Why Gold is Still King

While gold has been used to hoard wealth since the beginning of history, many mainstream experts still deride it in favor of nearly any newly invented investment opportunity. Financial advisors only suggest that gold should make up under 10% of an individual’s portfolio. Independent individual investors, dark money, and governments have recently contributed to gold’s spike in investment use, but mainstream financial advising professionals still use it far less than would be reasonable. They steer away from gold’s long-term stability because they cater to an audience that is conditioned to want far higher returns with an unreasonably low amount of risk. They have also confused the high convenience of electronic assets for investment value. Lastly, they hold to the assumption that the current socioeconomic system will be sustainable for an indefinite period of time.

The modern individual, while having access to an unimaginable amount of information, has a bias against reality as a result of some unique conditions. The idea that human progress and the stock market will rocket up together for all time is a belief that many of our ancestors would have found laughable. We live in a unique time where every problem that has plagued humanity for millennia is looked at as a candidate for extermination. We believe that the problems we face today could be eradicated within a few decades at the longest. Even when we do not believe this explicitly, we have let this assumption creep into our minds. In this sort of world, we feel entitled to have it all, and we will not settle for mediocre returns. We believe that high returns are both guaranteed and with very low risk. An advisor could become extremely unpopular and even viewed as hurting his customers if he warned them of this overly optimistic condition. Suggesting that people buy a lower returning asset is not often looked upon favorably, so advisors choose the easy route.

The flexibility and usefulness of electronic payment platforms has allowed the exchange of money to become extremely convenient, but has also led to the intellectual bias that electronic assets are better than physical assets. There is a certain sense of safety that can be found through electronic assets, as they seem to be whisked away to a world where they can never be touched by anyone but their rightful owner. Of course, this is not true, as hacking and technical errors lead to many situations of asset loss. Gold is subject to physical thievery and is less liquid than many electronic assets, but advisors should use neither of those reasons to push their advisees away from gold. As hackers become more advanced, staying safe in the internet world will require ever more vigilance, and some would prefer to avoid that battle. The lower liquidity of gold should not be a problem for most investors, as only an hour of time selling gold should be no obstacle to transitioning wealth built up over many years. The fact that gold has physical existence should not stop any advisors from wholeheartedly recommending it in favor of more modern and opaque assets. 

The final mistake that wealth advisory professionals make is assume that the current economic system will remain stable. If this current high growth environment was guaranteed to last forever, highly speculative investing would on average be the best strategy. The economic growth of the last 200 years may just be a historical anomaly. Apart from its uniqueness in human history, many extremely fragile factors allow this situation to exist at all. A natural disaster or global war could destroy the structures of communication that enable the high speed system we currently possess. While covid and other situations have shown that our current world is very resilient to large shocks, there is another more subtle danger that could undermine long-term growth. Bureaucratic growth and government malinvestment will reward inefficiency and strangle innovation. These factors have already posed many problems, particularly for small business owners. The bureaucratic desire to solve small problems often leads to the creation of larger ones. A slow creep towards overregulation has been a recurring problem since the beginning of our nation, and it endangers the existence of such exponential economic growth.

While financial advisors might quickly disregard gold as an asset for preppers, they fail to understand the wider situation that tilts the scales in favor of the metal. The ever-present uncertainty of the world calls to investors and tells them to seek the safety of tried and true assets rather than unsteady growth.