The bottom line was this… every dollar you invest in gold is a dollar you don’t invest in one of their preferred investment vehicles. . . whether it be 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 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 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. Even at the top of the market, when the Dow Jones was over 14,000, the index had only gained 1,500%.
Gold 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 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 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.
Gold 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 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 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 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,
Alex Koyfman
Contributing Editor, Gold World
P.S. With a gold resource worth 63 times more than its market cap, this junior gold stock is getting ready to pay off big time. This tiny $0.34 stock could make it’s first move over $2.00 in short order. The whole story is laid out for you here.
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From Gold World’s Gold and Guns blog…
Swiss Banks Running Out of Storage Space for Gold
Bleak Economic Outlook Rapidly Fills Bank Vaults
Gold Stock of the National Bank in Bern
Swiss news website 20 Minuten Online reports that the country’s banks are quickly running out of secure storage space for gold bullion owned by investors and institutions. Concerns over inflation, the global economic downturn, and the success of gold ETFs has rapidly filled Switzerland’s bank vaults with bullion
Several weeks ago, the 139-year-old Zürcher Kantonalbank reported that it was forced to relocate some of its stored silver bullion to another site to make room for gold. More recently, another Swiss investment banker was quoted in 20 Minuten Online saying, "We have the need to store more gold for our clients, but are finding it difficult to find secure storage facilities."
Many US-based gold ETFs have recently seen a relatively small decline in gold holdings. New York’s SPDR Gold Trust, for example, has sold over 34 tonnes of gold in the last four weeks, equal to almost 3.3% of its total holdings. Meanwhile, the Swiss ZKB Physical Gold ETF and Julius Baer Gold ETF has increased its holdings by 2.8% and 4.8%, respectively.
Luke Burgess
Managing Editor, Gold World