Which Is More Profitable – Gold or Share Market – Part I


The American financer and banker J P Morgan quotes, “Gold is money. Everything else is credit” It means gold has a certain intrinsic value of its own whereas the currency we own is nothing but a piece of paper that is stamped by the government. Otherwise, it’s just a piece of paper with no intrinsic value as such. If we analyze the US data from August 1971 we find that from August 1971 till February 2020, gold has given a return of approximately 3600%. So why are we talking about August 1971 and if we are living in India then why are we analyzing the US data? Let us find out in today’s blog.


The world’s most successful investor Mr. Warren Buffet says if we extract the entire gold available in the world and convert it into a bar of gold then what will happen? Nothing, we will keep staring at it and it will keep staring at us. The bar of gold will produce nothing. So Mr. Buffet says the thing like gold which does not produce anything and if we invest in such a thing then we won’t much out of it. Rather if buy land of all the amount of gold available then we can carry-out farming, in that way at least something will be produced and later if we start companies, then the companies will again start producing something.


According to Mr. Warren Buffet investing in gold won’t be much profitable. Contrary to this, the world’s leading Hedge Funds Manager, Mr. Ray Dalio quotes, “If you don’t own gold, you know neither history nor economics.” Now be it, Ray Dalio or Robert Kiyosaki, both of them believe cash is trash. Why do they say so? Let us find out.


In the year 1971, US President Mr. Richard Nixon abolished the gold standard. What does that mean? Before 1971, wherever there was a gold standard; the currency printing and circulation was determined by the total gold reserves the country owns. But after abolishing the gold standard, the banks in the country have the right to print as much money as they want. If any country is facing any problem and so if they print more currency and put it into the system and their production is also less then what happens later is the price of all the goods start increasing whereas the value of the currency of that country starts depreciating. In simple words if we talk about India then it means; 10 years ago the number of things we could buy with Rs. 100, today we cannot buy those many things with Rs. 100.  


Before the year 1971, the prices of gold used to be fixed via Dollars. But after removing the Gold standard as mentioned earlier, the prices of gold increased tremendously. Now, all those countries that were facing any kind of problems and as a result printed more currency to induce in the system, in all those countries the value of their currency has depreciated when compared to gold. It means in those countries the price of gold has increased many folds. Due to this, Mr. Harry Browne says the day when the system of this paper currency will crack, that day onwards the gold prices would in increase explosively.


Be it American journalist Mr. Henry or British economist Mr. David Ricardo both have said that Gold has some intrinsic value of its own because first, it has limited availability. Secondly, a cost is involved in mining and extracting gold, and third, it cannot be reproduced by humans again. As Mr. Robert Kiyosaki has said gold is god’s currency. It is a nature’s rule that whenever a pit is formed in one place, a pile is formed in another place. So whenever the stock market falls, at that time if there is a signal of an uptrend in the commodity or currency market then you can invest and earn good returns there.


In the year 2010, when the Indian share market valuation was expensive and the Nifty PE had crossed the mark of 25 and in the year 2011 when gold gave a signal of an uptrend, at that time we had written an article in Maharashtra’s daily newspaper ‘Pudhaari’ advising to invest in gold and later we too earned a good it profit there.  Similarly, in August 2019 as well as in October 2019 during Diwali, we had discussed that as the market valuation is expensive and as there is a signal of an uptrend in gold, so if you invest in gold then you can earn good returns there. So we too being SEBI register had invested in gold and earned good returns there.


Be it share market, commodity market, or currency market it is important to invest according to the market valuation, chart signal, and by placing a stop-loss. If you want to become a successful investor or trader then you need to quickly subscribe to the Smart Investor training program in our Aryaamoney app. Do check it out.


If you wish to invest for the long-term then gold it-self doesn’t produce anything itself. Hence, Mr. Warren Buffet says it is not profitable to invest here as such. But Mr. Ray Dalio says that if you don’t own gold, you know neither history nor economics. Then what should one do? How to find a solution to this problem? Stays tuned to our blog and get to know the solution to this.


Until next time…


Happy Trading, Happy Investing!!!



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