Gold? Or Golden Fields?

Gold prices are on the wobble once again.

Last week, they finished up.  The reason for this was a weak dollar.  But as they began the week, prices on the world’s favorite precious metal slumped just slightly.   The denting came from inclines in prices for oil and wheat.

This week begins with more slumping in stocks as the market reacts to news that swine flu has hit American shores and that federal government health officials are declaring a health emergency in some areas and closing several schools. (The outbreaks have been in California, Texas, and New York City.  All victims had recently traveled to Mexico, with the exception of one woman whose husband had just come back from that country.)  President Barack Obama says the flu outbreaks are cause for concern but “not a cause of alarm” at this point.

Apparently, the markets were “concerned” enough to cause an adjustment, but nothing major at this point.

But what about gold?  Is this the time to buy?  Would investment gold be an appropriate Mother’s Day gift?

Gold is always a good gift for two reasons: its intrinsic value and its ability to suggest long-term, deep emotional attachment to the recipient.  The price of gold usually shifts little over the life of a recipient with the only change likely to be slow and steady incline.  We have certainly seen a bit of movement in recent months, with the economic downturn as investors sought refuge.  That rush seems to be over for now, but it was completely in keeping with what the market and even the general public believes to be true about gold: it keeps its value and over time, will even show growth when other commodities won’t.

I did mention inclines in oil and wheat, didn’t I?  The price of oil will continue to fluctuate up and down while Americans look for alternatives in fuel and means of transportation.   The price of wheat, meantime, is riding just a little below $4 per bushel.  I want to offer a touch of perspective on that one, my friends.

I grew up on a farm.  My father is a college professor who owned a portion of a family farm that he bought from his own father.  He then rented out plots of land to his kids and paid himself to farm it for us.  (Don’t worry; he offered great hourly rates on tilling fields.  We were all on the “family plan.”)  And at the end of every growing season, he sold the crop for us and put the money in our college funds.  He usually planted wheat, but occasionally corn.   And during my high school years, the price of a bushel of wheat ran right around $4 per bushel.   Which also means I have no explanation for the price of a loaf of bread or a filet mignon.

Wheat hasn’t gone up in decades.  Gold has risen steadily in those same years.   Gold is an excellent investment right now, and at the same time, it’s also a good moment to divest of that investment if you need the cash.  The choice is up to you, but think of it this way: on Mother’s Day, which one would your mother rather have: a bushel of wheat or a little bit of gold?

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 Prices Waver… Should You?

Remember that little hit of satisfaction when you heard that the first day of trading in the new year showed the first real gains in some months? The result? The dollar rose just slightly, crude oil prices fell nearly 5%, and gold came down just a little bit, too.

The price of crude fell because investors are concerned that our economy isn’t strengthening, and that in fact a global economic contraction would limit fuel demand even further.

Gold rose in Asia on January 1^st, but then began to lose ground. But we’re in it for the long haul, as all good investors are, right? And after 2008, there can be no doubt of the precious metal’s value in any portfolio.

The value of an investment in gold advanced 5.8 percent in 2008. The reason? Buyers were looking for asset protection as a hedge against the financial crisis that pushed many major economies into recession and drove equity markets lower.

Meantime, oil (which began 2008 at all-time high prices) fell 54 percent in the last 12 months, which is the first annual decline since 2001 and the biggest drop since futures trading started in 1983. This was largely because fuel consumption in the United States was down… a whopping 3.7 percent during the four weeks ended Dec. 26 from a year earlier, according to the Department of Energy. Oil rose 14 percent on Dec. 31 after a report showed American fuel stockpiles climbed less than expected and the conflict between Israel and Hamas raised concern that Middle East supplies may be disrupted.

“That rally on the 31st didn’t have too much behind it so we’re seeing crude come back to a level more reflective of the fundamentals,” said Toby Hassall, an analyst with Commodity Warrants Australia in Sydne, AU. “We still don’t have a clear picture of when a global recovery is going to take place.”

Most economists don’t predict recovery to be a quick or a smooth process, but a long and painful ride that will take months if not years to get through. Investment dollars may never return in some areas, although crude oil may rise next week as the Organization of the Petroleum Exporting Countries makes record production cuts to counter this, the deepest economic slump since World War II.

What about gold prices? Gold seems to follow fluctuations in energy costs. If energy continues to drop, the cost of transportation, manufacturing and ultimately goods may fall, giving the American economy a little room to improve and carrying the dollar upward, but sending the price of gold downward. The two tend to move in opposite direction, reflecting gold’s value as a hedge against inflation.

But again, gains in all types of investing are seen as we stay in the market over a long period of time. If the economy strengthens more quickly than expected, gold’s value will hold, but it may become more precious for its other value: the art of the jeweler in the eye of the beholder.

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.