Faith in the Bailout? Or in Gold?

With the U.S. government now struggling to steady the teetering economy, and bailout after bailout being sucked down by greedy banks and other businesses who then ask for more, where can investors look?  The market is clearly struggling under the weight of unscrupulous investment deals that have now gone south.  And many are looking at the gold market.

Gold prices are currently sky high.  In late February, they topped $1000 per ounce; a benchmark that wasn’t anticipated until much later this year.   Since then, they’ve come down somewhat again.

Sure, the glittering metal has mesmerized people from all walks of life for thousands of years.  But as an investment, it’s had a slightly tarnished history.  In the 1980’s and 1990’s, it actually lost value as the stock markets gained and some global central banks started selling their reserves of the precious metal.  By the late 1990’s, it was below $300 per ounce and as an investment, it returned zilch.

But then came September 11, 2001.  The terrorist attacks of 9/11 shook global markets and sent investors scurrying for something they could hold on to: gold.   By 2006, the return was 16.25% across five years.   And last year, the global equity market collapse brought a boom in the price of gold.

The attention being placed on gold right now is largely due to the uncertainty that many investors feel.  In the past, they might have considered buying land as an investment, but speculation in real estate has cost already. And nobody feels sure where the drop in land values might end.  Thus, as the stock market crashed last year, demand for gold rose 64% over the preceding year.

What does this mean to you?  If you’re investing in gold for financial security, this is a tricky time.  The price of gold has already seen huge gains.  Nobody wants to get in when the price is already high.  But if you are trying to get out, it might not be the right time to do that, either.  Buyers are now turning away from trades because the high prices have brought out everyone with a bulky neck chain or bracelet left over from the 1990’s.

If you buy gold on a site like Apples of Gold, you are buying it as a purchase of love; either you love it or you care deeply about the person that you are buying it for.  These are not financial investment pieces, but rather a down payment on a lifetime of caring that you hope will return rich rewards on a regular basis.

Gold: Time to Buy, Sell, or Hold?

The price of gold is doing the rollercoaster thing again. Up sharply in the last week, then dropping precipitously in the last several days, and why? Experts tag this to the fact that it did go sharply up and then come screaming downward as everyone rushed to sell their gold at the record high prices.

Consumers are in a state of shock mixed with agony over what is going on in our economy. Daily reports of layoffs, bankruptcies, going out of business sales, and other “end of all” financial dealings are almost too much to take.

Buying and selling gold in shaky economic times are nothing new. Gold has long been called a “barometer of fear.” When people are anxious about the economy – they turn to gold and bid the price up. The two main things that make people anxious are deflation and inflation. Most think that deflation is “falling prices” and inflation is “rising prices.” Actually, rising and falling prices are symptoms. The root causes are decreases (deflating) or increasing (inflating) of the money supply.  Gold has the remarkable ability to store value in both deflationary and inflationary times.

But what about you and your situation? What about your economic worries and woes? If you are concerned about the value of the dollar, is this a good time to sell? Not really… because holding gold may allow you to hang on to the value of your investment.

Economics are cyclical in nature. Almost every country around the world has had at least one major “currency crisis” over the last one hundred years. Those that had some of their wealth in gold survived.

It’s best to think of your personal investments in gold as insurance. Do not think of gold as a way to “make money.” Do not try and “time the market.” It is better to buy gold in small amounts regularly, every month for example, over a period of time. The percentage of your total wealth devoted to gold is a personal decision and depends on your particular situation. A conservative goal would be ten percent. In times of uncertainty the “best practices” percentage could be much higher.

Gold can protect against both deflation and inflation. It would be best if we all kept some of our wealth in gold where possible. The time to sell is when the market is ripe and the value is needed. The time to hold is when the market is rocketing up and downward, like now. Let others panic, while you hang on to any gold you may have, along with its value.