E Gold's Not An Investment - You Won't Get Rich

Perception of gold as an investment is fundamentally flawed. No matter the detail behind the analysis, gold is simply not an investment.

investment...a thing that is worth buying because it may be profitable or useful in the future.

Let's suppose you are at the grocery store and you see that butter is on sale for $2.00 per pound. Normally you pay $3.00 per pound or more.

Since you use butter in your cooking and eating and buy butter regularly, you place the butter in your cart and express thanks for such good fortune. But why not take advantage of the sale? You buy an additional one month supply and place it in your cart.

Have you made an 'investment' in butter?

According to the definition above, the answer is yes. This is true even if the butter were not on sale; and even if you had only purchased your usual amount.

Your consumption of butter makes it "worth buying because it may be... "useful in the future".

In this particular instance, since the butter was on sale, and since you purchased additional amounts for later use, there is also an implied profit motive.

Which is more important - the profit potential or the future use of the butter?

Definitely, the use of the butter in the future is more important.  If you did not use or consume butter at all, would you buy it just because it is on sale? Likely not.

The reason you buy it is because your use and consumption of the butter - now, or in the future - represents value to you.

So why do people invest in stocks? Because companies, in general, provide goods and services of a productive nature that add value to our economy -  today, and in the future. Over longer periods of time, it becomes value added. Which means that there is profit potential, even without price discrepancies, or bargain sales.

The explanations above, and their fundamentals are independent of the measure of value used to quote their price.

For example, whether we measure the price of butter, or  Amazon stock, in dollars or other currencies, beads, grains, or gold, does not affect the value of the butter or stock. The value comes from the use and consumption, or the added convenience, efficiency, comfort, satisfaction, and complimentary benefits to our standard of living.

The price of anything is an implied measure of its value; but to whom? If the finest men's suit that money can buy is of no interest to me because I don't wear suits, then it has no value to me at any price.

This is true of most usable and consumable retail items. Hence, the technical application of the definition of 'investment' in our first example re: butter, is probably not how most people view their purchase of groceries or clothes.

But it is definitely germane to our example of stocks. And real estate, too.

You might purchase a piece of property now, with the intention of building a house on it in a couple of years. The property has value to you because of how you intend to use it later on. And, depending on other fundamentals, there is also profit potential.

So what about gold? In gold's case, there is no shortage of people who believe that gold is an investment. Can we apply the definition of investment to gold? Might it ''be profitable or useful in the future"?

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Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN'T, AND WHO'S RESPONSIBLE FOR IT and  more

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