Every decade or so, gold investors have their place in the sun, and we are in one of those periods now. Gold prices have jumped 16.8% so far this year, beating even the high-flying Nasdaq index as the top-performing investment for the first half of 2020.
Chances are, you know why. Gold is considered a safe hedge during times of economic uncertainty and political instability—and when in recent memory have we experienced more of both than today? At $1,800 an ounce, gold is within striking distance of its record all-time high of $1,900.
There is, however, a problem with betting your nest egg on any single commodity; the trends can reverse in a hurry, and meanwhile your commodity investment is not generating revenues, or profits, or paying dividends to mitigate the downturn. For instance, consider oil, which is far more important as a resource for our economy than gold. While the stock market indices were falling like a stone from late February through March, so too were oil investments. But unlike stocks, oil never recovered. The SPDR S&P Oil & Gas Explor & Prodtn ETF is down 44% so far this year.
Food is also kind of important to our economic well-being, right? Yet the S&P GSCI Agriculture index, which measures prices that farmers get for the things they grow or raise, has lost just under 12% this year.
There is no way to predict whether gold prices will continue to beat every other investment for the rest of the year, or fall back unexpectedly the way oil and agricultural products did. Gold investors are enjoying outsized returns that nobody could have predicted. But if the markets, the economy and our political situation stabilizes, the party could end suddenly.