Tuesday, December 23, 2014

Buy Gold and Silver to Protect Yourself Against the Vagaries of Government Paper Money--Really?

Your friendly proprietor is deluged with radio and television ads to buy gold and/or silver bullion and coins to protect himself against the inflationary decline in purchasing power of government-issued fiat paper money.  Whatever the daily price, promoters confidently assert that "gold (or silver) is poised to go higher" next month, next year, or over the next few years.

Gold peaked at $1909 an ounce on August 22, 2011.  It stood at $1177/ounce on December 23, 2014. That is a decline of 38.3%. Profit for the dealer, shipping, and handling puts the loss at about 40%. Silver peaked at $48.58/ounce on April 28, 2011, falling to $15.81 on December 23, 2014--a decline of 67.5%.

What I want to know before investing in gold or silver is whether the merchants stating that gold and silver are protection against an inflationary loss in purchasing power and wealth have reimbursed their customers' losses?

Of course not.  All investments carry some measure of risk.  Caveat emptor!

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