Thursday, July 23, 2009

They're Running out of Storage Space for Gold

Today we'll look at some of the myths and misconceptions these same institutions want you to believe, along with the down-to-earth realities that will put your mind to rest about the unique benefits of owning gold.

Gold #1: Stocks always outperform gold

Fact: This is a misrepresentation popularized by institutions whose job it is to sell you stocks for commission, regardless of whether you see gains. But the truth is gold has increased by as much as almost 3,000% since the US abandoned the gold standard and the metal was allowed to trade freely on the open market in 1971. Meanwhile, the Dow Jones Industrial Average has only increased by about 900% since that time. Even at the top of the market, when the Dow Jones was over 14,000, the index had only gained 1,500%.

Gold #2: Gold is a risky investment

Fact: Gold is the opposite of risky. In fact, it's one of the safest investments you can make. And that's simply because gold can never be considered as a liability. Companies can go fall to zero.

Of course, every investment carries some degree of risk. The price of gold is subject to supply/demand fundamentals, currency fluctuations, government and central bank actions, etc. But the value of physical gold can't disappear in the middle of the night with a crooked investment manager or in the wake of a collapsing government.

Gold #3: Gold is a poor hedge against inflation

Fact: Gold is actually one of the best hedges against inflation. Consider this. . . In 1971, the factory sticker price for a Mustang Boss 351, Ford's final muscle car masterpiece, was $5,198. If you decided to hold onto your cash and buy a car today, your $5,200 would only make for a good down payment. The lowest MSRP of any vehicle sold in the US today is about $11,000—and that's for a tiny plastic death trap. But say that you bought gold instead of holding cash. At the time, $5,200 would have also bought you about 150 ounces of gold. Those same 150 ounces of gold are now worth over $140,000 at today's gold prices. With that kind of money, you could buy a brand new, fully loaded BMW M6. . . plus have an extra $20,000 leftover to put towards gas.

Gold #4: Gold ETFs or gold mining stocks are a better investment than bullion

Fact: This is another myth touted by institutions interested only in commission. It's true that gold ETFs and gold mining stocks are a slightly more convenient way to invest in gold. But as I mentioned in Gold Myth #2, funds can become defunct and companies can go belly-up.

It's also important to note that while gold ETFs do represent shares of the physical commodity, they end up costing you more in the long run because of annual storage fees. Owning and holding physical gold in your house costs you nothing.

Gold #5: Physical gold is illiquid

Fact: It may not be accepted by most vendors in lieu of cash, but the liquidity of gold has increased significantly over the past few decades thanks to the large number of brokers streamlining the process of buying and selling. Today's brokers have made trading gold as easy and attractive as possible by offering nearly instant payments and guaranteed sales prices.

An easy way to significantly increase the liquidity of your physical gold investments is to buy small coins and bars that are minted by a government or well-known refiner. You can purchase gold coins as small as 1/10 of an ounce, and you can buy gold bars weighing as little as small as 1 gram. These small gold coins and bars offer higher marketability than their larger cousins simply because they are much easier for private individuals to afford.

Conclusion

With its reputation for value stability and long-term growth spanning most of recorded human history, gold remains a popular and viable method of preserving and growing wealth during economic downturns as well as periods of prosperity, even today.

Those that will have you believe otherwise argue against gold ownership out of a purely pecuniary interest. Take hold of your future today and make your decisions based on objective fact, not self-interested fiction.

Good Investing

No comments:

Forex