Precious Metals and Diamonds

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Gold[edit]

I hate gold about as much as Warren Buffett does:

In Gold Collapse: The Start of Something Big?, it's shown that gold's long-term real return is very close to zero: 0.46% average annual return from 1838-2012. Warren Buffett points out that this makes perfect sense: gold is a completely nonproductive asset.

Today the world's gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce -- gold's price as I write this (Author's note: Gold was $1,240 an ounce at the time this article was written) -- its value would be about $9.6 trillion. Call this cube pile A. Let's now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 ExxonMobil's (the world's most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B? -- Warren Buffett

Diamonds[edit]

Diamond prices are manipulated by a cartel. Investing in diamonds is even more stupid than investing in gold.