Is Gold the Worst Investment Right Now?

According to an article in the Wall Street Journal by James Altucher, gold is the worst investment that you can make right now.

Why is that?

Mr. Altucher has a few reasons:

• For one, he notes that the only reason that people buy it is because it's a "fear metal," meaning that investors will put their money into the value of gold when stock prices begin to plummet and interest rates aren't high enough to attract, well, interest. If there is political instability abound, then you buy gold. Banks about to fail? Get some gold! (Beats storing dollars under your mattress, though it's doubtful that gold is more comfortable to sleep on.)
  
  
• Gold can be a great hedge against inflation, some say, but Mr. Altucher says that stocks can also be an effective hedge as well. If the dollar softens, U.S. products will be cheaper in other countries, and profits should shoot up. Notably, about 40% of the S&P 500's profits come from abroad. Altucher also notes that many companies pay out dividends, some even become "dividend aristocrats," those that have increased their dividend each year over the last 25 years. Companies in that club include Proctor & Gamble (NYSE: PG), Wal-Mart (NYSE: WMT), and McDonalds (NYSE: MCD).
  
  
• Companies, unlike gold, can continue to grow, innovate, and attract investor attention. Gold is gold. Notable companies at the top of the food chain that continue their innovative undertakings include Apple (Nasdaq: AAPL), Google (Nasdaq: GOOG), and Exxon Mobil (NYSE: XOM).
  
  
• Gold has industrial and dental use. It is a good conductor of electricity. Do you know what else has similar properties? Silver. However, compared to gold's $1200/ounce price tag, silver is holding strong at just about $18/ounce. As more companies and industries turn to silver for their needs, gold will continue to pile up.

Altucher also gives us a little price history for gold. He notes that the price of gold peaked in 1980, at $800/ounce, or $2000/ounce in today's dollars. Essentially, gold has lost 40% of its value since 1980. Also, at $20/ounce in 1800, the metal has only averaged a gross return of 2% annually, not including costs of mining and storage. Including those costs, the return of gold drops dramatically.

Altucher says "Don't put your money on a simple rock."

While Altucher makes some good arguments against gold, smart money buyers including John Paluson, George Soros and David Einhorn are betting big on the precious metal as fiat currencies debase around the globe.

Time will tell who is right. Meanwhile, investors and traders can play a number of stocks and ETFs to gain exposure to gold long or short.

Gold miners and ETFs include, among others:

• SPDR Gold Shares (NYSE: GLD);
  
  
• PowerShares DB Gold Short ETN (NYSE: DGZ)
  
  
• iShares COMEX Gold Trust (NYSE: IAU);
  
  
• Market Vectors Gold Miners ETF (NYSE: GDX);
  
  
• Market Vectors Junior Gold Miners ETF (NYSE: GDXJ);
  
  
• Goldcorp Inc. (NYSE: GG);
  
  
• Yamana Gold, Inc. (NYSE: AUY);
  
  
• Barrick Gold Corporation (NYSE: ABX);
  
  
• Randgold Resources Ltd. (Nasdaq: GOLD); and
  
  
• Eldorado Gold Corp. (NYSE: EGO).

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