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Eight Things You Need To Know About Investing In Gold + Lee’s take on GE, BAC, S, PG, AM, BYI, EBAY, WYNN, BCS, CS, JPM, GM, TIF, ZLC, WMT, AXP, V, MA, C, PEP |
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InvestorsObserver
Featured
Contributor
Lee M. Allen
What is it with gold anyway? You can’t eat it, fuel your car with it, or live in it, but it seems to have so much value. Right now, if you had an ounce of gold instead of just lint in your navel, it would be worth around a thousand dollars. You would probably need to collect over three tons of navel lint to get a thousand dollars.
In turbulent economic times, when stocks like General Electric (GE), Bank of America (BAC) and Sprint (S) have dropped to historic lows, people start thinking more about the safety of keeping a portion of their assets in gold. The darker things get in the economy, the more they are attracted to the shiny stuff.
But before you liquidate all your investments, auction off your baseball card collection, sell your children and convert your wine cellar into a gold bullion vault, you may have a few questions… And I am just the person to answer those questions.
Read on for more of Lee’s insights into investing in gold...
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One of the many unusual uses for gold
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Since ancient times, gold has been considered one of the most precious metals. Its pleasing color and ability to be worked into most any shape just adds to the desirable qualities this metal possesses. For centuries gold was the preferred material for filling cavities in teeth. But then, with the invention of Crest Toothpaste, manufactured by Procter and Gamble (PG), cavities virtually disappeared as evidenced by all those commercials with kids excited about good dental checkups and parents gushing with more pride than if their child just got accepted to Harvard.
For the person who has everything:
a gold plated car
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Another precious metal is silver. Stay away from silver at all costs. Do not consider even for a moment an investment of any kind in silver. This metal can be easily lost, stolen, or misplaced. When I was a kid, my Aunt Marge would give me rolls of quarters for my birthday, Christmas, Easter – owned by American Greetings (AM) - and other gift-giving occasions. Many years later she asked about how my collection of solid silver quarters was doing. I told her they were all at a video arcade not far from my house. I was addicted to pinball machines and I fed all the quarters into those crazy machines with blinking lights, ramps, flippers and electric bumpers made by Bally Technologies (BYI). |
Platinum is another metal with some exotic value. In fact, an ounce of platinum is worth even more than gold. So why don’t people talk about this valuable material more? I’m pretty convinced that’s a symptom of bad public relations and poor movie product placement. Think about all those films you saw where someone had a huge storehouse of gold doubloons. They were always after the gold. How about those Leprechauns? It’s a pot of gold at the end of the rainbow. Never a pot of platinum. I’m not sure “007 Platinumfinger” would have been as big a hit as “Goldfinger”. Bad public relations can do that.
So now that the stock market has ran up for a few weeks and you’ve recouped all your losses plus more, you might be looking for a place to park all these excessive profits before the market crashes again (if it has not crashed already) which can happen. You might want to consider gold, but I’m sure you have a few questions so here are some answers to the most commonly asked questions about gold:
Who should buy gold?
Anybody except my wife. It’s bad enough that she owns more shoes than she could ever wear in one lifetime.
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Need money? Enlarge this, print it out and sell it
to all your friends
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What could happen to the price of gold in the future?
Nobody knows for sure, of course, but a few trends are evident. Hundreds of years ago gold was accepted just like currency. But then, so were stones, shells, buffalo horns, and tuna fish can labels in some cultures. With the advent of paper currency, credit cards and PayPal – a division of eBay (EBAY) – gold seems to be less important. So watch out if you are planning to put everything you own into gold. In a few years it could be as worthless as Enron, Lehman Brothers, or WorldCom stock.
What are gold Krugerrands?
This is a common mistake made by people new to investing in gold. Krugerrands are a small pungent fruit from New Zealand that taste good only when you put lots of sugar on it. This fruit is so rare, it costs about the same as gold, which is why people make this mistake.
Why not Platinumfinger?
Must be bad public relations.
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How can I tell if the gold I am about to buy is the real thing?
If you are considering buying gold coins, you can bite into the coin. I’m not sure what happens when you bite into it, but you will look like you know what you’re doing.
Should I just buy a gold Electronic Traded Fund like GLD?
Do whatever you want, but when you are sitting at a Las Vegas Wynn Resorts (WYNN) poker table, nothing intimidates the other players like a heavy gold chain and a few pinky rings.
Where do you buy gold?
You can probably go to one of those big-time professional brokerage firms like Barclays (BCS), Credit Suisse (CS), or J.P. Morgan (JPM), but you will be forced to pay high commissions and fill out all kinds of paperwork. Then, after you have gone through all that, the broker will probably try to sell you something like a credit default swap, mortgage-backed security, or General Motors (GM) bonds. Save yourself the trouble and commissions by going directly to the source. There is usually a guy in every town who is the exclusive gold distributor. You can spot him standing on the corner by the bus or train station. His uniform is a long coat that doubles as his display rack. He sells gold in the form of Rolex watches, slightly tarnished, previously worn rings and chains. You will find his per ounce price much lower than the quotes from your regular broker. |
Are there other ways to acquire gold?
The best way to build your gold holdings is to mine your own gold. If you don’t like working in dirt or never really perfected the use of a shovel, consider panning for gold in a river or stream. Either way, you will need to buy a donkey just to get into the gold miner’s club. When you pan for gold, you scrape sediment from a creek bed then let water wash the lighter material out of the pan with a gentle shaking motion. Once all the lighter material is washed out of the pan, at the bottom you should see some sparkling flakes of gold. Or, more likely, you will see nothing. But go ahead and try it again; there are around eighteen hours of sunlight in the summer and you will need all of them to accumulate an ounce of gold every few months.
I’m a white collar worker with not even enough money to buy one ounce of gold, what can I do?
This question comes up pretty often. People are always looking for a way to participate in gold investing, but with the recent crackdown on credit card use, they just can’t go out to the local Tiffany’s (TIF), Zales (ZLC), or Walmart (WMT) and use their American Express (AXP), Visa (V), or MasterCard (MA) to buy a few ounces of gold. Most major governments have this same problem. They want to accumulate something of value or just need some extra cash to buy the odd car company or bank like Citigroup (C) but they just don’t have enough money. So they print their own money. Consider printing some stock in a gold company or Gold Certificates – paper money supposedly backed by gold - like the US Government did back in the old days. Now the fed just prints cash and doesn’t even bother with the ruse that anything with value is behind it. If they can do that, you could too; right?
Hopefully that answers all your questions about gold. How long do you think it would take to accumulate a few tons of navel lint? I hear that in Nepal they knit it into sweaters. |
Gold Digging - Another way
to acquire gold
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If you have any other ideas on buying gold or have any coupons for Rold Gold Pretzles – made by Frito Lay (a division of Pepsi (PEP), please e-mail me at LeeAllen@InvestorsObserver.com.
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CLICK HERE to begin your 90 DAYS FREE.
We can make this 90 day FREE offer because we are confident you will find our service an essential part of your investing toolkit and stay a subscriber for many years to come. Our biggest risk is that we do find people cancel their subscriptions when they move to their own private islands without internet access. |
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