the typical investor. Sure glad I chose S&P, as that is a real investment, and I now have some $’s for retirement.
I stand corrected! Man, it really hammers home just how massive the impact of even an extra 1% per year in compounding can be over a really long timeframe like 46 years.
I’d originally plugged in a ballpark 11% average return on my trusty old calculator, figuring it was a solid, conservative-ish estimate. Never crossed my mind to just ask an AI for the precise historical figure—with the actual S&P 500 total return (with dividends reinvested) from early 1980 to now clocks in closer to 12% annualized, which blows past that and explains why the ending value came out so much higher than I first thought. The power of that little difference is wild when you let it run for decades!
Hypothetically:
A couple of years ago, I purchased several new gold coins and bullion, tubes of silver dollars and platinum bullion – all through Costco at the mighty “discount” price of 4%. Plan was to eventually give the grandkids an equal share at a time when each metal was at what appeared to be at or near a peak, preferably while our clocks are still running. The thinking was to gift it at an appreciated value (documented) then let each decide what they want to do with it during their life, regardless of the value at that chosen time. Could be a loss, on paper. Once gifted, the base value is reestablished as of that date for each new owner(my understanding, not a fact). The money paid for the purchase of these precious metals (PM’s) was ‘written off” and not included in our asset base moving forward. Purely speculative move. And they sure are beautiful. Sadly, newer US currency is often quoted as melt value (lower price) if looking to sell these days, minus commission as well, of course. Beware.
Even through this weeks drop, the total PM package value has more than doubled. WARNING: Pick the right baseline and timeline, and you can likely show just about any investment appear the way you want it to look – terrible or great. For the PM’s, over two years – good fortune (for now). Over the last two days, not so good (for now). Total asset portfolio – 256% gain over three years. Yay. YTD 2026 – wrong way! Such are the ways of the markets. Hang on tight. I have full faith in our leadership that their ongoing rhetoric and actions will help drive PM prices back up. Sorry. My bad.
So, in this “hypothetical” situation, I sincerely would appreciate input on the “appreciated value gift/ new basis” plan. I have more homework to do, but even if not true, it’s still a gift.
Best to all.
Not being a US citizen, I have no clue about your hypothetical situation. Being a curious soul, I copied your text and ran it through a few AIs. They all suggested your understanding of the tax implications is incorrect; maybe you should reconsider the strategy?
Thank you for your thoughtful reply. Indeed, an inheritance (bad news, good news) resets the basis to the new owner as of the date inherited. Gifting (still here) merely transfers the original basis to the new owner. Good news – I can still sell any or all of the items when I want. The current 28% tax on collectible items (includes PM’s) gain is hefty but it is what it is.
I really enjoy your articles. Please keep em’ coming.
I inherited a couple of ounces in gold from my parents. I was going to give them to the kids, but now wonder if it might be better to sell. Sell high, right?
Gold may be a reflection of a number of things including the dollar. In about the last year, the dollar is down approx 12% as measured by the DXY index. That’s a great deal of purchasing power lost. An ounce of gold is an ounce of gold, but what it’s priced in, the dollar, keeps changing and not for the good.
I plan to stick with the tips I get from thye shoe shine boy.
Hey, I use that kid for tax advice!
1980–GOLD–$850 per ounce
2026– GOLD–$5,000 per ounce
1980—$ 800 invested in S & P 500– recent value $150,000
I believe gold hit a high of about $850 in 1980. I suspect gold has not been an inflation hedge but more like a security blanket in a volatile world.
While the direction of your comment is true, I think you’ve overestimated the S&P 500 return. More like $90,000 with dividends reinvested.
I stand corrected, your S&P figure is accurate.
I was just asked the same question by another investor in retirement. But nope, I don’t buy gold in any form. We should realize this is a great deal for THE FUND, BANK, HOLDING COMPANY. You’ll pay plenty for the security and holding of these assets, so not a low cost investment.
And when you buy Gold coins, bullion, you buy at retail and sell at wholesale, an extreme loss of capital.
Buy a little nice jewelry and leave it at that. At least you’ll get some appreciation of the emotional kind.
I admit last year, I bought a tiny bit of IAU for fun, It’s gain has been a bit less than the market. Should have went with silver….
“Should have gone with silver?” Look on the bright side—you didn’t have a 20% drop in value yesterday! 😂
I don’t know why silver is moving, but I bought some because it is. That’s it, I admit to a make money quick scheme.
Similarly, I bought IAU precisely because gold is buzzing. Part of this buzz is that gold has intrinsic value. I don’t have to believe it, but market sentiment is all that matters. We’re living in extremely politically volatile times, so I’m hoping that when the market dips, Au will hold value better.
I know this is all contrary to HumbleDollar teachings, but I can’t give up fun on the side. VT and SCHD remain the core. (I had to say this to avoid downvotes. Why are people here suddenly obsessed with the updown votes, I find them informative.)
I heard a relevant comment recently …. anyone about to go long or short gold is crazy. It feels like a mad move up or down is equally likely, and for no good reason.
I also prefer to invest in productive assets, not just something that you hope someone else will pay more for in the future.
Gold definitely has the look of a potential rollercoaster ride, and I’m not keen on paying today’s entry price, no matter how popular the ride is right now.
Right on cue, the spot price of gold dropped 8% today! 🙂
I hadn’t realized that. I thought I’d try following Jonathan’s advice—writing something interesting on a timely financial topic—but that just proves how wise his advice was.