Well CNN finally commented on the surge in Gold prices this morning at about 7:20 and once again the mainstream media swung and missed completely reminding people not to rely on TV news for financial information.
The reporter excitedly stated that gold was up and, it certainly sounded to me as if she said it had gone up “1/3 of one percent” in the past year. Gold is actually up about 36%, giving me personally a LOT of confidence that the rest of the report was going to be just ever so accurate.
Perhaps I misheard but I wasn’t disappointed as she went through the list of reasons why people are buying gold, focusing on the tangible assets aspect and central bank purchases.
But the parting shot was when she pointed out that in 1980 price terms the high value for gold would actually be a bit over $2,000 today, not the $1,237.10 where it closed in New York yesterday.
Unfortunately the report failed to make the gigantic baby step leap of pointing out that a major reason gold is now climbing is because of inflation. Not fear of inflation, but actual inflation – that is what it means that gold at about $800 in 1980 is the “equivalent” of gold today at over $2000.
It now takes a lot more green printed paper to buy an ounce of gold, more than $1,200 singles because the value of the dollar has plunged in the past decade and is likely to drop much further.
The search for something which will have tangible value as governments around the world struggle with amazing deficits is an important factor in gold’s rise, but that also is inflation because they are currently coping by printing more paper backed by promises. Promises which even the United States government has defaulted on in the past by devaluing the currency and thus making the debt easier to pay off.
The simple fact is that gold has been the most stable and reliable investment of the past decade when you compare the buying power of gold to stock averages and even real estate. It took as little as $255.30 to buy an ounce of gold one day in 2000 and yesterday it would have taken $1,237.10.
Just in the last year gold went from a low of $909.10 to $1,237.10 and, as CNN’s report showed (even though they failed to mention it explicitly) that is even higher when you factor in “inflation”.
But whild gold is probably still a great investment, what many people who buy gold bullion tend to forget is that the U.S. has confiscated gold in the past, most notably when the country was faced with giant deficits, a banking crisis, world-wide collapse of business, and high unemployment.
An even better place to invest might be silver which is also surging but lagging behind the historical relationship to gold prices and which the government has never attempted to confiscate.
Silver is now priced at about $19.40 per ounce.
Another alternative investment is in gold mines which have the gold in the ground where it won’t be confiscated. Gold mining stocks are far undervalued compared to their prices just a few years ago, especially since gold is reaching news almost daily.
For historical and daily (spot) gold pricing, visit http://www.kitco.com/charts/livegold.html.
For my earlier stories related to buying and selling gold, see:
Warning Against Buying Fake Gold Coins as An Investment
Fools and their Money – Fool’s Gold!
and more links on my NewsBlaze home page: