Is It Time to Buy Gold?

Dear Kingdom Builder,

Gold is up nearly 100% over the last year…

It was at $2,750 on year ago.

It just hit $5,075 an ounce.

The chart below puts the recent move in perspective.

So, here’s the loaded question: should you invest?

And if so, how much?

(And how in the world do you go about investing, anyway?)

I have a few thoughts on this, so buckle up.

First, gold is known as the “ultimate inflation hedge” because it’s priced in US dollars. When the dollar loses value, gold typically rises. In reality, it rarely reacts in lockstep. Gold usually takes its sweet time. After five years of heated inflation, it finally decided to show up to the party.

Once it did, everyone and their second cousin piled in, igniting a massive bull market in gold. It has been unprecedented. We are talking full-blown mania at this time.

And honestly, I wouldn’t be shocked if gold sprinted to $10,000 an ounce within the next year.

Why?

Because that is how global markets behave these days. Everything goes straight to extremes. Social media shows you how much money everyone else is supposedly making, envy kicks in, and with five taps on a smartphone, people rush into the trade.

There’s the whole sovereign wealth funds piling in as well.

Eventually, though, the music stops. Buying slows. Investors turn into sellers. Then the stampede begins to reverse. Once the party is over, expect gold to fall, and fall hard, when that moment arrives.

So, should you buy gold?

That is ultimately your decision. But here are a few things to consider before you load up on the yellow metal (the last point may be the most important).

Again, gold could race up to $10,000 or more. Logic left town a while ago, and I never try to fight the crazy trend (unless it is skinny jeans. I don’t care how fashionable they were. Aint no way!). What we do know is that people need a place to put their money, and gold is the trendy spot right now. But, again, bubbles always pop. Where gold lands afterward is anyone’s guess.

However, history may be a guide. The last time gold went on a run like this was from 2000 to 2015 … when gold went from $400 to $1,900 … and then fell about 50%. Look closely at the below chart.

Gold then sat around $1,500 for about eight years, before finally starting the current trend. So think about it, if you purchased gold in 2012, you would’ve had to wait over a decade to see any real returns!

My hunch: after years of underperforming, gold is finally priced fairly. But now we are closer to “expensive” than “cheap.” Investing now may mean too much risk for too little reward.

The best investments pay you for owning them. Dividends. Cash flow. Income. Something. Gold pays… nothing. It is a collectible. Essentially, an adult version of baseball cards. Its value is only what someone else is willing to pay. If prices fall, you are stuck holding an asset that produces zero. Compare that to the S&P 500, which at least hands you a small dividend (around 1.05%).

On paper, it seems easy. You can buy GLD (SPDR Gold Shares ETF). Supposedly backed by real physical gold somewhere in a vault. Can you ever actually touch that gold? Probably not.

Another option is to buy physical gold and have it shipped to your house. That comes with a 3% to 5% markup above spot price. Plus, you then get to play a real-life game of “Where should I hide my treasure?” followed by “Where did I put my treasure?” followed by “How will my kids find my treasure if I get a fast pass to heaven?”

The third option is to let a company store it for you. But they typically charge a 1% annual fee, which adds up fast when gold only averages a 3% to 4% long-term return.

Warren Buffett nailed it …

This matters. God calls us to steward resources well. When we invest in productive enterprises, our capital helps hire employees, build infrastructure, fund research, and create goods and services that benefit others. Investments create a ripple of productivity. Even if the investments fail, the economy benefits.

Gold does none of that. It sits there doing absolutely nothing. It is basically the third servant in Matthew 25 who buried his talent in the ground. The master called him wicked and lazy, which is not the review you want on Judgment Day!

I am not buying gold at these prices. But I do own a little gold. I bought some in the summer of 2015, along with silver, to create an “emergency fund” of sorts. You know, in case the dollar really did collapse. And they did rise in value, a lot, over the last 10 years. Or, perhaps the dollar just fell. A bit of both, right?

However, my stock investments went up even more and I was paid dividends along the way. And I’ve enjoyed owning really strong companies.

Big picture: holding a little gold as insurance against a declining dollar is reasonable. Just don’t go wild or get caught up in the speculation. Historically, the stock market outperforms gold and pays you along the way … and your money has a bigger economic impact.

If you decide to buy gold, I do have a shameless plug: I am one of the founding owners of a new bank, Battle Bank, that is on the verge of opening. Through our bank, you will be able to buy gold. You can have it shipped to your house or let the bank store it for you. Storage fees will be only 0.25% per year, well below industry averages.

If you want to be notified when the bank opens (should be in the next two months), go to www.battlebank.com and sign up for the e-letter. We will have a lot of amazing products coming soon that will pay you higher returns than your typical bank.

For His Kingdom,

Aaron DeHoog

Founder & 49% Owner, Abundant Prosperity

www.abundantprosperity.org