THE TRUTH ABOUT GOLD
Learn before you sell.
What are my gold jewelry and
diamonds really worth?
While the a large number of investors, analysts and others seem bullish on gold, there are some very sound indicators, along with historical performance data, that would seem to caution against gold as a long term investment. The truth is, gold has had a heck of a run over the last couple of years and in fact has consistently outperformed the S&P Index by considerable margins, but, this is short term. If you want to play the gold market, that's one thing, if you're talking about holding your gold as an investment, that's a different subject.
First, let's address some basic facts. While gold might be breaking records, the spot price for gold does not take into account inflation. If you adjust for inflation, even at prices over a $1000 or over $1200 as gold is currently, the price is still nowhere near the inflation adjusted record highs of the early eighties. Fact is, if you had invested cash in gold in 1980, it might be worth more on paper now, but once you adjust for inflation - you've lost money.
Of course, if you purchased gold in say 2001, you're sitting pretty, but that's hardly a long term investment. If you want to make money in gold, you need to study the market, understand the factors that influence the price of gold and be ready to buy low and sell high - and not just based on spot price.
Many pundits would also make the argument that now that gold has hit the front page news, it's run is almost over. An argument that historically has more often then not been the case. Remember, the smart money sells when the news is at its best.
On a simplistic level, those predicting gold prices in the $2,000 and $3,000 range are correct in their predictions. Gold is bound to climb. The question is when and when accounting for inflation, how high? Furthermore, on a basic level these predictions seem to assume that the economic state will stay consistent or deteriorate. What if it improves? Logic would seem to indicate that at some point, it will and a drop in the gold price will likely accompany the event.
From an investment perspective, it's also crucially important that gold produces no income for its holder, unlike a variety of other investment vehicles.
The bottom line is, we don't recommend gold as a long term investment. If you're qualified to play the "gold market" in the short term, we'd be glad to sell you gold to lock away in your safe. If you're looking for that long term home run though, we'd recommend looking elsewhere. If you're considering whether or not to sell your gold jewelry we recommend taking the cash and putting it to use in another investment vehicle, or maybe even for a much needed vacation.
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