Gold Is Some Scary $#!%–An Analysis

The shakier the market, the more appealing it is to think about hiding away a lot of money for your old age. It’s even more appealing to think about grabbing some gold. The stuff certainly keeps going up in value. If you grabbed some gold Krugerand coins out of South Africa back in 1980, then their worth has gone up around an average of $1,000 each. Your old comic books didn’t appreciate that much. Some stocks sure have, though. And, just as with stocks, some people need to learn that the price of gold can also go down. The value has shot up in these recent hard times, but don’t trust too much in those self-assured sales pitches on the radio.

Right now, for example–meaning right now–gold might not be such a bright idea. Gold is priced in dollars. That means you’re depending on a weak American dollar. The more that America is in debt over dollars, the more your gold is worth. America is in a lot of debt right now. But as things get worse in Europe, the American dollar starts to look better. The European Union is currently suffering some serious problems with the value of the euro–mostly thanks to Greece being pretty much on the tip of bankruptcy. Gold was going for almost $2,000 an ounce in late September. This week, gold dipped down to $1,560 an ounce. That’s a serious hit for guys with vaults full of the stuff.

Yes, that’s a relative thing. Gold has still become way too entrenched as a sure-fire bet. Don’t think about investing in the stuff to make a quick killing. Things will get worse in Europe before they get better. It’s a delicate balancing act between figuring out if Europe or America is going to be in worse shape over the next several years. Gold even dropped by 20%  during the 2008 financial crisis, thanks to lenders making the dollar scarce. There aren’t any reliable rules–except maybe that gold is great for the really rich. Despite all the economic weirdness of the last decade, gold has still appreciated almost 400% since 2001. You just have to be able to afford to hang on to it for that long.

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