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Lies About Gold: 10 Myths About Investing in Gold

GoldSilver Team 

Gold has been around for thousands of years, and most everyone knows it is both beautiful and valuable. However, there are still some misconceptions about the realities of investing in it. Some perceive it only as an option for the wealthy, or think that it’s hard to buy. As we’ll show, both of these myths, and many others, simply aren’t true.

It all starts with the fact that gold has served as money and a store of value for millennia. This stands in stark contrast to today’s paper currencies that have no real value beyond what is ascribed to them by their respective governments. Gold is a finite resource, standing in stark contrast to paper currency denominations, which have been printed into existence by the trillions. Tellingly, gold’s purchasing power has remained very consistent over the centuries; it buys roughly as much today as it did thousands of years ago. 

Here are the primary misconceptions we’ve heard about gold, and why they’re inaccurate.

1. You Have to Be Wealthy to Invest in Gold

Investors can open a precious metals portfolio with as little as $100

To invest in gold bullion doesn’t require great wealth. In fact, GoldSilver enables buyers to purchase their gold in any amount they see fit, whether buying 1 oz, ¼ oz, 1/20 oz, or even 1 gram coins or rounds. Because of this, gold investors can start their portfolios with less than $100.

2. Investing in Gold Is Risky

Gold is a less risky investment that alternatives because it has been a store of value for thousands of years

Most risks associated with modern-day investments can actually be positive for gold. That’s because gold can act as a hedge against downturns in most other investments. When the economy turns sour or geopolitical conflicts make headlines, investors seek out safe-haven assets like gold, and that buying activity supports its price.

Of course, gold does well during inflation, too. Its biggest bull market in modern times occurred during the high inflation of the 1970s.

While the price fluctuates, gold has never gone to zero, a risk certainly present with individual stocks and other investments. Gold is an excellent portfolio diversifier for these very reasons.

3. It’s Difficult to Buy, Store, and Sell

Another common myth about investing in gold bullion is that it’s difficult to buy. There have been periods in history where this has been the case. 

However,  GoldSilver has made buying, storing, and selling gold simple and straightforward. Whether you’re looking for gold bullion coins, bars, or jewelry, we make the process easy, transparent, and secure. You can invest from the comfort of your home 24/7, and we offer secure vault storage with private vaults at very affordable rates. Buying and selling gold has never been easier.

4. Gold Pays No Interest

The role of gold isn't to produce dividends. Gold is a hedge against other investments and a reliable store of value over time.

Some stockbrokers criticize gold because it doesn’t pay interest or dividends, and doesn’t have earnings like public companies. And yes, some years stocks outperform gold--but other years gold outperforms stocks, particularly during recessions or periods of crisis. 

But they misunderstand gold’s role; gold is money, an alternative currency, and its purpose isn’t to spit out dividends. Investing in stocks is speculative in nature while buying gold is holding a form of money that has been a store of value for thousands of years. Owning physical gold is a crucial insurance policy against events beyond your control.

5. Mining Stocks Have More Potential Than Physical Gold

Gold mining stocks carry more risk than physical gold investments

Gold mining stocks can provide some leverage to the gold price– but that leverage works both up and down. Some gold stocks might rise further than the gold price if you pick the right ones, but they also fall further when the gold price drops.

Further, gold stocks are exposed to many risks gold doesn’t have, such as management prowess, political pressures, operational issues, etc. 

Gold, on the other hand, is money– a tangible form of savings, something that will always hold value. We recommend owning physical gold first and foremost, as an insurance policy or hedge investment. If you want to take on the risks associated with gold stocks that’s an entirely different category of investment which requires considerably more due diligence.

6. The Gold Price Will Fall if Interest Rates Rise

Interest rates can rise or fall, but it’s the “real” rate that tends to impact gold. A negative real rate occurs when the interest rate is below inflation, which is a positive environment for gold. When real interest rates are at or below zero, things like cash and bonds are no longer effective because the return is lower than inflation.

In that case, the investment is actually losing purchasing power, regardless of what it may pay. Investors then shift to assets that offer returns above inflation… or at least a vehicle where money doesn't lose value. Gold is one of the most reliable and proven tools in this scenario. Further, studies have shown that interest rates have an overall 28% correlation to gold prices, which is “considered to be not much of a significant correlation at all.”

7. The Government May Confiscate Gold

The risk of a gold confiscation is low

In 1933, an order was issued by then-president Franklin Delano Roosevelt that prohibited the “hoarding” of gold, which required citizens to surrender their gold in exchange for cash. However, the US was on a gold standard at the time, whereas today we are on a fiat currency standard. Though the risk is not zero, the likelihood of a gold confiscation today is low. The advantages of owning gold far outweigh this risk.

8. It’s Better to Hold Cash Than Gold

Cash is currency. Gold is money.

Gold has been used as a form of currency for thousands of years (dating back to at least 700 BC). In the modern world that isn’t the case. Virtually all currencies today are fiat, meaning they’re backed by nothing, and thus rely on people’s belief in its value.

Further, central bankers around the world have been diluting their currency by printing more and more of it, reducing its purchasing power. History shows paper currencies ultimately don’t last

Gold, on the other hand, has maintained its purchasing power for centuries. Holding some cash in your local currency is always prudent, but it is not a long-term store of value.

9. Buying Gold Coins Is a Scam

Numismatic coins are a more speculative investment than bullion coins because their value is derived from other factors besides the value of gold.

Numismatic coins can be used as bait in for marketing scams, like any investment. Some less-than-reputable firms will peddle rare coins to unsuspecting buyers because the mark-ups and therefore their margins are much higher. While many of these coins have historic or collectible value, their value depends more on rarity or condition, and not the price of gold. 

GoldSilver focuses solely on bullion coins that are offered in many different sizes and designs, all tied directly to the spot price of gold.

10. Gold Is an Outdated Relic

In today’s world, it can seem old-fashioned to invest in gold, when there are many different types of investments, including the emergence of the emergence of Bitcoin and other cryptocurrencies. But gold has many advantages over these other assets, starting with the fact that is has proven itself as an excellent store of value over time, which is crucial in times of economic uncertainty. And the more severe the crisis, the more gold is likely to protect your portfolio. Further, there are reasons to believe that gold is building a base for a significant rise in the near future.

If you’re thinking about investing in gold bullion, now’s a better time than ever to buy gold to protect your purchasing power, and before prices start to rise. To learn more about how high gold could go and why it’s so crucial to own at this time in history, check out Mike Maloney’s smash hit video series, the Hidden Secrets of Money.