Gold is often seen as a safe investment, with low long-term volatility and easy to understand. However, there are many potential drawbacks to investing in gold that should be taken into consideration. Gold mining is one of the most destructive industries in the world, displacing communities, contaminating drinking water, and harming workers and pristine environments. It also contaminates water and soil with mercury and cyanide, endangering the health of people and ecosystems.
Most consumers don't know where the gold in their products comes from or how it's extracted. Producing gold just for a wedding ring generates 20 tons of waste.In the short term, gold could face other obstacles. The lack of inflation could reduce its attractiveness and investors could reject the asset class should the market experience a sharp rebound in risk. Furthermore, there are transaction costs, storage problems, and lack of liquidity associated with gold investments.
It's also a very bad idea to buy gold jewelry as an investment since you usually pay manufacturing costs and wasteful expenses for the jeweler.Significant capital is needed to be able to buy gold, and finding the best storage and insurance for your assets can be challenging. Its speculative nature of value may be precarious for conservative investors. This means that the energy needed to extract that gold and the waste and pollution produced in the process are proportionately increasing. If the speculative community takes a negative view of gold, this could cause a fall in global gold prices, adversely affecting the stock price.In conclusion, while gold is recognized as a safe investment with low long-term volatility, there are many potential negatives associated with investing in it.
From transaction costs to storage problems and lack of liquidity, it's important to be aware of all these factors before investing in gold.