Everyone wants a short-term, high-gain investment, but gold investing is principally intended to be a long-term venture.
Posted by Adam King on March 20, 2012
Gold Investing in the Long Term
March 20, 2012 – Everyone wants a short-term, high-gain investment, but gold investing is principally intended to be a long-term venture. Short-term, high-gain investments are by their nature the riskiest ways to use your money. The potential for an immediate, short-term boost is there, but you also have the opportunity to lose your money. Also, no amount of money won is ever enough. You would have to continually invest ever greater amounts of capital is increasingly risky ventures to sustain a winning position.
Of course, no one makes 100 percent accurate forecasts and so everyone would lose some money at some point. The nature of short-term and high-risk is such that the amount of money lost would be very high. While this should deter investors from this particular type of investments, the lure of fast cash seems to supersede the mathematical logic.
Interestingly, hedge funds the world over use gold investing as a hedge, or protection, against their riskiest investments. If MF Global, for example, had hedged its $5.3 billion bet on European sovereign debt, the bank would not have gone bankrupt because the solid investment in gold would have been a position they could fall back on as they unwound themselves from the losses.
For many years, inside market analysts have been advocating a position in gold to hedge personal risks. This is a sensible and a smart option for the average American, given the dynamic of the market. Stocks are up now, but it is hardly enough to erase the performance of the market over the past five years. Trillions of dollars of wealth have been wiped out over the past five years, principally from the middle class. Those losses were incurred in stocks, real estate, and derivatives.
Gold has been up considerably in that time, over 300 percent. In March of 2007, gold hovered between $400 and $500 an ounce. Gold is currently over $1,660 an ounce. I often ask stock investors if they have had a 300 percent return in the last five years. None have dared to answer yes.
But the lesson is clear. Over the long term, the current market is unstable at best and even high prices in stock markets should not be trusted. Let your memory serve you when you think of the risks involved in stock investing. We now have the performance history to back our view of gold as the most solid method of investing and best hedge Americans have in this market.
Stewart Lawson
Senior Staff Writer – Certified Gold Exchange
Categories:
US Gold Market
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