The Ignorant Investor

I must say I'm tempted to buy some these days, only to make myself feel a little less irritated by its rise. As I've made clear, I dislike the idea of gold. It doesn't earn money. It doesn't distribute a dividend. It doesn't even get consumed so people can make money on its replacement. Almost all of what comes out of the ground just sits in a vault. You are thus tied in completely to what other people are willing to pay for the right to possess it. Or can afford to possess it. And it's something that can be sold easily in a time of financial hardship, meaning that the price can drop easily. But that's only my own opinion, which counts for literally nothing (it's something I give away free and still have no takers).

What we could be seeing now is a lot of new money coming into the gold market not just in speculative money chasing anything that promises outsized returns (which are becoming harder to find), but also by people who want to have a kind of insurance
against inflation and currency fluctuations. If a large swath of investing professionals or the retail market begins to decide that having 5-10% of a portfolio in gold is a good idea, that's a lot of money chasing a limited product.

There's nothing more tempting right now than the idea to buy some gold through very liquid ETFs and try to manage the downside risk with a stop-loss order. If it keeps going up, I win. If it drops 5% past what I paid for it, I'm out. (It's not like I'm doing anything mroe compelling with my cash right now). Yet I assume everyone else is doing the same thing. If the price were to drop significantly, wouldn't all our orders go through simulataneously, dropping the price even more?


So gold is tempting me. Which should worry all gold investors. When I become seriously interested in investing in an asset, there's a very good chance it's about to tank.