When I was at university (which was a very long time ago), we were taught about the gold standard.

That was a time when gold was considered a serious investment.

Since then, gold as an investment has never been taken seriously. But those in the know keep an eye on it, and there are some who think it is the be-all and end-all.

In my book The Passport to Wealth and Real Financial Freedom, I only mentioned a few paragraphs about it, and now I think maybe I should have had more to say. But what I said then is still valid today.

During times of financial uncertainty, investors tend to flock to gold. But since the global financial crisis, the price of gold has gone berserk from about $1,300 an oz to about $2,300 an oz. That is rise of 76% over 16 years.

So why is no one talking about it?

I guess this is because gold is a bit of a mixed bag. Some people see it as an investment. Others see it as a safe haven. Some think it is bonkers to invest in it, and others buy it for vanity.

For those that just look at the increase in prices, they do not really care. They think the investment is good.

I have a lot of doctor clients. Those who come from the subcontinent are obsessed with gold. That, I think, is because of culture. Gold has been seen as an investment in the subcontinent for generations. This was because family wealth was determined not by a bank account (most at the time did not even have bank accounts) but by the amount of gold they had stashed away under the mattress.

Many also think that gold is tax-free – it isn’t – see below. Serious investors looking for growth tend to stay away, too.

So, what is the true story? Is it bonkers to invest in gold, or are you missing a tremendous opportunity?

Well, let’s look at history. In 1900, gold was worth about $19 an oz. Which meant if you invested $1 in 1900, you got about 0.05 oz of gold. If you sold that gold in 2024, you would get back …… drum roll, please ……… about $125. Yeah, it’s not going to buy you a helicopter. Maybe a toy one, but not a real one.

Compare this to the stock market – well, an investment of $1 in the Australian stock market in 1900 would be would be worth …… drum roll, please ….. about $500,000. Again, you might not get a real helicopter, but any toy you get for $500,000 is going to be a lot more fun.

That is disastrous news if you happen to be a gold investor. Now, that is about to get worse because if, in 1900, you invested $1 and then reinvested all the dividends back into the stock market, it would be worth a whopping $1.974 million!

This can be explained because stocks and shares compound, i.e., the growth in shares and the real dividends also grow in future years. Because that growth is real, when you sell, the compounding is real.

There’s more grim news (as if it was not bad enough). That is because many serious investors don’t think of gold as an investment. A pure definition of an investment is something that brings money to you and does not cost you money.

By that definition, gold brings no money in, but the chances are if you have a significant amount of it, you probably need to pay money for its security. But then again, this is the same for your house. You will tell me a home generates no money but costs money to keep, so it is not an asset. And that is where I will agree with you. It isn’t an asset.

So, by this definition, the stock market wins by a massive margin.

But that is not the whole story.

This is because the history of gold is divided into two parts. What has happened for a century, and then what has happened in the last 20 years? In 100 years, it hardly moved. In the last 20 years, it has gone bonkers. From about $300 an oz to about $2,500 now. And this year alone, it has gone up 16%.

And that then makes it something to consider.

But also consider this: If you invested $300 in the Australian stock market in 2014, those shares would, on average, be worth just shy of $2,000. By this calculation, gold is better.

Or is it? Because the one thing you get with shares that gold does not give is dividends. On average, those $300 shares would have generated $900 in dividends, giving total growth of $2,600 (if you ignore the initial $300 investment) compared to $2,200 for gold. But also remember you must store gold, or it can get stolen. Chances are, if you put them in a bank or a safe deposit box, you will have to pay for storage.

Then, there is the belief that gold is tax-free. It is only tax free if it is used and consumed personally. What does that mean?

In a nutshell, if it is jewellery and you adorn it on yourself. If you have brought gold biscuits, bars or bullion, then they are investments subject to capital gains tax per the ATO. I know what you are thinking. How will they know? Well, considering bullion is tracked and knowing the ATO with their tentacles, they can probably find out, so make sure you follow the rules.

But you need to remember that the price of gold is dependent upon global events. At times of uncertainty, the price of gold rises. And the last 20 years have been volatile. But when the world is stable, it falls. It is, in many ways, the opposite of stocks, and that may be a good or bad thing.

In 2013, gold prices fell 30pc, which also happened to be the same amount that US equities made investors that year.

With the share market, we have fallen all the time, but history has shown us that it always moves upwards.

Financial advisors always say a well-diversified portfolio of investments is what you want. That means if you want to invest in gold, it should be part of a larger portfolio of investments.

The benefit of gold is that when the stock market is crashing, gold is likely to go up, so it can be a good hedging asset to hold. It can also be useful during periods of high inflation, which is why gold is popular during periods of high inflation such as now.

The downside? When the world looks rosy and stocks are high, gold tends to stay steady or even fall and so it is volatile.

This article is general in nature and should not be seen or interpreted as advice. Hitesh Mohanlal is not a Financial Planner, nor is the WOW! Advisors group registered to provide financial advice. As everyone’s circumstances are different, you should seek independent advice specific to you before any investments are made.

Investments are step 7 of our 9 Steps to working less, earning more and creating astonishing wealth. If you would like to know more, contact Hitesh at hitesh@wowadvisors.com.au or Ros@wowadvisors.com.au or call 07 3161 9548.