How Good an Investment Has Gold Been?

[MineralMan]

When I married for the first time in 1972, my wife's parents gave us 100 Krugerrands. At the peak of gold prices in 1972, that was worth $5800. I stashed them in a drawer.

In 1974, the value of those 1 oz. coins had gone up to about $200 each. So, we sold them and bought a small fixer-upper house in California for $20,000. So much for hoarding gold.

In 2004, my second wife and I sold that house, all fixed up, for $337,000. Gold was worth about $400 per oz. So, it would have been worth $40,000. Clearly, the real estate was worth far more than those Krugerrands. We did much better to sell them than to keep them.

In 2024, those 100 Krugerrands would have been worth about $2000 each, or about $200,000. The house in California was worth about $600,000 by then. Again, real estate had done better than gold.

More importantly, that first house paid for the next house, which paid for the house after that. I have never calculated how much interest we might have paid on mortgages over that time.

What about now? Well, gold is around $5000 per oz. That would still buy a nice little house where we live now. So, maybe we would have caught up by now with the increased value. Will that value hold? I don't know. But, you can't live in a stack of Krugerrands, so the question is moot, really.

It's all very interesting.

[ret5hd]

1. i believe people look at gold/silver totally wrong...

i read this (a paraphrase here, exact quote long lost):

gold will not make you rich. gold is a means to transfer some portion of your wealth from one side of an economic crises to the other side.

using that logic, i have always kept a small but decent portion of our “estate” in gold and silver. just sits there, in a safe deposit box, ignored, static, etc.

if it is never needed in our lives, we will pass it on…with the above advice…and maybe it will help someone in the future.

[MineralMan]

2. That seems like a good approach.

For me, the desire to own a home overrode my desire to stash something away, just in case.

Since I could not eat gold, nor live in it, it had less value for me than a home I could own.

What's missing in this story is that that little run-down house became a career for me. I spent about 10 years fixing it up, and using each project as the subject of an illustrated article for a DIY magazine. That enabled me to do far more with that house than I would have done otherwise. When I sold it in 2004, it had been transformed from a fixer-upper into a charming small home with very attractive features.

So, that's another aspect of how it gained so much value over time, aside from the meteoric rise of home prices in that part of California. I had three offers the first weekend it was on the market. I sold it myself and only had a title company handle the paperwork. I wrote an article about doing that, as well, which paid for all of the closing costs.

My life motto: "Don't do things to make money. Make money with the things you do."

[1WorldHope]

3. That is really interesting.

[MineralMan]

4. It's a different approach, but a workable one.

Or, at least, it was workable at the time.

[hunter]

5. I think it's unethical to participate in gold markets.

In much of the world working conditions are horrendous for the miners. Many are essentially slaves.

The environmental damage done by gold mining is also horrendous.

[MineralMan]

7. No doubt you are correct.

However, the same can be said for many human enterprises. It's always a dilemma, isn't it?

[PufPuf23]

9. The lust for gold has an overlap in the brain with addiction to meth IMO. nt

[Sogo]

6. My sister and her husband bought their house in San Diego in 1975 for $34,000.

They still live in the same house and, including the modest renovations and addition they've put on it, it's now worth over $2M.

[MineralMan]

8. That's a Spectacular Increase, Isn't It?

I might still be in that little house in California, except that my wife's father had a stroke in Minnesota and her mother needed help with dealing with him and her own age issues. So, we sold and moved. Now, California is out of our price range, so we're Minnesotans now. And so it goes. I'm not really anchored by places, though. Wherever I am is wherever I am.