7/26/09 Exposing Several Myths About Gold

Precious Metals Market Analysis, By Michael Pennington (Copyright 2010 Pennco Coins)

It seems appropriate to give gold equal exposure.  The fact is we all know the government does everything in its power to prevent the public from investing in gold. Why? Simply every dollar you invest in gold is a dollar you don’t invest in one of their preferred investment vehicles. . . whether it be bank accounts, stocks, mutual funds, or the US dollar. In the eyes of these institutions, investments in physical gold mean lost commissions and lower profits.

Today we’ll examine 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.

Myth #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. Since year 2000 gold has significantly outperformed stocks and bonds every year.

Myth #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 fall to zero and many have this year, but gold can never go 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.

Myth #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.

Myth #4 Gold ETFs or gold mining stocks are a better investment than bullion.
Fact: This is another myth touted by institutions interested only in commissions. 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. There are also many experts today that believe the metal ETF’s hold no physical metal and are therefore nothing more than another fraud perpetrated by GS and friends.

Myth #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 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 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.

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About Pennco Coins

Pennco Coins
This entry was posted in Buffalo, Bullion, Coin, Dollar, Eagle, Federal Reserve, Gold, Gold to Silver Ratio, Government, Investment, Maple, Mint, Palladium, Peso, Philharmonic, Platinum, Silver, Tax and tagged , , , , , , . Bookmark the permalink.

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