If you are "investing" in gold right now you are probably not happy. The gold ride for gold and silver has been brutal. Currently it is trading under $1,400 which is a 26% decline from September 2011 high of $1,900.
As I mentioned on an article I wrote August 2011, Gold Is Not An Investment,
Gold does not qualify as an investment since it does not generate income
by itself when we put our money and capital at risk to acquire it. Gold
has no real intrinsic value, its value is the one assigned to it. I
understand there is a market for gold, just like there is a market for
real estate and stocks. Gold is raw material, it does not produce
income, no dividends, no cash flow. Gold is a chunk of metal while a
stock is ownership in a income generating company. The performance of a
company can be tracked and projected, you cannot do so with gold. The
price of gold is speculative. Commodities are regulated by offer and
demand, the challenge for gold is that we do not know how much gold
really exist therefore the price assigned is speculative, thus it is not
an investment.
Right now there are a lot of people that are confused and wondering, What now?
The problem we have is the speculators and traders going around over-selling the idea of "buy gold now", which in turn it inflates the price and creates a bubble just like the one created for real estate. However, intelligent investors buy gold and silver to accumulate for the long term. They understand that gold is not an investment; it is money. Also, an intelligent investor understands that it is good to hold money as this world moves closer towards global bankruptcy and default.
You must stop playing the rigged casino where prices of precious metals are being controlled by a few by expanding or contracting the supply using ETFs. Ask yourself, why did the price of gold and silver took such a sharp dive last week? Some claim that "improved economic conditions", really? Others claim that the reason for the decline can be attributed to a report issued by Goldman Sachs last week that pointed to lower gold prices.
When looking to hedge your money against the risk of inflation/devaluation you must be careful about doing so through the most popular
gold ETF, or exchange-traded fund, known as the GLD. ETFs negate the fundamental incentive for
hedging your cash supply since individuals cannot take possession of their
investment or have it segregated or accounted for. Also, ETF is not an
investment in actual gold, it does not promise that any gold is in
its trust, and the legal structuring of the ETF
makes it impossible to determine if its gold is being leased, as it
cannot be audited. GLD’s own prospectus, states that there are no written contractual agreements between
subcustodians and the custodian or the trustee, thereby making legal
repercussions impossible should there be misuse or loss of leased gold.
The prospectus also says that “failure by the subcustodians to
exercise due care in the safekeeping of the Trust’s gold could result
in a loss to the Trust." This means that if gold leasing is a component of the
ETF and a default occurs, investors are extremely vulnerable and could
potentially lose all their money if that metal is unable to be
replaced. This is the reason why I recommend that the portion of your portfolio that you are holding in gold by physical gold.
Is it possible that a small group of people are trying to manipulate the gold market to suppress the price of gold making illegal profits at the expense of ill advised investors who buy high and sell low. By suppressing the precious metal now an illusion of hope can be provided to the paper dollar.
There is one monetary principle that you must understand; gold is money, and the dollar is credit-of declining quality. So why do you measure your the "gains " in dollars? Why do you sell your gold for dollars?
