In defence of Glod investment

Gold has been much maligned lately and is regraded by many as the investment equivalent of a pet rock, to be avoided by the smart investor who should sell gold, and buy stocks. That’s a ridiculous notion. In fact, if you believe in buying low and selling high, this is the time to do the opposite...buy gold, and sell stocks.

It pays to remain as objective as you can be when analyzing any investment. People have a tendency to fall in love with an asset class, usually because it’s treated them so well. We saw that happen with Internet stocks in the late ’90s and with houses up to 2007. Investment bubbles are driven primarily by emotion, although there’s always some rationale for the emotion to latch on to.

In the same way, people tend to hate certain investments unreasonably, usually at the bottom of a bear market, after they’ve lost a lot of money; even thinking about the asset means reliving the pain and loss. Love-and-hate cycles occur for all investment classes.

But there’s only one investment I can think of that many people either love or hate reflexively, almost without regard to market performance: gold. And, to a lesser degree, silver.

It’s strange that these two metals provoke such powerful psychological reactions - especially among people who dislike them. Nobody has an instinctive hatred of iron, copper, aluminum, or cobalt. The reason, of course, is that the main use of gold has always been as money. And people have strong feelings about money.

Let's look at how gold’s fundamentals fit in with the psychology of the current market.

What Gold Is - and Why It’s Hated

Some, with a Platonic view, think that money and commercial activity in general are degrading and beneath the “better” sort of people - although they’re a little hazy about how mankind rose above the level of living hand-to-mouth, grubbing for roots and berries. Some think it’s “the root of all evil,” a view that reflects a certain attitude toward the material world in general. Some better-informed people (who have actually read Paul of Tarsus) think it’s just the love of money that’s the root of all evil. Some others see the utility of money, but think it should be controlled somehow - as if only the proper authorities know how to manage the dangerous substance.

From an economic viewpoint, however, money is just a medium of exchange and a store of value. Efforts to turn it into a political football invariably are signs of a hidden agenda, or perhaps a psychological aberration.

But, that said, money does have a moral as well as an economic significance. And it’s important to get that out in the open and have it understood. Money is a high moral good. It represents all the good things you hope to have, do, and provide in the future. In a manner of speaking, it’s distilled life. That’s why it’s important to have a sound money, one that isn’t subject to political manipulation.

Over the centuries, many things have been used as money, prominently including cows, salt, and seashells. Aristotle thought about this in the 4th century BCE and 

arrived at the five characteristics of a good money: