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Gold vs. Guns: One Investment Outshoots the Other

Robert Weinstein

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NEW YORK ( TheStreet) -- Gold is at a key support level, and you may want to use this time to reevaluate your reasons for owning the soft yellow metal. The usual suspects for owning physical or paper gold include hedging against inflation, use as money during times of unrest, speculation, and the cool factor of looking at gold coins.

About a year ago, I alerted investors that it was time to move out of gold and look for other investments. Included in comments from readers was a lively amount of enthusiasm and reasons why my thesis was incorrect. Gold has declined, but investors shouldn't ignore the opportunity cost of owning physical gold.

There isn't a logical reason to argue against owning gold coins for the wow factor. If you naturally like owning coins to hold and look at, you should own a few. It's an emotional decision, not unlike buying a Corvette that will sit in the garage 95% of the time. If it makes you feel happy, why not.

However, if your motivations are hedging against Washington money printing, and or apocalypse, physical gold may not harbor the best solution. A common phrase I've heard about owning gold is, "You should have enough gold to bribe border guards." Although history has shown that can be a solution, it's not the best solution.

During World War II, occupying Japanese and German soldiers wanted gold jewelry more than gold bars and coins. Sure, we can all agree soldiers will take whatever they can get, but in relative terms, jewelry is as valuable in war as it is during peace time. Obviously, the soldiers were not wearing the jewelry; they wanted jewelry for the same reason men have always bought jewelry -- to give as gifts to women.

If you want to own gold in case of war or strife, gold jewelry may be a preferred solution because it's something your family can use now and enjoy while offering all or more benefits during a worst-case scenario.

Owners of gold also tend to be gun owners. For many, this is obvious, but for those who haven't considered guns as an investment, you have missed out. Maybe it's not politically correct in all circles to expound the investment thesis of guns and ammo, but guns and ammo investors haven't witnessed a bear market in arms in my lifetime.

During times of peace and prosperity, guns increase in value and provide an inflation hedge. During times of unrest, they can safeguard your property and family more than gold coins can.

Sturm Ruger's monthly chart has trended higher incessant since 2009. Smith & Wesson hasn't traded long enough to valuate it based on the monthly chart, albeit the weekly chart has remained bullish since 2011.

The S&P Gold Trust can't gloat about performance while near 52-week lows. Sturm Ruger delivers a big caliber dividend over 4%, while GLD slowly eats value from management and trading costs.

Now trading near $130.60, GLD was $45.30 at the beginning of 2005, an impressive gain. During the GLD peak in 2011, an investment in GLD was almost a four-bagger. Not bad at all, but Sturm Ruger started 2005 at $4.09, and is now over $48, a 12-bagger by itself, but Sturm Ruger paid out enough dividends since to return most of your original investment.

The bottom line is that guns as an investment may help you reach your safety and financial objectives better than gold can, both in physical form and as a stock.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.