Gold is Touted as a Hedge Against Inflation… har har har!

I’ll tell you what frosts me. A former head of the mint on TV telling unsuspecting victims that gold doesn’t have volatility like the stock market.  I don’t have an issue with owning precious metals. I own a good bunch of silver myself. What I do have an issue with is LYING!

If you’ve ever played musical chairs you will understand what is going on. The TV commercials are saturated with ads for owning gold coins. Personally I think that is dumber than dirt. When I bought silver I bought one ounce coins and bars believing that if the ‘you know what’ hit the fan, I would be able to negotiate those into goods and services and food. Afterwards I bought shares of SIVR since it actually owns auditable silver. Now consider this. You get induced to buy expensive gold coins or ingots. What are you going to do when it does hit the fan? Chip away ounces of gold to barter?

Recently I visited many websites to check on gold coins. Results?

  • 1/10 oz. gold American eagle for 143.70, or 1430 per ounce with gold at under $1100
  • ¼ oz. Am. Eagle $654., or $2616/oz.
  • $50 gold Am. Eagle avg. price $1400.

So when you buy any of these coins you are banking on what we used to call in the real estate tax shelter era, a greater fool buying it from you at a profit – not a good bet! Why gold coins of any ilk continue to generate greater fools has always been beyond me. Oh I get it, history literally comes alive in your hands har har har!

The alleged former head of the U.S. mint tells you gold doesn’t suffer from market forces and excessive volatility. If you want to believe that please call me as I have a number of great bridges for long term lease or sale. Around 2011 gold hit just under 1900 an ounce. Today in 2016 it runs around 1200 an ounce….no volatility????

Gold and gold coins are touted as a hedge against inflation. Study after study proves there is no significant relationship (R-squared) between gold and inflation. Instead, to quote Neil Azous of Rareview Macro:

“Ultimately the price of gold is cyclical, just like that of commodities”.  Further, “in inflation adjusted terms, gold peaked in 2011 at roughly the same level as the 1970’s bull market.”

The average price of gold seems to be approximately $825 per ounce over the long term.

Taking that one step further, sellers on TV are touting gold in your IRA. The only thing dumber than that IMHO is real estate in your IRA. Since U.S. gold coins have a market value of their face guaranteed by the U.S. government it is being alleged that you can self-store them in your IRA at home. Assuming that is legally correct, why would you ever do that? Take current cash out of circulation in your IRA and buy a static commodity at an inflated price way above its guaranteed value? All gains in an IRA account are non-taxable under current law. That means you should want to hold highly appreciable assets, trade bonds, trade options, and make as much short term profit as you can in your IRA account since it will all be non-taxable.  Assets subject to capital gains are more logically held outside an IRA since CG taxes are significantly lower.

By harnessing fear and ignorance selling organizations are always getting the unsuspecting to buy stuff they don’t need to buy in a manner not advantageous, or to sell stuff they shouldn’t sell to get the money to buy stuff they shouldn’t buy.

How can one discern this? Look at the volume of ads on TV and calculate the cost of them. Look at the promotional giveaways. The profits for the selling companies are so huge they can give all sorts of things away, promises too. Free shipping, a free safe, a free this, a free that, “at cost”, etc. It reminds me of lending your money to savings banks in accounts in the fifties at 2.5% interest in return for a $9.99 toaster.

What a bunch of malarkey. Again, as usual, caveat emptor, buyer beware.

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