The Debate: Should we go back to buying gold?
As gold prices reach a record high, is it time to start investing in the yellow metal? Two experts hash it out in this week’s Debate
Yes: Holding physical gold provides a hedge against the risks associated with stocks
Physical gold has proven to be one of the most reliable and enduring investments throughout history. In times of economic uncertainty and market volatility, it remains a trusted store of value. Unlike paper assets or digital currencies, physical gold is tangible, offering a sense of security that is hard to replicate. Its limited supply and inherent scarcity ensure that, over time, gold retains value, often appreciating during periods of inflation and currency devaluation – and that’s why we should all be buying gold.
Diversification is key to a robust investment portfolio. Holding physical gold provides a hedge against the risks associated with traditional financial assets such as stocks and bonds.During economic downturns, gold often outperforms other assets, giving investors peace of mind when other markets falter. Its independence from the policies of any single government or central bank further underscores its value as a safe haven asset.
Physical gold is universally recognised and accepted – it sits above any currency, making it a liquid asset in global markets. This liquidity means that in times of need, it can be readily converted into cash or used as collateral. Unlike digital assets, it is also immune to cyber-attacks and technical failures, providing an extra layer of security.
Buying the yellow metal is a prudent decision for those seeking long-term stability, portfolio diversification and a safeguard against economic turbulence. It is an investment that not only preserves wealth but also offers a tangible and secure asset in an ever-changing financial landscape. Physical gold serves as a reliable foundation for preserving wealth, ensuring financial security during both prosperous and challenging economic times.
Peter Walden is managing director of Bullionbypost, the UK’s largest online bullion dealer
No: Hoarding gold is unproductive and contributes nothing to society
Gold has traditionally been viewed as a safe haven, but its track record reveals significant limitations as a long-term investment. For instance, while gold surged 148 per cent from October 2008 to August 2011, it took nearly nine years, until July 2020, to reach new highs. Such prolonged stagnation makes it unappealing for investors seeking steady, long-term growth.
A key issue with gold is its lack of productivity. As Warren Buffett aptly noted, “gold… has two significant shortcomings, being neither of much use nor procreative”. Unlike stocks, bonds or property, gold generates no income – no dividends, no interest and no contribution to economic growth. Its value relies solely on the hope that someone will pay more for it in the future.
Gold’s price is also notoriously volatile and unpredictable. While it is often treated as a hedge against inflation or economic uncertainty, these drivers frequently fail to explain its erratic price movements over time. Even seasoned investors like Warren Buffett have treated gold-related investments as short-term plays rather than core portfolio holdings. Moreover, owning physical assets like metals incurs additional costs for storage and insurance, which erode returns.
These factors make gold less efficient compared to diversified portfolios of income-generating assets that actively contribute to economic value creation. In today’s dynamic world, investors should prioritise forward-looking investments that build wealth rather than static assets that merely hold value.
Gina Miller is founder of Moneyshe.com and SCM Direct
The Verdict: Often have you heard it told…
With gold prices clearing $3,000 for the first time ever on Friday, the yellow metal is back in the spotlight. But is the safe haven asset really worth its weight in gold?
Well, as Mr Walden argues, in literal terms yes. As a physical asset, gold is unique, with value you can literally feel with your fingers. In an increasingly digital, and vulnerable, world, this is naturally enticing. But, before you start imagining yourself swan-diving like Scrooge McDuck into your pool of coins, it’s worth remembering that this tangibility does not come without downsides.
Beside from logistical matters of storage (coin pools are not typical), the real downside, as Ms Miller points out, is more philosophical: what good, really, is hoarding gold, for society at large? When you invest in stocks, you may also be contributing to the growth of exciting businesses, that subsequently create jobs, that subsequently create opportunities, that subsequently create change. Gold, against this measure, is uninspiringly static. The truth, often have you heard it told, is all that glistens is not gold.