Get the Facts About Gold Before You Buy

Gold has been a hot topic in the media lately. Everywhere you go you hear about people stockpiling gold, and companies are begging you to send in your old gold for cash. Before you decide to buy gold, it is good to know the pros and cons, the ins and outs. We want to dispel the myths the media has put out there and give you a general overview of why you would buy gold and what to do with it (keep in mind, we are not advising you here to buy or not to buy gold. It is your decision and something we feel you should discuss with your financial advisor before you invest).

Gold is one of the economic pivot points that you can invest in to diversify. It’s a good way to spread out your money. Economic pivot points are the many places you can invest, including things like stocks, bonds, real estate, oil and gas, commodities, and gold, among others.

Basically, putting your money in gold is a way to protect yourself against inflation over a long period of time or in case our dollar goes away. Our country has a specific amount value in it.  This value is represented by buildings, roads, business, etc. – any kind of improvements. The dollar must go out and make something better by work in order to increase value.  For example, a vacant lot might be worth $100,000.  A person might spend $300,000 building a building on the lot.  The total cost at this point is $400,000, but if the lot and building were put up for sale, they might be sold for $500,000.  The lot has thus been improved on and has increased in value. Money has been created and so has value to match the money that was created.  If money is created when there is no improvement of value, then the printing of the money will only be able to represent the value that already exists – thus decreasing the dollars that are in existence at this point.  Our dollar gets its value based on the improvements that have been made in this country. If dollars are printed when work has not been done, and value has thus not been created, then the newly printed dollars will only water down the value of the dollars in existence already.

Gold used to be the standard of value.  The paper dollar was only brought into existence to represent the value of gold that you owned that was stored in the bank.  When they took us off of the gold standard, we were left with only paper we were holding.  If it no longer represented the gold we had in the bank what did it represent?  It represented the value of the country.  Gold, however, still maintains its intrinsic value.  By being off the gold standard, the banking system was able to begin creating more dollars than the amount of available gold they were supposed to represent.

Look at it this way. Say many, many years ago you could buy a gold coin for $20. That gold coin could be used to buy you a new suit. Today, you can still use a gold coin to buy a new suit. However, you would need $800 to buy that gold coin. It is our dollar that has deflated, so it takes more of them to buy the same thing.

If our dollar goes away, which could happen at some point in the future (though we don’t know when), then gold is a safe investment because it is tangible, and you will be able to use it. However, there are some things that you should be aware of when purchasing gold. First is the Presidential Executive Order 6102 which empowers the acting President of the USA to demand US citizens to surrender to a member bank of the Federal Reserve any gold coins, gold bullion and gold certificates in their possession. This Order has been used before. In 1933 President Roosevelt issued the order in an effort to boost the economy. If the President calls in the gold, you are required by law to turn it in! There are a couple of exceptions where you would not have to turn it in, and those include “graded” coins that have a 15% or higher “collector’s value” and were minted before 1933. They must be graded MS60 (MS = Mint State) or higher, or AU50 (AU = Almost Uncirculated) or higher. These coins do not have to be turned in, so it is a good idea when investing in gold to buy something that you would be able to hang onto. Otherwise you have to turn them in for whatever price our government sets.

When purchasing gold coins, do so from a reputable dealer capable of certifying the grade of coins you buy. Make sure you are getting what you expect. And as a general rule, you don’t want to take your gold to a safety deposit box because if the banks close you will not be able to get in to get your gold. So you’ll want to save it somewhere else, but you don’t want to tell everyone where you are hiding them, or even that you are doing it – unfortunately people have been known to do all sorts of things when they are desperate to feed their families.

So if you are thinking of buying gold, be sure to give us a call! We would be happy to discuss the pros, cons, ins and outs of investing your money in gold. Call us at 303-462-2001.

Tags: gold, investment