Is There Really Such a Thing as a Gold Bug?

If you’ve ever read any commentary about investing in gold you’ve probably come across the term “gold bug.” It’s a derogatory term used mainly by mainstream financial commentators to denigrate those who understand the importance of gold to a well-rounded investment portfolio. But is there really such a thing as a gold bug?

The term gold bug is used in a derogatory manner to invoke associations with being old-fashioned or behind the times. The mainstream financial press has bought into the idea of gold as being a relic of a bygone era, a “barbarous relic,” and not something that modern sophisticated investors would place their trust in.

But as thousands of investors in the US can attest, gold has done wonders for their investment portfolios. Over the past 20 years gold is the second-best performing asset there is, roughly doubling the performance of stock markets. While there may be some people out there who make outrageous claims that gold will shoot to $10,000 overnight, there’s about a 90% chance that gold will reach $2,500 within the next decade, almost double its current price. Will the Dow Jones reach 50,000 points in the same time frame? Doubtful.

Lending even more credence to the case for gold, central banks are scooping up gold at record levels, with their purchases reaching all-time highs. They know that gold is the ultimate money, which is why they’re buying as much of it as they can afford without too severely roiling international gold markets.

Instead of gold bugs, it’s far more appropriate to speak of stock bugs, bond bugs, or dollar bugs. Those who think that stocks will keep appreciating in price because of the recent bull market, or that bonds will remain safe investments despite the increasing level of near junk-level debt issuance, or that the dollar will remain the world’s reserve currency despite the Fed’s loose monetary policy are the real bugs.

They can see plainly that central bank money creation is what leads to overinflated asset valuations, that suppressing interest rates for long periods of time leads to bubbles, and that the dollar is headed for the dustbin of history. But they’re more interested in looking respectable in the eyes of their peers and dissuading investors from investing in solid, wealth-protecting assets such as gold, so they downplay gold at every opportunity. Thankfully enough investors see through that and continue to make gold a vital part of their retirement savings, where it will continue to protect their assets for years to come.