Should I Buy Gold Now?

I’m going to start off this blog by telling you that I’m not going to give you a “Yes” or “No” answer to the question of whether or not you should run out and buy gold. But I will give you some very useful information that you can apply to your financial situation and make an informed decision.

Every other day when I turn on the TV or radio, there is usually an add about a company who wants to buy your gold, or someone who says you need to go out and buy gold because it’s value is going up. Honestly, whether or not you should buy gold depends on both your financial situation and your goals. If you are planning on buying it to make a lot of money, that’s probably not a good idea. If you are thinking about buying it to preserve your money, then you may want to go for it. Let’s go through a brief explanation of why this is…

Gold and the Dollar
You may be surprised to hear that the price of gold goes up when the value of our American dollar goes down and vice versa. When the dollar is worth more, you’ll see the price of gold drop. Why is this? Let’s go back a hundred years and say you have a $20 gold coin, and it will buy you a nice suit. Jump forward to today and a gold coin that is worth much more will still only buy you one nice suit, not two, not three. It has the same purchasing power that it did a hundred years ago even though we’ve seen inflation and you’re holding an $800 piece of gold instead of a $20 piece. Gold simply preserves your purchasing power. It does not make you any more or less wealthy when you buy it. In another hundred years, let’s say that piece of gold is worth $100,000. That may sound great to you to go from $800 to $100,000, but will still only buy you one suit.

Another thing to consider when thinking about buying gold is the value of the dollar. Because of the inverse relationship between the value of gold and the dollar, if you think the value of the dollar is going to go down, then you would probably want to buy gold sooner rather than later because its price will go up. If, however, you think that our dollar is going to get stronger, then you might want to hold off and buy gold later when it is less expensive. All the while, though, keep in mind that it’s not a good way to get rich or create wealth – it’s a way to preserve wealth.

Why Bother?
So if gold is only a way to preserve wealth and it won’t make me rich, then why bother? Why not go put all of my money in the stock market? The truth is, you never know what’s going to happen. If my crystal ball worked, I’d put all of my money in the best spot and live rich for the rest of my life. But since I can’t see the future, I know it is best to spread out my funds so as to minimize risk. That way, if one area fails (like the stock market, where so many people lost so much money a few short years ago), then I still have a cushion with the other areas. If the stock market were to take another big plunge, but I had some money in gold and other economic pivot points (<- other types of investments like real estate, commodities, natural gas, etc.) then I would not feel the full weight of that crash. It’s a good way of spreading out your risk.

I hope this article has been helpful and gives you some information to keep in mind as you consider whether or not to buy gold. Remember, it doesn’t matter what the media is saying or what Bob next door does. You need to consider your own personal financial situation and goals when thinking about any sort of investments.

Tags: gold, investment