Should You Buy Gold?



I run into people occasionally that can’t wait to tell me how they got into gold and sold out of stocks. I am happy for them. If they made their purchase a year or two ago, they probably made a lot of money and I hope they are smart enough to get out before the speculators beat them out the door. Usually those speculators are the ones that think the country has become dysfunctional and it’s just a matter of time before our decline and fall like Rome did many years ago. I usually keep my mouth shut, but if one of them asked me I could tell them that I was an investor in the 70’s when a fellow named Howard Ruff published a newsletter called Ruff Times. His advice was to buy gold, stock up with 1 year’s food supply, and buy guns and plenty of ammo. The gold was to be used for barter when the world fell into chaos. I googled him and he’s still around. And about every 5 years he comes out with a new book on the impending dooms day.

The thing that got him started was the price of gold had doubled just a couple of years before his first book. People thought they needed gold because stocks were in the doldrums and had been for several years.

What happened next was that Ronald Reagan got elected in 1980 following 4 chaotic years under President Jimmy Carter, which included the oil embargo, very questionable tax shelters sold to investors, union domination, and 12 % inflation. By 1982, people started believing in Reaganomics and the stock market took off like a rocket and didn’t stop until 2000. Meanwhile, gold dropped and stayed down for 25 years until this latest run up. So the lesson learned was to avoid putting all your financial assets in to a single investment and don’t get caught up in what could turn out to be nothing more than a fad. Bonds and stocks have factories and products behind them, but gold just has glitter and its price is set by the whims the speculators. A fund that invests in a broader basket of commodities that includes oil, agriculture, and other minerals, such as the PIMCO Commodity Real Return Fund, is a much safer bet.

And one last observation, for every reputable gold dealer, there are 10 wheeler dealers out there that will sell at a price way over the market price and buyers who will take advantage of anyone in the market to sell. Invest in gold or silver if you wish, but put it on someone you care for.

About the Author: Michael Skehan

Michael Skehan, CPA, PFS, Senior Advisor is a well-known industry leader who has been recognized for his outstanding contributions both by his peers and community. Skehan was with RJ Pile for 44 years prior to retiring as managing partner to join WealthPoint Advisors LLC.