Tuesday, September 30, 2008

Gold Fever on the Air

Gold! Gold! There's gold in them thar hills! Gold! [enter the John Huston dance] Gold! Roll out the idol!

Gold is that precious metal which has been used as coins, in jewelry, religious idols, in bars to look at and hoard, clothing, cutlery, and food service since history was first recorded---and probably before. Uses now include electrical and computer technology.

In times of trouble, people buy pure gold to retain value in their wealth. But whether it's gold---or even diamonds in some cases---you'll never retain value by buying gold at the top of the cycle.

Until 1974, the London gold price was under $100 an ounce. In 1974, the average price was $159; in 1999 279; in 2000 $279; in 2005 $445; in 2007 $695; and the closing price on 9/30/2008 is $885.

The current forecast is for gold to reach $904 through 2009. And remember, if you buy gold bullion or coins, you'll be paying a premium. If you buy gold jewelry, you'll be paying for the artistic efforts as well as the constituent parts.

Based on past volatility and the expected rebound of our economy, I don't think you can expect gold to advance too much over the near term. Let's say, $1000 at the top.

So, for the time being, it doesn't seem to make sense to buy into the increasingly prevalent gold purchase commercials. The premiums themselves will cut your value, and you'll be stuck with the gold if the price drops. If you want value, don't sell your old jewelry. Keep it around. There's no premium to that.

If there's gold in them thar hills, it'll be tough to get with all the ore milling, taxes, claim jumpers and pyrite mistakes. Besides John Huston's dance, you have to deal with a wild group not needing 'no stinkin' badges!'

Just strengthen your marriage, and you can keep your wedding band on.

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