Sunday, March 13, 2011
What do you think about investing in gold right now?
At one time gold was a great place to sock away some cash, of that there is no question. However, I think that gold now is one of the worst investments someone can make, and I would strongly caution anyone against it. To me all of the indicators that gold is in a bubble are clear. Take, for example, the advent of numerous kiosks collecting scrap gold that have cropped up in our neighborhood shopping malls. There are gold collection sites on street corners, and some pawn shops, and even a few jewelry stores have transformed completely into gold collection businesses. This is clearly a sign of the beginning of the end for gold being a current, solid investment. This is not to say that gold will have no future value, or that overall gold will still be viable as an investment, but only to say that gold's value today is greatly inflated, and it will come down hard when the bubble finally bursts. Anyone buying the commodity in any form now, including through gold funds, will see the value of their investment seriously reduced, and getting that value back will likely take many years. At present I think what is continuing to hold up the value of gold is the still uncertain future valuation and viability of the American dollar as a leading world currency, and the continuing stresses on the economies of other countries all over the world. Once we are out of the economic quagmire that we are in, gold will be less and less attractive as an investment. As in all bubbles, the fall will be swift and detrimental, and anyone caught in the fall will have their financial clock cleaned. I'm not getting near gold with a ten foot pole, and I don't think anyone else should either. Sell it. Trade it. But do not hold it.