What is safer: Investing in Gold or Investing in Bonds
When making investment decisions there are several questions one should ask oneself. Cheif among these are, "What is safe?" This question reflects the likely age of the individual asking it. Typically, investors are liberal with their investments when they are younger and become more conservative as they age. The reasoning for this is simple: making risky investments when close to retirement age put one's retirement fund in jeapordy.
So, Which is safer: Investing in gold or investing in bonds? This depends heavily on whether one is considering government bonds or corporate bonds. For reasons of simplicity, one can assume that government bonds are being considered.
A quick answer would be government bonds, plain and simple. Taking the United States as an example, one can understand the stability of such bonds when one realizes that any currency in circulation is backed by the federal government. Though the US is heavily in debt, this currency still retains its value because the US dollar is the standard in many parts of the world. Put simply, anything the federal government backs, including its bonds, can be counted on.
The value of gold, like most precious minerals, fluctuates based on the law of the invisible hand, AKA supply and demand. The fact remains, however, that the value of Gold has increased far more than the value of Bonds. Gold has enormous stability but its value is dependent on many economic variables. US bonds, on the other hand, can be counted on to be worth their value upon maturation.
Another question one might have when making investment decisions might be, "What has the highest return relative to fiscal stability?" The answer to this question: Gold. As stated, the value of gold is dependent on many economic factors but retains its value quite well. In fact, the value of gold steadily - sometimes rapidly - increases with each passing year. This may be due to its wide range of characteristics which make it a very efficient electrical conductor, a treatment for inflammation in the body, but particularly its rarity. There is very little supply compared to demand. This problem will get worse over the next few decades, resulting in very likely increases with a relatively stable value. In other words, gold will go up but will likely not go down in price.
I-bonds, however, may, in some years, yield a higher return than gold if the inflation rate suddenly spikes. If the decision to invest in bonds over gold is made, I-bonds are probably the best way to retain the value of an individual's financial resources during high inflation periods.
Overall, it is in one's best decison to consider which is more desirable: safe or high return. Gold is the way to go if one is willing to take a [minor] risk for a good return. If safety is key, however, government bonds are perhaps the safest investment vehicle one can use when planning for retirement, saving money to start a business, or just putting money away for that proverbial rainy day.