Chicago, IIL
By A.B. Dada
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As an avid gold bug, with almost a decade of praising the gospel of gold to the masses (and those closer to me), I continue to get looks of surprise from people I haven’t met in years who yell at me for not being pushier over the years in getting them to buy gold. “Why didn’t you tell me it would go up so much?”

And today, while still an avid goldbug advocating the many reasons to own gold, my new proclamation to these fine folks makes them frown: Gold is a terrible investment. No, not because I feel it will fall in relation to the dollar or other currencies; gold has always been a terrible investment, even when it has skyrocketed almost 400% in less than a decade.

Gold is not an investment, not now, not ever. Then again, most stocks aren’t investments either. For an investment to be true, it must offer two things: an asset of value, and a return on investment from the profits the asset makes. If you start your own company, that is an investment: you end up with assets (property, tools, software, etc) and if it generates a profit, you get a nice return. At any time, you can sell the company and its assets for money as well. This is a worthy investment.

In terms of the stock market, the only true investment is one where your shares purchased offer you an asset (property, tools, software, patents, etc) that would have value if sold, but the share also pays you a dividend, or a portion of the profit that company makes. Most stocks pay little to no dividend. If you buy a stock that does not issue a reasonable dividend (I believe in at least 10% annually, but my businesses can pay well over that), you’re not investing, you’re gambling. The main reason a stock price goes up is because people see new value in what the assets of that company would sell for. A company that issues no dividend is not a profitable company because the profits are spent elsewhere: capital growth, big big bonuses, advertising, etc. Would you start your own business if it paid zero profits? Of course not.

The worst investment, though, is hoarding. Be it dollars, euros or ounces of gold, hoarding has no long term gain in terms of profits paid. Even putting money in the bank is a better “investment” because you get an interest rate return, usually lower than the cost of living increases, though. Holding gold is akin to hoarding dollars. The only reason I do this is because gold tends to hold its value over time, versus all paper moneys which crash to worthlessness in usually less than one century. The U.S. dollar has lost almost 98% of its value in less than 100 years. $1 from 1910 is worth $0.02 today. Gold, on the other hand, has held up quite well, but its return is only in the gained value of its asset price.

For me, gold keeps up incredibly well to the theft of value that central bank inflation creates. An ounce of gold, to me, has stayed relatively stable versus life’s cost increases for as long as I’ve been holding gold. Even better, gold over decades has held its value, and gold over centuries has held its value. That’s all it is: a stable, consistent store of value. Yes, it fluctuates here and there due to industrial demand and investor demand, but overall, it tends to be more valuable over time (versus other currencies) because it is the only true money in existence. The first metal used by humans as money was gold. Gold has been the only money to exist as money after thousands of years of human history. Gold is the most liquid form of money imaginable: if you hold U.S. dollars and are in a foreign country, your gold ring would bring you a consistent return whereas you have no idea what the dollar will be worth depending on the market’s need for dollars.

I will never offer advice to people to buy gold as an investment. Will the price go up? Surely it will, over time, because our world’s currencies are constantly being destroyed through central banking inflation. Will it make you a profit? Maybe, maybe not, depending on how much speculation is built-in to the spot price. But it won’t become worthless, even if it falls in value over time.

I’ve been very happy and very successful in using coupons to schedule my month. I’m finding much more time in my days (as much as 7 hours a week saved) just by prioritizing what I need to do based on how it can save me money doing it in a particular order. I’m also saving over US$12 a day just by using coupons and by focusing on specials (daily specials or TV advertisements). The only problem I had is that savings from coupons and specials were not real savings — I “saved” money only to have more money to spend frivolously.

Now I’m changing my tune and finding a new definition of “saving money” with coupons and sales — not quite a new definition since it is closer to the old fashioned definition. Now, when I “save” money on a purchase, I really save it. After the purchase is complete, I review the receipt for the preferred customer savings and coupons. I highlight these savings when I get home and I toss the receipt into a folder. When I go out and buy bullion, I tack on to my usual purchase the full amount of savings I found in my purchases. This turns a coupon’s virtual savings into true savings: bullion savings. That US$12 a day I’m saving translates to about 6 ounces of gold a year!

I’m also looking for other ways to focus on true savings, such as rebates. I am one of the worst people ever when it comes to rebates. I’ve literally thrown away hundreds of dollars in 2005 alone by not mailing in those forms. Now I have good reason to do so — instead of getting back paper dollars to spend needlessly, I will throw that rebate check into the folder and use it to convert the worth-less paper into bullion savings. The incentive of getting gold and silver for my rebates might actually get me responsible in mailing the forms in properly. We’ll see, though; I promise to follow up the next time I have a rebate to redeem.

If you go shopping and realize a price reduction because of a coupon, a preferred buyer card or another incentive, it really isn’t savings unless you’re saving it. If you turn around and blow that new-found money on junk, you’re right back to where you were before you clipped coupons — even worse, you now have more junk you have to take care of, find room for, and use. You also lost valuable time shopping for the junk you might never use. Consider doing what I do — convert your paper savings into real bullion savings each time you add more real money to your savings portfolio.

Discuss this article at the gold investment forum.