Gold, Dollars, and a Fellow’s Chances

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Now, gold. A curious thing, gold. Folks have been stackin’ it up since before there were folks to stack it. Legal tender in some states, they say. Though I reckon you’d have a hard time buyin’ a loaf of bread with a nugget these days, seein’ as how the price has gone and flown higher than a Mississippi steamboat whistle. It’s a peculiar habit we have, admirin’ a shiny metal more than honest labor.

Why, in the last year, gold has put on a show, risin’ a good 64%. And it’s already up another 18% this year. The S&P 500 (^GSPC +0.77%), bless its heart, is pokin’ along at a mere 1%. Seems investors are pilin’ into the yellow stuff like ants at a picnic, fearin’ what the government’s spendin’ and borrowin’ might bring. Returns like that ain’t normal, mind you, but the conditions are ripe for it to keep climbin’. It’s a spectacle, I tell you, a spectacle.

Now, buyin’ physical gold is the surest way to profit, if you’ve got a strongbox and a disposition for worryin’ about thieves. But for most folks, an exchange-traded fund like the SPDR Gold Shares ETF (GLD 1.41%) is a sight easier. It tracks the price of gold without the bother of storage and insurance. A clever contraption, really. Let’s have a look at why it ain’t too late to add a bit of gold to your portfolio, though a dose of common sense is always a good companion.

A Rising Tide of Paper, and What it Means for Gold

Gold’s reputation as a store of value comes from its scarcity, you see. Only a measly 219,890 tons have been dug out of the earth in all of human history. Billions of tons of iron ore and coal, now that’s abundance! Even silver is plentiful compared to gold. A fellow could practically swim in the stuff.

The world, for the most part, agrees on gold’s value. Investors, governments, even central banks—they’re all consistent buyers. Why, back in the old days, many countries pegged their currency to gold—the “gold standard,” they called it. Limited the amount of paper money governments could print, see, ’cause they needed an equal amount of gold to back it up. A sensible idea, if you ask me.

The U.S. abandoned that system in ’71, and predictable as a rooster’s crow, the money supply went and exploded. The dollar has lost about 90% of its buyin’ power since then. So, even though gold don’t produce nothin’—no revenue, no earnings—its value in dollar terms has skyrocketed. It’s a lesson in simple economics, really. Print too much paper, and everything else gets worth more.

Lately, investors have been buyin’ gold at a faster clip than usual, fearin’ the government’s spendin’ habits will only get worse. Last year, they ran up a deficit of $1.8 trillion, sendin’ the national debt to an all-time high of $38 trillion. A prodigious sum, I assure you. Enough to make a miser weep.

Ray Dalio, a hedge fund fella with more sense than most, recommends folks put as much as 15% of their portfolios into gold. Another hedge fund billionaire, Paul Tudor Jones, piled into the SPDR Gold ETF, sayin’ civilizations have always tried to “inflate away their debt” by printin’ more money. A cynical observation, but a truthful one, I reckon.

A Word of Caution, and a Bit of Perspective

Over the last 30 years, gold has averaged a return of around 8%, so these recent gains might not last. But the government’s on track to run another trillion-dollar deficit, so fears about the money supply ain’t likely to disappear anytime soon.

However, history shows us that gold ain’t always the best bet. The S&P 500 has delivered a higher return of 10.7% over the last three decades. So, folks who put their money in stocks back then would be doin’ a sight better today. A lesson in patience, perhaps.

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In my view, gold’s short-term gains and the S&P 500’s long-term returns simply highlight the importance of diversification. Ray Dalio is likely right about holdin’ more gold in these times, but stocks should still be the dominant asset in a diversified portfolio, with gold takin’ up a modest 15%.

A Simple Way to Part with Your Cash

Buyin’ physical gold comes with storage and insurance costs, and it’s hard to sell quickly when you need cash. That’s why the SPDR Gold Shares ETF might be the right choice for most folks. It don’t require storage, and it can be bought and sold through any investin’ platform.

The ETF does have an expense ratio of 0.4%, which is the fee they charge to cover management costs. So, an investment of $10,000 would cost you $40 a year. But it’s likely cheaper than ownin’ physical gold, and a good deal easier on the nerves.

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2026-02-25 13:03