Listen to any news program on terrestrial or satellite radio recently you’ve no doubt heard a direct response commercial touting reasons to buy gold now. With the stock market as volatile as it’s ever been the pitch is aimed at nervous investors who are beside themselves with what to do next.
Gold has always had special allure for many people and it is used not only for jewelry but for many industrial applications. In fact all the gold mined in the world in history would fit in a cube 60 feet on each side, that is to say, it would fit in the space underneath the Eiffel Tower. Gold occurs as part of the earth’s crust at approximately .0025 parts per million, and is widely distributed throughout the world. Gold also occurs in seawater, to the tune of approximately 10 parts of gold per trillion parts of water, concentrations too small to profitably extract.
The price of gold spiked to nearly $ 1,800 an ounce Thursday and an opportune direct marketer had spots in the can and ready to go. I listened to it a couple of times over the past few days, the spot points out that you could have bought gold for $ 300 an ounce back in 1998 and even $ 1,200 an ounce just a couple of years ago.
There are some financial pundits that have surmised the price of gold could rise upwards of $ 2,000 an ounce on its way to $ 3,000 or even $ 4,000 an ounce. Since I am not a speculative investor I will refrain from commenting on the likelihood of that occurrence. I will note that yesterday the CME (Chicago Mercantile Exchange) raised the margin requirements for gold futures http://nyti.ms/nfuhwg which helped knock the price of gold down 3% for the day. You have to have a strong stomach to ride that kind of drop down the tracks.
Here’s what does bother me – preying on average people’s fears and lack of knowledge when it comes to investing in general and investing in a commodity such as gold (or any precious metal for that matter). Most of the ads for investment vehicles have some sort of accompanying disclaimer about the risks of investing – right before the phone number and URL is barked several times, but this particular ad doesn’t have the disclaimer.
I guess one could be impressed with the timeliness of this advertiser in buying spot radio time during this current stock market roller coaster ride. Yet what is worrisome is the possibility or even probability that non-professional investing people do not really understand how fast the price of a precious metal like gold can drop. (And yes I realize it can also rise).
The point I am making is that a making a move into a precious metal like gold that has appreciated dramatically over the past two plus years (nearly 50%) requires careful consideration and attention both before and after the fact.
The attempted frenzy being created by the recent radio ads I refer to just seems cheesy and sleazy to me.
How about you? What do you think?