Fool's Gold

DEFINITION of 'Fool's Gold'

Fool's gold, also known as iron pyrite, is a gold-colored mineral that is often mistaken for real gold. Pyrite is a brass-yellow mineral with a bright metallic luster. It has a chemical composition of iron disulfide (FeS2) and is the most common sulfide mineral.

BREAKING DOWN 'Fool's Gold'

Fools's gold was frequently found during the gold rush of the 1840's in the U.S. Many less-than-knowledgeable miners would frequently believe that they hit the mother lode upon finding a cache of pyrite iron that looked like gold. Unfortunately, unlike the real thing, fool's gold is relatively worthless commodity because of its natural abundance and lack of industrial utility.

Today fool's gold is a common term used to describe any item which has been believed to be valuable to the owner, only to end up having no value. Investments in hot stocks that seemed too good to be true, only to crash and burn, can be referred to as investing in fool's gold. Journalists and Wall Street analysts sometimes use the term to describe overvalued stocks as well. They title their articles and investors notes with headlines like, "Fool's Gold in High Tech" or "Mining Company Debt is Fool's Gold".

Most recently the fool's gold term is being used with various cryptocurrencies like Bitcoin and Ethereum as their values rise at an exponential rate. Some analysts are concerned these lofty valuations could come crashing back down to Earth. If it happens, then cryptocurrencies could be a 21st century example held up as fool's gold.