The year 1980 truly wasn’t that long ago. Legions of people alive today remember it. Investors especially recall one event that made international headlines that year – the price of gold exceeded $800 per ounce. Historically, it had never been that high.
A mere decade earlier, in 1970, the price had been barely $35 per ounce. Then, in 1973, President Ford declared Americans could again personally own gold as an investment. Citizens increased demand by buying gold coins and bars. That year, gold climbed to almost $100. Vintage numismatic coins also gained traction and collectors.
Gold continued to climb through the ‘70s and ‘80s thanks to an oil crisis and political tensions. Then, interest waned. Prices languished. In 1999, gold fell to as low as $255. It didn’t receive much attention until the 9/11 World Trade Center attacks in 2001 and later during the subprime mortgage crisis. Those bolstered demand for tangibles and helped gold climb back to over $800....
That’s pretty much when some forecasters began predicting gold exceeding $1,000 per ounce. Many laughed and rolled their eyes. But, in 2008, it happened. Gold hit $1,023. By 2010 it had risen again and has stayed above $1,000 ever since.
During the early 2000’s, we were treated to an endless parade of gold “experts” on TV and radio advising that gold was sure to soar above $3,000. Maybe even $5,000. Again, we rolled our eyes wondering on what these prognostications are based. Of course, as of last week, gold has quietly climbed above $3,400 per ounce.
Actually, I shouldn’t use the word “quietly.” Gold (and silver) prices are regularly included in financial reports. Much of the value for the metals centers around their industrial uses in electronics. Outside of that, the increasing value is simply ornamental a-lure and speculation. It would be easy to ridicule the price rises for gold given the fact you can’t eat, drink, live in or require gold to exist.
Of course, when it comes to rampant speculation, consider Bitcoin. If there has ever been a house of cards with nothing to support it, it’s Bitcoin. Technically, you can’t even hold it. It’s all digital. And, if you forget your password, it’s 100 percent inaccessible. Gone.
Even with all that intangibility, last week the value of one digital Bitcoin exceeded $110,000. For maximum regret, consider that, in 2010, one Bitcoin could be purchased for less than a penny. In May of that year, the first retail transaction of Bitcoin took place when two pizzas were purchased for (I’m not making this up) 10,000 Bitcoins. Those pizzas today would have a value of $1.1 billion.
Gold hasn’t been nearly that dramatic and maybe it hasn’t been climbing too quietly. On TV, radio and online, it’s common to have economic pundits promoting and selling it. Regularly, everyone from notable TV psychologists; former game show hosts; fictional Hawaiian private eyes; evangelical pastors; and even one-time stand-up comics have been tapped and are promoting the purchasing of physical gold.
What qualifies any of these individuals to be “experts” on precious metals is a mystery to me. As a species, we seem to have a penchant for blindly accepting the word of an actor, sports figure or other recognized individual, even when it comes to something as vital as our finances.
While I’ve been among those to purchase gold over the years, and still am, I’m intrigued with how these spokespeople are now suggesting gold be bought. Some promote companies that sell gold over the phone or online. In one sense that might be fine. But, I noticed the slick materials, websites and mailed promotions many of those companies produce. That can’t be cheap.
To check it out, I went on the sales sites of a few of the firms. Across the board, when a one-ounce gold coin could be purchased from a local dealer near me for around $3,400, firms with celebrity spokespeople were selling them for over $3,700. A $300 difference. On top of that, if purchased with a credit card, add another $100.
I may sound like a broken record, but local coin and bullion dealers seem to be a financially beneficial option for such purchases. Of course, no matter what, shop around and compare prices.
One last thing…as of this month, both Maryland and Washington State have very foolishly joined a few other states in reimposing a sales tax on gold purchases. Wait! It’s money. They are charging a tax to convert one type of money (paper) for another (gold).
Founding fathers are spinning in their graves.
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