Frank Rumpenhorst, AP
A bank employee meassures a gold ingot during a press conference at the German central bank in Frankfurt, Germany, Wednesday Jan. 16, 2013.
These are not necessarily the right questions to ask. We should be asking ourselves whether or not gold is an investment at all, and if we should own it and how much. —Shane Stewart, Certified Financial Planner(R) at Deseret Mutual

Watching the price of gold the past several years has been exciting. Just when you thought that it could not go higher, it did. Is that ride over? Probably, but that remains to be seen.

The price of gold has dropped dramatically since hitting an all-time high in 2012 ($1,900 per ounce). Even in the past few months it has dropped significantly (in the $1,300 per ounce neighborhood). So the “gold-bugs” and inflation doomsayers are claiming that it will dip and come right back with gusto very soon. The gold naysayers claim it will plummet to where it started in 2001 ($256 per ounce). Who is right? Who is wrong?

These are not necessarily the right questions to ask. We should be asking ourselves whether or not gold is an investment at all, and if we should own it and how much. (For my opinion on whether gold is an investment, see my article in the Feb. 1, 2012, edition of the Deseret News.)

Suffice it to say that I (and many financial advisers, including notable investor Warren Buffet) maintain that there is no intrinsic value in gold. It does not “do” anything. This means that it does not produce returns or dividends like many other investments but is a commodity that relies on the beauty contest of supply and demand and perceived value. And this beauty (or ugliness) truly is in the eye of the beholder and not based on intrinsic value. For a pointed take on investing in gold and how misguided some so-called gold-buggers might be, see Barry Ritholtz’ commentary of the "12 Misguided commandments of gold bugs." Not only is it somewhat scathing but educational on how many misconceptions there are about gold as an investment. Many of the “commandments” that pro-gold proponents adhere to seem more like self-justifications for owning something exotic like gold rather than based in fact.

Whether this debate matters or not depends on your perspective. If you currently own gold as an investment, it matters. If you don’t own gold and never plan to, it doesn’t matter quite as much. If you are thinking of buying gold in this environment, this is more complex.

Some investment advisors like Mary Ann Bartels of Merrill Lynch Wealth Management think that the current slide in gold is temporary and has a floor price. They are cautiously optimistic about holding gold in an investment portfolio.

Bartels does not ever state that gold is where all of someone’s investment money should go, and this is significant. Many of the gold-bugs push to own large amounts, and I have even seen people take significant amounts from otherwise performing investments to buy gold at an all-time high (two huge mistakes: trying to time a market and abandoning diversification).

I don’t know if the debate over whether gold is an investment or even a good idea to own will ever totally be resolved. It becomes a matter of personal preference.

Whether you love gold or hate it, whether you think it is an investment or not, the key is to not get carried away in the debate. For those who think it is an investment and feel they must buy it as an investment: Make it a small part of your investment big picture. This helps not put all the eggs in one basket. Also consider that it has been at an all-time high and, as Bartels suggests, you might not want to buy right now but wait and see where prices will go.

If you don’t have it in your investment portfolio, you are not missing out on something. Don’t stay up nights fretting. Focus on saving and being properly diversified in things such as your employer's 401(k) or an IRA.

Yes, the debate will likely always rage on. Just be careful not to make significant moves with your money based on emotion. And in this gold environment, there certainly is a lot of emotion.

Shane Stewart is a Certified Financial Planner(R) at Deseret Mutual. He welcomes your feedback. Or you’re welcome to suggest a topic. Please send your comments to [email protected].