Hardly a day goes by when an ageing actor doesn't appear on television extolling the virtues of investing in gold. But is gold everything they hype it up to be or are they simply getting paid without knowing the facts?
Gold “bugs “have always claimed it’s a hedge against inflation but, as you can see by the chart below, adjusted for inflation, gold would have had to you buying second hand clothes as the local Sally Anne when compared to stocks and bonds.
So why is this the case? Part of the answer lies in the fact that gold can’t buy anything. Try paying for your loaf of bread with some gold dust, and before long the white coats will be taking you to La La land.
Gold has absolutely no intrinsic value nor is it productive. On the other hand when you own a stock you own a piece of a business that produces goods and services.
Meanwhile gold remains locked up beneath 5th avenue in Manhattan, Fort Knox and in the private vaults of the wealthy in Switzerland. In the meantime, companies such as Proctor and Gamble, Tim Hortons, Loblaw’s and hundreds more are not only paying increasing dividends but providing meaningful wealth in the form of capital gains.
The idea that gold is a flight to safety is simply an exaggeration as gold prices fluctuates widely, the price of which is determined by a handful of people every day.
Did you know that Deutsche bank was recently found guilty of manipulating gold and silver prices over the past decade? And, according to court documents, the Bank of Nova Scotia was called out as one of their co-conspirators .To date, BNS has yet to have their date in court but when they do it should be interesting.
And if that’s not enough, most investors own paper gold bought through mutual and exchange traded fund. These gold contracts stipulate they never have to provide you with the physical gold. I guess so, because according to pundits the number of ounces of paper gold sold exceeds the amount of gold ever mined in history by 100 fold!
In my opinion gold is not a hedge against inflation, is highly speculative and if you must own own gold, buy the physical gold only. Until gold becomes an official currency once again if ever, I will stick to Kleenex and Timbits.
Category: Bonds, Economics, Gold and Gold Investing, Portfolio Management, StocksBy Joshua KennonJuly 26, 201135
Robert Roby, CPCA CDS.
Senior Wealth Advisor
IPC SECURITIES INC.
This commentary is provided as a general source of information and is intended for Canadian residents only. The views and opinions expressed in this commentary may not necessarily reflect those of IPC Securities Corporation.