Before you start hurling cyber-insults at me with gold trolls, I must confess right away that if anyone owns gold, I don’t mind. I’ve got myself a few coins.

But I don’t agree that gold is a good investment. Most people are scammed into buying it in different ways. The fear factor is again in effect with the recent presidential election.

My reasons why I don’t see gold as an investment are simple. The metal pays no interest, as opposed to a bond. There’s no dividend there. It may not protect you from the worst forms of inflation that often occur in health care. And there is no implicit guarantee that value will be appreciated.

I believe most of the investments are mentioned here. But at least if you invest, although not guaranteed, in a basket of major stocks, you are likely to receive payments for dividends. This is not the case if you buy gold bullion or coins.

And I also understand that investors are sceptical about paper currencies. These are, of course, dependent on a government’s faith and credit, but the U.S. Treasuries Securities in the history of none have been defaulted on. If that were to happen, the entire financial system in the world would crumble— and you wouldn’t do much good for gold.

For the most part, the value of gold is based on fear. When investors think currencies are shaky or whole economies are wobbling, they buy it. Yet gold has been a poor investment since the devastating crash of 2008— with Europe and the U.S. struggling to recover.

Gold and other metals won’t help you in a low-inflation environment. The cost of money and credit demand is low and the interest rates are kept in check. These are pretty good times for most of us concerned about the cost of living.

Yet the uncertainty is peddled by gold bugs. They assure you that because times are bad and getting worse, you can make money. While you can always argue for that, the opposite is true. The U.S. and Europe continue to recover. Credit is tight, but not costly. Corporations continue to make profits.

This anxiety about the future of the economy drives various gold scams. Dealers in mining companies may be pushing coins, bullions or stocks.

Brokers love these cars because on commissions they make money. The more products they sell, the richer they become, especially if the feeling of the investor is skittish. They charge more for products based on gold than the metal’s actual price.

Be smart about it if you choose to invest in gold. Here are some of the Federal Trade Commission’s purchasing guidelines:

  1. “When you purchase bullion coins or collectable coins, ask for the coin’s’ melt value’– the coin’s basic intrinsic bullion value if it was melted and sold. Melt value is widely available for almost all bullion coins and collectable coins.
  • Get an independent evaluation of your particular gold product. The valuation of the seller may be exaggerated.
  • Consider the extra costs. To protect bullion, you may need to purchase insurance, a safe deposit box, or rent offsite storage. These costs will reduce Bullion’s investment potential.
  • Many sellers supply bullion or bars to a secure facility instead of a customer. When buying metals without delivery, take additional precautions to ensure the metal exists, is of the described quality, and is properly insured.
  • Walk away from sales pitches that minimize risk or sales representatives claiming that disclosure of risk is merely a formality. Reputable sales representatives are upfront about the risk of specific investments. Always get your transaction receipt.
  • Refuse to “act now.” Any offer for sales that begs you to buy right away is a warning to walk away and keep your cash on.

Author: John F. Wasik


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