These are worrying times for investors. Russia has invaded Ukraine. Israel is fighting Hamas. And Iran and China can’t stop eyeing off Taiwan, with the US warning them to forget the idea of an invasion.

As I said, these are scary times for nervous investors. When this happens, some cash up and take 5% in term deposits, while others run to the apparent safety of gold.

Right now, the Aussie and US dollar price of gold is at record high levels, which reflects the concerns of some investors. It also can be linked to interest rates. When rates fall, gold has historically become more attractive.

Reuters reported the views of Phillip Streible, chief market strategist at Blue Line Futures in Chicago and this is what he said: “Geopolitical uncertainty continues to support gold and if there is any escalation in the situation, then prices could move towards the $US2,500 range. Gold prices will only come lower if central banks stop buying or if investors go back to a risk-on phase."

In market talk, “risk on” is when stocks are really popular and there are no threats like war to make investors nervous. As the nervousness grows, so does “risk off” situations, and then gold and term deposits look more attractive.

But this current love affair with gold isn’t just short term. It has been on a rise for nearly 20 years but there have been ups and downs as the chart below shows.

While the price rise since 2004 has been great (gold has gone from around US$520 an ounce to US$2,372), if you’d bought in 2012 at US$1,900 an ounce, it would have taken eight years (2020) to get your money back and over that time, you earnt nothing! And you missed out on what you could have made if you were invested in stocks.

Since 2012, the stock market is up around 80% in capital gain and about 60% in terms of dividends (even more if we add in franking credits).

So, stocks would’ve returned around 140%. If you bought gold in 2012, the gain would’ve been about 30% at best and you had a long wait — 12 years to get that return.

The simple lesson is that buying gold when it has been in the doldrums for a long time can pay dividends but there’s often a long waiting time and there’s no payment while you wait. On the other hand, stocks pay dividends and term deposits pay interest. I suspect gold will go higher and US$2,500 is a forecast that analysts see happening. Some real gold bulls see US$3000.

But this is guesswork dependent on war and the course of interest rates. As a financial adviser, I can support a small exposure to gold when prices are low, but I prefer stocks and great quality properties, especially when you buy them in a down market.

This is what Warren Buffett, the world’s greatest investor, says about gold: “Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”

I agree with Buffett that there are better assets, such as stocks, to hold that pay you income while you’re waiting for their value to grow. If you’re a scaredy cat, you buy quality stocks when stock markets crash.

If you’d bought CBA some 25 years ago, your $23 stock is now worth $111. That’s a gain of 382%. Over that time, you would’ve gained about 100% in dividends, which adds up to about 482%. And with franking credits, it would be over 500%!

I rest my case.