June 18, 2010
What would happen financially in the event of worldwide panic? How would you feed your family if national currencies were devalued? There is a school of thought that says the answer is gold. Nearly every society in history has viewed gold as a store of value. There is a well-known anecdote about an ounce of gold being worth the value of a good-quality suit. Goldbugs often use this story to illustrate how gold has, over time, kept pace with inflation. That logic tends to work with many asset categories: real estate and stocks, for example, show decent relationships to inflation over time. The question is: what time? Looking at a 50-year chart of gold prices shows that you could be way ahead or way behind depending on when you bought in. In that way gold is like any other asset.
Back to safety. Physical storage poses an element of risk. If you own gold in bullion form, where do you keep it? Bank safe deposit box? A safe in your closet? Under your bed? Some investors prefer to own gold indirectly, in the form of mining shares, or through a mutual fund or ETF that owns mining shares or bullion. (note: mutual funds are not the preferred form for the apocalypse crowd)
A last safety issue to consider with gold is the bubble element. Over the last 5 years the price of gold is up 300%. Any time you see an asset class run up that far, that fast, think twice. (Florida condo, anyone?)
In Part Five I'll touch on real estate.
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).