Gold and foolish investors walk hand in hand into the poorhouse.

Over the last 190 years, the average annual return from investing in physical gold is around 1% . By contrast, over the past 100 years, the average annual return from investing in a diversified portfolio of United States equities is almost 10% . Equities have dramatically outperformed gold. But inexplicably, from time to time, a gold rush sweeps over the investment community. Last week, the December contract for one troy ounce of gold set an all-time high at $2,071 . The previous high of $2,051 an ounce occurred in August 2020. For traders, gold is a hot commodity, up 11% year to date. Yet, year to date, the S&P 500 is up almost 20% . Over any recent period, one year, three, five, 10, or 20 years, equities have substantially outperformed gold.

Traders and speculators are buying the precious metal, seemingly as a protection against inflation. But inflation has fallen dramatically, and most economists believe it will continue to fall and that the Federal Reserve’s low contained inflation target of 2% is in sight. Even more bizarrely, over the past few years, when inflation was elevated, 4.7% in 2021 and 8% in 2022, gold generated a negative annualized real return. The datasets say gold trades on mass psychology. Gold is so popular today that it is being hawked on television, and even Costco, one of America’s premier retailers, is promoting the yellow metal.

Costco’s advertisements suggest you can buy a gold bar. In fact, you can only buy an ounce at a time. Each gold promotion is so popular that Costco sells out of its inventory in a matter of hours. Costco does not disclose that buyers through Costco get ripped off. The cost of gold bought through Costco is typically 6% to 7% higher than the market price for gold, as set on global commodity exchanges. And Costco does not disclose that when you sell the ounce of gold, there will be a similar discount on the selling price. Costco rips off the investor coming and going and laughs all the way to the bank.

By contrast, commissions on buying equities or exchange-traded funds, ETFs, or mutual funds through a major investment firm are now normally zero. Buyers of physical gold are often unaware that the lump of metal pays no dividend. It generates no income stream. It is just a piece of rock. It is no longer a powerful medium of exchange. You can’t take an ounce of gold to the store and buy groceries. You can’t use gold to buy gasoline. The value of gold is determined by human psychology, not economic fundamentals.

Rather than buying physical gold or a gold ETF, most investment experts recommend allocating capital to a broad market index such as the S&P 500. Over extended periods, a diversified portfolio of equities delivers 7.4% compounded annual returns adjusted for inflation. When you own equity in a company, your shares represent a claim on the cash flow of the business. The premier companies of the S&P 500 generate significant amounts of free cash, and their free cash flow streams grow. As a shareholder, you own a proportion of that cash flow.

Invest in equities. Don’t give your money to gold hawkers. And don’t be seduced by the alchemy of the early morning TV ad. Over time, equities are money in the bank, and gold really is only for fools.