The thing is, instead of arguing for or against gold or the DOW or etc etc etc, we should all be looking for the best place to put our money. Sometimes the best place is the stock market (1980-2000); sometimes it’s best to buy gold (2000-present).

Personally, at this moment in time, I put more value in believing the worth of gold (and silver) which has been around for thousands of years, acting as money in one way or another, much more so than corrupt and fraudulent Wall Street goods.

Each has it’s place and time and value.

I’ve had a portion of my assets in a precious metals and minerals fund (USAGX) for the last several years. It has been returning double-digit returns each year for the last several years (39.24% in 2005, 43.19% in 2006), and its five-year average return is 27.79%. I missed its best year return, 2003, when it returned 79.43%.

That said, the dollar won’t collapse any time within the next 5 years. Bernanke and co can keep spending capital into the market – socialism for the rich, dontcha know – for about that long. I look to see inflation (again, real inflation, not the figure the government reports) of about 18% at the end of this cycle – and that inflation figure will wipe out any gains anyone is making in the stock market. Still, the central banks have been playing a shell game with our currency for almost 100 years, and their little house of cards – as history tells us – has got to fall down eventually.

All bets are off, though, if the geopolitical climate _really_ changes – that is, if we’re actually stupid enough to attack Iran. If you wake up one morning and there have been airstrikes, it’s too late to save your portfolio. :)

http://finance.yahoo.com/q/bc?s=IAU&t=2y&l=off&z=l&q=l&c=VGPMX

Also, about the Vanguard fund: it re-opens semi-regularly for new investors. I know someone who bought in about a year and a half ago and is loving the returns.

Just an addendum… you’re doing the thing that Dave doesn’t want to do when you buy stocks, too. You’re speculating that they will go up when they can just as likely go down! :) There is risk either way, and my money (a portion of it) is riding on the only thing which is retained its value for more than 3 millennia – gold.

The real inflation rate (the one that the government has stopped reporting – google the M3 money supply figure) is 10-12% right now, depending on how you calculate it. The feds are pumping so much money into the market that the dollar is going to completely tank – and ALL fiat currencies tank eventually. When that happens I’d sooner have a couple of gold coins tucked away in a sock under a loose floorboard than a wheelbarrow full of useless paper, no matter how well it had theretofore been invested. (Ask the folks in Germany after WWI.)

Again, no one’s saying that all your money should be in gold, but it is a valuable asset to have – if only for the peace of mind. The wild market returns party cannot continue indefinitely, as American history has proved.

I personally think your time would be better spent covering sensible asset allocation principles and the few investments 90% of people will ever need: int’l stock index, US stock index, and bond market index.

If you want to invest in the metals themselves, there are exchange-tracked funds you can invest in like GLD, SLV, and CEF.

My personal holdings are about the same as Trent’s. I’m personally fond of gold Krugerrands, which are an alloyed coin, and thus less prone to scratching. (Still contain a full ounce of gold, though – the coin itself weighs slightly more than an ounce.) If you’re looking for silver coins, I’d consider the Canadian maple leaf coins (still being minted, so less “collector” value) or the Morgan silver dollars, which are very beautiful. My grandfather gave me some of these, so I didn’t have to pay the collector markup.

If you’re Canadian, you can get Canadian coins (both gold and silver) directly from the mint.

If you’re not looking for numismatic or collector value, you might consider gold bullion, which is oftentimes sold at less of a markup. Harder to trade with, though, should the apocalypse come in the form of Argentine-style hyperinflation, or Peak Oil, or whatever.

What Dave said is right (the value of gold hasn’t changed since the Roman era – you could buy a very nice suit and a pair of shoes with a 1 ounce gold coin, just as you could buy a very nice toga and a pair of sandals with a 1 ounce gold coin back then) but I strongly disagree with his conclusions. I would rather have had all of my money in gold buried in my back yard in 1929 than in the stock market!! A major depression will happen again, so having real money is a nice backup. :)

1985 -8.29%
1988 -17.55%
1990 -23.96%
1992 -21.78%
1994 -7.83%
1995 -7.09%
1996 -3.58%
1997 -40.32%
1998 -5.38%
2000 -10.37%

Now there have been pretty crazy gains also:

1986 +47.07%
1986 +33.83%
1993 +87.80%
1999 +26.06%
2002 +31.26%
2003 +55.91%
2005 +39.08%
2006 +30.09%

Basically, this is very volatile stuff. After the losses are cancelled out, you have an annualized real return of 7.48% with a standard deviation 30.56% for the past 22 years. To give you a comparison, Emerging Markets has returned 16.97% with a standard deviation of 31.42%. Basically, you are taking EM risks without EM returns. So precious metals would be good as a hedge position — perhaps 5% of your portfolio at best — but not as a core position.