Gold, Gold, Gold!

It’s a cry we love to hear every leap year around this time, even if it’s for an athlete we’ve never heard of before and in a sport we didn’t realise was part of the games. I always find it amusing to see how many commentators on the telly who normally don’t cover any sport but football suddenly become expert enough to call Olympic events.

Australia’s fascination with gold goes further than whether we will end up in the top seven in the medal tally. There are plenty of experts around who will only be too happy to tell you when you should be buying the precious metal itself.

Gold tends to come in two forms – gold that has a function and gold that doesn’t. Functional gold is not just jewelry but also the stuff that you find in computer boards and that dodgy person’s smile. Gold that has had its purity lowered to 18 Karat or 9 Karat will obviously not have the same value as its 24K pure counterpart. And any premium paid for jewelry designs like the ol’ love heart may have value for you but doesn’t add anything to the worth of the metal itself. Anyone who has wanted to get rid of that ring or necklace from their former lover knows that the price you are offered at the pawnbroker is only about 10% of what it cost. As if you needed another reason to hate that person even more.

You may be fortunate enough to have in your possession some gold jewelry that has value because of its age or the significance of the previous owner, or coins that were pulled up from the ocean floor many years after the pirate ship they were aboard sank. But the problems surrounding the value of these items and the security issues of holding them are similar to those for the gold that doesn’t have a function.

When you see the gold price on the news, it refers to the price of 24K gold per ounce in US dollars. Most investors know it as bullion and there are plenty of people who talk it up when the price is high. When you think about it logically, this is really weird. Why buy something that is really expensive if you want it to go up in price? Wouldn’t it make much more sense to buy that item when it was cheap, especially if, like gold, the price goes up and down so much?

Gold’s greatest problems are that not only does it have no income flowing from it (like the income you can get from shares, property and savings accounts), and not only do you have to rely on someone paying more for it than you did to make a profit, but that you have to store it somewhere. I guess you don’t have to store it somewhere secure, but it kind of makes sense to do so. If you are anything like me, the only safe you ever see is that little one in the wardrobe of the hotel you stayed in on your honeymoon.

So next time you hear someone talking up the merits of gold as an investment, just remember that the gold worth getting is the one draped around your neck before the national anthem is played. If you have as much chance of getting that as I have, aim for a ring from a loved one and leave the bullion to the mugs.

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