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Update: the Gallup poll used the word “Best” not “Safest”.

Jordan Weissmann has a fascinating discussion going on at the Atlantic about a recent Gallup poll regarding “safe investments.” (The full discussion is well worth your time). Its appears that a plurality of “Americans believe Gold is the single safest long term investment option.”

For the second straight year, an annual Gallup poll has found that a plurality of Americans believe gold is the single safest long term investment option. Safer than savings accounts. Safer than real estate. Safer than stocks. A full 28 percent of adults ranked gold as their top choice, down from 34 percent last year, a drop just outside the five point margin of error. It was most popular among older Americans, those without a college a degree, and individuals who earned between $30,000 and $75,000 a year.

Note that the question isn’t the BEST investment or the HIGHEST RISK ADJUSTED RETURNS, but rather, the safest. We can define safety by looking at a) return of capital and b) liquidity.

For the record, as the SAFEST investment, I would personally have picked US Treasuries. (Only 8% of Americans picked bonds). My expectations are extremely high that I would get paid back in full the capital I invested, and have no problem exercising that redemption. We shall save a discussion of counter-party risks and paper claims on gold for a latter date.

New marketing tagline for the ETF GLD: Gold: Its what the public thinks is safest.

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Source:
Is Gold Today’s Safest Investment?
Jordan Weissmann
The Atlantic May 3, 2012
http://www.theatlantic.com/business/archive/2012/05/24k-nation-are-americans-crazy-to-think-gold-is-the-safest-investment/256653/

Category: Contrary Indicators, Gold & Precious Metals

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

47 Responses to “Safest Best Investment According to the Public? Gold”

  1. InterestedObserver says:

    You focused on the top/bottom relation in the poll, but to my reality it’s as though the entire sequence is roughly inverted.

  2. machinehead says:

    For many poll participants, ‘safety’ probably includes the attribute of an asset holding or even increasing its value.

    Gold has done well in that respect over the last eleven years. In 2001, when gold was scraping bottom just over $250, it probably wouldn’t have ranked as high in a poll about safety.

    On the other hand, the poll indicates that some diehards are still ‘going gaga over real estate,’ as an iconic Time magazine cover proclaimed in 2005, a year before the top.

    Overall, this poll could be characterized as a motley mishmash of momo chasers, bottom pickers, and the merely perplexed. Oy!

  3. ConscienceofaConservative says:

    Interesting about “safest investment”. Opinion on what is depends to a certain extent on time horizon.

  4. normal1 says:

    A couple of years ago, when I was reading the Daily Reckoning blog, I noticed the love affair over gold. As I’m more of a social observer, I see gold as part of the zeitgeist that rails against the “fiat monetary system.” The move from the gold exchange is often brought up as a very, very bad move, leading to the rise of speculators calling the shots, currency manipulation, etc. What’s the average investor to do, now that our retirements have been “generously” put in our hands?

    Not to get too Ron Swanson, but the emotional value of owning something “real” also plays a part in it’s rise in popularity, I believe. The frustration with both political parties, the introduction of complicated investments that leaves the average guy feeling the game is rigged, and the breakdown of long held conventional wisdoms that helped create the framework for American society could have led many to run to gold as a passive aggressive ‘F YOU!’ to the moneymen in charge.

    Personally, I missed out on silver (SLV) when I could have bought around $9 or so. But, I try not to dwell on it.

  5. Alex says:

    One characteristic of physical commodities – as opposed to paper contracts for delivery, etc., is that they are no one else’s liability. With the possible exception of getting the bank to open your safe deposit box for you, that bar of gold you have doesn’t require action by anyone else to realize its value. Of course, the actions of others will determine what other things it will buy, but it is not like a stock or bond, even a treasury, or real estate, where someone else must do something in order for you to get your value out of it. If the company managers or property tenants don’t do what they said they would do, you are screwed. With gold you don’t have that problem.

    I don’t own gold or treasuries, but I live in Idaho and there are a lot of people out here who like the idea of self-sufficiency, and gold is a part of that. Moreover, I am sure there are plenty of urban dwellers who would never consider moving to a subsistence farm, but think owning gold will somehow be a partial substitute. My Dad felt that way – we used to argue about it. In any event, that is where gold got its aura of “safety” for him – it gave him a (false) sense of self-sufficiency that made him feel more comfortable, particularly as he grew older and felt more vulnerable generally.

  6. [...] Americans polled believe gold to be the "safest" investment (28%) followed by real estate (20%).  (TBP) [...]

  7. BennyProfane says:

    Of course, if this was a random sampling of the American public, hardly any of them had any tangible assets that they invested in, so, why bother asking? A better sample would have been the 10% who have actually saved and invested a portion of their income. And, I doubt gold would come up #1 in that survey.

  8. Mike in Nola says:

    @Benny – bingo

    Also, it’s probably more a reflection of what has appreciated most in recent memory. I imagine if you had asked the same question back in 2006-07, the answer would have been real estate.

  9. JimRino says:

    Food and Water.

  10. JimRino says:

    In a crisis gold is just as worthless as paper money.

  11. decius says:

    Echoing @InterestedObserver this really looks like bad data – like the answer key in the survey was accidentally inverted or something. Although I expect that most Americans are financially illiterate from the perspective of the sort of people who follow this blog, I find it a bit hard to believe that people are more likely to say that the stock market is a safer investment than a savings account. People know better then that, don’t they?

  12. TennesseeTrader says:

    Perhaps one reason “bonds” is so low is because the generic category “bonds” is different from “US Treasuries”. “US Treasuries” doesn’t appear to be an option. With interest rates so low, it’s hard to imagine a 30 year investment in a bond fund, for instance, being a sure bet to get your money back. I agree with an earlier poster that return of capital with the same value that it had when the investment was made is what safety entails to me. Using this definition you’re pretty much guaranteed to get less back with US Treasuries. But you will indeed get it back. I suppose you could consider this a “tax” which it basically is, so you’re getting your money back minus the implied taxes of our current system. But is gold any better? I highly doubt it, and definitely don’t think GLD is safer. There’s a premium to getting and storing physical gold. There’s always the various gold trusts with “unemcombered” and “segregated” assets which makes one ponder… where is Corzine these days? However gold is an insurance policy so to speak against the “all in” path chosen to devalue fiat. And if I was forced to answer a survey I don’t know but what I wouldn’t say gold just due to how I feel about certain decisions and policies. It’s kind of my way to take a jab. Answering a survey is slightly different from putting your own money up.

  13. theexpertisin says:

    What is the safest long term investment for Americans? Spending other people’s money. No risk. Immediate gratification.

    ~~~

    BR: you are a one trick cowboy, aren’t you?

  14. NoKidding says:

    “People know better then that, don’t they?”

  15. Paul Brodsky says:

    Its not an investment and shouldn’t have been included in the poll. The right question is: “which is the safest currency?” My guess is that gold would have had about the same response by the same demographic.

    Paul Brodsky,QB Partners

  16. Mike in Nola says:

    @decius: Just a reflection of the incessant media barrage.
    The Feds and banks have “fixed” real estate, so it still ranks highly. Bernanke’s pumped up the market and you see that touted every day. Right wing talk radio still has lots of commercials for gold, not just those on the ex-alkie, drug addict shows and they are still very popular with the less perceptive, not to mention all the wingnut sites pushing gold and guns for protection against Obama and armageddon.

    In fact, the results may be more indicative of watching/listening/surfing habits than anything.

    Also note that the poll is from last August when stocks were near lows for the year. It may be that the same poll today would show stocks on top.

  17. jaymaster says:

    I think this depends on what a person considers the greatest threat to their investment.

    If your greatest fear is inflation, then real estate and equities make more sense as “safe” (and maybe gold, but recent history doesn’t support that theory).

    If you fear the collapse of banking/currency/society, then gold and probably real estate look safer.

    If you fear economic malaise or deflation, then CD’s and bonds look safe.

    If you fear nothing, then education might be the safest investment….

  18. Mike in Nola says:

    oops! have to take some of that back. Clicking through the source article takes you to the August 2011 results. Searching for older polls brought me to the newest which is here
    http://www.gallup.com/poll/154232/Gold-Americans-Top-Pick-Among-Long-Term-Investments.aspx

    It does show the changes I expected, but not enough to dethrone gold. They do show a tabular breakdown of the results, showing some of the expected correlations, though not as strong as I would have thought. Of course, while Republicans favor gold, there is a difference between Republicans and Republican if you know what I mean. I bet breaking out the Tea Baggers would have shown a big diff.

  19. Petey Wheatstraw says:

    It seems like we’ve had this discussion before. Déjà vu all over again.

    JimRino:

    If taken to the extreme, in a real crisis (of which, most of us will only ever have one), nothing physical — even food or water — has any real value.

    Generally, there is much to be said for gold, and it has been said repeatedly. Labeling it as a “barbaric relic,” does not erase its enduring and ubiquitous value to humans over the course of our entire collective history. Indeed, that much of our history was formed by and written in this unique material is evidence of it’s value.

    As with most things, understand why it has value to us is more revealing than the off-the-cuff observation that it simply does.

    So, what does gold have value?

    Maybe we are like Bower birds when it comes to gold. That is, maybe we are genetically evolved to be attracted to it — to hoard and collect it. (Before laughing this idea off, one must firs explain why its appeal crosses not only time, but also cultural, linguistic, political, and geographical barriers).

    Then, there are its physical/elemental characteristics. It is relatively immutable. It is elemental. It is uniquely resistant to degradation by other chemicals, to the point of being eternal — gold found in tombs, in the ground, or at the bottom of the ocean is exactly as pure and untarnished as that stored safely in controlled conditions in vaults.

    I could go on, but I risk sounding like a gold bug.

    Take gold or leave it, but to deny its very real value over the entire course of human history is to deny fact.

  20. Petey Wheatstraw says:

    Jeez. BR, an edit function would help. I’m my own worst proof reader.

    Corections:

    As with most things, understandING why it has value . . .,

    and;

    So, WHY does gold have value?

  21. “For the record, as the SAFEST investment, I would personally have picked US Treasuries.”

    Pretty, paper, preposterously perpetually printed.

    Pathetic.

  22. drtomaso says:

    Gold has value- actually is has the same intrinsic value as paper money. The only difference between gold and fiat currencies is that gold has to be mined while fiat currency printed, and assumedly its easier to print than mine.

    Ultimately gold has value because people believe it to have value, just like fiat currency. In a real crisis, my guess is that gold will be less valuable than lead.

  23. BennyProfane says:

    I’ve always thought that gold is safe because it would survive a bad fire and most other disasters, if you were so inclined to be squirrel-like and bury your “investments” inside or outside. But, then again, if we were all somehow dropped into a “The Road” apocalyptic world, then you thigh would be worth much more than a pound of gold.

  24. dkelland says:

    It is a commonly overlooked consequence of the hyper-inflationary fear campaign waged by the right wing that voters are also investors — no matter their lack of qualifications for the latter role. Ron Paul’s misunderstanding of monetary policy and his inability to distinguish between reserves at the Fed and money being lent into the economy may someday result in drastic investment under-performance for his acolytes.

  25. gman says:

    Paul Brodsky Says:
    May 3rd, 2012 at 8:40 am
    Its not an investment and shouldn’t have been included in the poll. The right question is: “which is the safest currency?” My guess is that gold would have had about the same response by the same demographic.

    Paul Brodsky,QB Partners

    BR: you are a one trick cowboy, aren’t you?

  26. drtomaso says:

    If Obama-phobia really is a significant driver in the gold markets, then investors better hope he gets re-elected, or that source of demand may very well dry up.

    To my mind, all markets mean revert. I’ll put gold on as a trade, but I do not want to be in it when that reversion starts.

  27. gman says:

    “Ron Paul’s misunderstanding of monetary policy and his inability to distinguish between reserves at the Fed and money being lent into the economy may someday result in drastic investment under-performance for his acolytes.”

    How many loyal viewer does Glenn Beck have? Goldline anyone..buy gold w/ 50% mark-up?

  28. mathman says:

    geez o man – i’m seriously off track here with my safest investments more in the way of seeds & soil, potable water, fruit trees . . .

  29. Petey Wheatstraw says:

    Central banks hold gold, and those who are light on gold holdings have been buying the metal. Fools!

    Maybe they’re all swayed by Glenn Beck. Maybe they’ll all realize their mistake and dump gold for US Treasuries.

    Oy.

  30. DeDude says:

    Presuming that “safe” means not losing its value after purchase, it would be interesting to see a list of the gold “bears”. How much loss from the top to the bottom and how long to recovery back to a new high. My guess is that gold is not much better than stocks and a lot worse than real estate.

  31. Dima says:

    GOLD GOLD GOLD – everyone gets so worked up about it and argues value, protection , etc, etc, etc.

    Why gold has value was never told more succintly, accurately and completely than in the classic movie “The Treasure of the Sierra Madre”.

    If you want to really know why Gold has value – just watch the 2 minute scene where Walter Huston explains to Humphrey Bogart and Tim Holt why Gold – which has no practical value other than gold teeth or jewelry – has economic value.

  32. Petey Wheatstraw says:

    DeDude:

    “real estate,” is a very broad class of potential investments.

    40 acres and a mule is nothing like a condo in the exurbs.

  33. tagyoureit says:

    I see “investing in yourself” (presumably refering to debt-financed college undergraduate & post graduate education) is NOT on the list…

  34. gordo365 says:

    Tagyourit – I’m with you. When I read the question – “my health” is the answer that popped into my mind.

    I guess the question mat be broadly interpreted as what is a “safest investment you can lock in a safe deposit box earmark to give to your grandchildren and not have to manage or ever think about…” kind of way.

  35. techy says:

    gold is the biggest buy and hold in india even today, they never sell.

    kind of weird but thats a cultural thing to keep increasing the hoard of gold in good times irrespective of its real value. They usually dont buy it for investment, mostly as gift hence they dont ever sell unless they are facing financial crisis. I think India maybe entering the day where they may have to seize their citizens gold and sell it to get some forex (Oil), Imagine if a million ton of gold is sold and 50% of current buyers vanish.

    http://www.reuters.com/article/2011/03/31/india-gold-demand-idUSWNAS166620110331

  36. Christopher says:

    Regardless of your views one way or the other….Gold certainly does not equate to GLD.

    Gold is gold.

    GLD is paper….with “Gold” written on it.

  37. tarheel95 says:

    Seems like Treasuries would be the obvious answer. However the prob with using return of initial capital as the gauge is that it ignores the impact of inflation. Sure you’re getting your $xxx back in 2o years but it’s worth 1/2 what it’s worth today in real terms (@ 3% inflation p.a.).

  38. [...] Americans think gold is the safest asset.  (The Atlantic also Big Picture) [...]

  39. DeDude says:

    Petey;

    Good point – real estate is a mixed bag. But I doubt that even the most volatile real estate like “exurb condos” had the kind of price swings that gold has seen.

  40. Ramstone says:

    I know that the 2% “other” isn’t Timber, but there’s more than a fair argument it’s the safest long term investment (though it lacks some liquidity).

  41. techy says:

    sorry India’s gold hoard is only 18000 tons not million tons. But it is still huge.
    chttp://www.mining.com/2011/12/07/ft-asks-if-indians-love-of-gold-is-destroying-their-economy/

  42. socaljoe says:

    “In a crisis gold is just as worthless as paper money.”

    Maybe… maybe not… depends on the nature of the crisis.

    After the crisis, however, (physical) gold will have still have value and the paper may be worthless, having been replaced by new paper.

  43. [...] Warren Buffett running shoe – DealBook 28% of Americans think gold is the safest investment – The Big Picture Mutual funds confront not-quite-as-dumb money – Bloomberg [...]

  44. [...] Buffett running shoe – DealBook 28% of Americans think gold is the safest investment – The Big Picture Mutual funds confront not-quite-as-dumb money – Bloomberg [...]

  45. Alex says:

    Ramstone:

    Beetles, fire, avalanches, even floods. How can you possibly call timber “safe”? A diversified portfolio of timber properties might be a good long-term investment, but owning your own stand of timber can be a very volatile nestegg.

  46. DeDude says:

    The presumption seems to be that after a crisis we will have time dialed back a few centuries and back then the medium of exchange was gold – so it will again be gold. Personally I think that the medium of exchange will be potatoes and carrots – that would make a lot more sense as a medium of exchange now that pickup trucks have made the issue of transportation mute.