Indulge an old fellow in his reminiscences: back in 1980, I remember line-ups out of the doors of banks as people queued up to buy gold. Coins, bullion or certificates—they were all hot commodities, even though gold was selling for today’s equivalent of $2,100 per ounce.

Doesn’t that sound like a lot, you might ask? Indeed it was. Before that, the price of gold was only (adjusted to inflation) $500oz. After that, it dropped again to $500/oz. In other words, those long line-ups happened at the peak of gold’s value, not before and not after its drop in price. The situation always reminds me of a joke in financial circles: “Why don’t poor people own gold? Because it’s not expensive enough yet.”

That seems counter-intuitive: you’d think that people would gravitate toward cheaper investments. But we need to keep in mind what investors were going through in 1980. The focus then was almost entirely on “alternative” investments, and commodities were the place to be. Between 1972 and 1979, returns on the stock market were virtually nothing: bonds and stocks both delivered less than the rate of inflation. The best asset class to be in, by far, was gold. A close second was diamonds, followed by—I’m not making this up—stamp collections. Next best were foreign currencies, farmland, and real estate.

At that time, investors in stocks and bonds had already been desperately crossing their fingers for seven years, enduring a grim bear market. And it wasn’t even over: the biggest recession since the 1930s was soon to begin, lasting until August 1982. That was when the stock market finally turned and began its fantastic ascent, the great bull market of the ‘80s and ‘90s.

 I find it’s always important to keep that historical perspective in mind. If you read old newspapers to see what conventional wisdom was in the past, you’d be amazed at what “the people in pinstripes” were saying. For instance, in 1979 the influential newspaper Business Week ran an article entitled “The Death of Equities,” which caused a lot of investors to sell off their stocks. That article has been pointed at with derision ever since, along with the people who followed its advice. What idiots, we laugh, lining up to buy gold at more than $2K an ounce, and selling your stocks just before the greatest bull-market run in history!

But it’s unjustified arrogance to mock such investor folly. It might be obvious enough today, with the benefit of hindsight. Perhaps if the financial world really wants to laugh at someone, though, we ought to pick on one of the portraits hanging in the boardroom. Come on: pension fund managers investing in stamp collections?!

What lessons can today’s investors learn from all this? Certainly, we’re in trying times again. Stocks have given us virtually no gains in the last ten years, interest rates are low, and the U.S. dollar is dropping. But commodities are entering another year of record returns, and gold is flying once more.

Does this mean you should rush down to the bank and buy some bullion? Personally, I don’t think so. In his best-selling book Stocks for the Long Run, Milton Friedman points out that a dollar invested in gold two hundred years ago is today worth—just a dollar. Gold yields only the rate of inflation. Your house, bonds and stocks all do much better.

So my advice is: don’t do anything. That’s always hard advice to follow for investors bent on action and excitement. But if your portfolio is broadly diversified, and if you’re paying down your mortgage and buying RSPs—then resist temptation. Put down the Globe & Mail, and turn off CNN.

Remember what the “experts” in 1979 were telling investors: buy stamp collections and diamonds. But the strategy of putting all your future eggs in the basket that worked last year was a disaster in 1979. Is it really different this time? Stick with what you’re already doing, then history is on your side.