Is Gold A Good Investment?

There has been a lot of debate lately as to whether or not gold is a good investment. So lets have a look whether it is good investment for the long term or for the short term. Below is the price history of Gold in US dollars for past 20 years:

Year	Closing Price	Year	Closing Price
1993	$391.75	2002	$342.75
1994	$383.25	2003	$417.25
1995	$387.00	2004	$435.60
1996	$369.00	2005	$513.00
1997	$287.05	2006	$635.70
1998	$288.70	2007	$836.75
1999	$290.25	2008	$869.75
2000	$272.65	2009	$1087.50
2001	$276.50	2010	$1420.25

1. Is gold a good investment for the long term? Yes, if you count in 2009 and 2010 ,when people invest highly in gold as they are afraid that they will lose value in money due to the weakening of US dollar. Annual rate of return is around 7%. But besides these 2 years, the rate of return annually is just around 4.5%. The average rate of return tracked as far back as history will go is a little better than 2%. However, if you were to have invested your money in a good index fund (i.e. S&P 500 or Dow Jones), you would have earned on average 9% in those same years. So, gold is a not really a good investment with a fairly mediocre track record. Though it is doing well right now, don't count on it.

2. Is it good if it is for the short term? Not right now, that is, if you don't already have invested in it. A common rule for investing is to NEVER buy high. And right now the price is exceptionally high. But, again, with its track record, we should be very careful about taking any chances as the price can be very volatile. It might still be going up in the next few years for all we know. But rather than taking the risk, it might be better if we look at other alternatives such as ETFs, real estates and commodities.

Think about it....