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.

RELATED TERMS
  1. Gold Bug

    An individual who is bullish on gold. Gold bugs believe that ...
  2. Gold Standard

    The gold standard is a system in which a country's government ...
  3. Gold Reserve Act Of 1934

    The Gold Reserve Act of 1934 is an act that took away title to ...
  4. Gold Fund

    A mutual fund or exchange-traded fund (ETF) that invests primarily ...
  5. Short Gold ETF

    A short gold ETF is an exchange-traded fund which seeks to profit ...
  6. Gold IRA

    A Gold IRA is a retirement investment vehicle used by individuals ...
Related Articles
  1. Investing

    What Drives The Price Of Gold?

    Gold prices are based on the economy and actual uses, but there are many other factors that dictate gold's perceived value.
  2. Investing

    Does it Still Pay to Invest in Gold?

    Gold's appeal dates back thousands of years and investors now have several different options when it comes to investing in the royal metal. Find out whether gold can live up to the hype.
  3. Investing

    Will Gold Mining ETFs Ever Be a Buy?

    ETF investors have numerous choices with gold ETFs, but most concentrate on the gold miners or the commodity.
  4. Financial Advisor

    4 Ways You Can Invest In Gold Without Holding It

    Owning gold can be a store of value and a hedge against unexpected inflation. Holding physical gold, however, can be cumbersome and costly. Fortunately, there are several ways to own gold without ...
  5. Investing

    How High Can the Gold Miners ETF Go? (GDX)

    Gold miners have been one of the hottest trades of the year. Is there more room to run with this ETF?
  6. Investing

    Three Ways To Short Gold

    Investor enthusiasm for gold has been falling by the wayside. For portfolios, that could mean it's time to short the metal.
  7. Investing

    Investing in Gold: Direct Vs. Professional Management (ABX, GG)

    Find out how you can access the gold market through common stock, futures contracts, and actively managed or passively managed ETFs and mutual funds.
  8. Investing

    Top 5 Gold ETFs for 2018

    Gold ETFs offer a convenient way to take advantage of the volatility of the precious metals market.
  9. Investing

    Why the Price of Gold Is More Than Just Supply & Demand

    The price of gold is driven by multiple factors that work together in at times counterintuitive ways. Understanding the place of gold in a portfolio requires a look at history.
RELATED FAQS
  1. What is the gold standard?

    Learn more about the gold standard, including its complicated global history and its connection to the fiat system and the ... Read Answer >>
  2. Has gold been a good investment over the long term?

    Examine the investment performance of gold dating back to 1933, when President Roosevelt required all gold bullion, coins ... Read Answer >>
  3. What criteria classify a company as a junior gold miner?

    Learn about junior gold miners, companies that exclusively mine for gold. These firms typically rely on venture capital and ... Read Answer >>
Hot Definitions
  1. Discount Rate

    Discount rate is the interest rate charged to commercial banks and other depository institutions for loans received from ...
  2. Economies of Scale

    Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
  3. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  4. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  5. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  6. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
Trading Center