Tuesday, May 6, 2008

Why I'm Not Investing In Gold

It's the gold rush all over again! No, they haven't discovered gold in Missouri, not to my knowledge anyway. I'm talking about the hype in the gold market since prices have soared. Everybody seems to be rushing in to gold, with some reasoning it is a hedge against losses in the value of the dollar or the stock market. Sounds reasonable, the price certainly has skyrocketed as the dollar dropped and markets went into turmoil. However, I think that now is not the time to be investing in gold. If you wanted to invest in gold, the time to invest would have been when gold was $300 an ounce instead of near a thousand dollars an ounce. If I had bought gold then, I would be selling now. Perhaps the price will continue to climb, maybe even going over $1,500 or as some are predicting, $2,000 an ounce although I tend to doubt that.

I think gold is at or near the top. When everyone wants in, that's usually a good time to exit. With recent buzz that the Federal Reserve may be through cutting interest rates and may begin to actively fight inflation and work on strengthening the dollar, gold prices are likely facing a correction. I doubt we'll see $300 an ounce again any time soon, but I do see prices dropping dramatically when the Fed's shift their focus to fighting inflation. Like I've mentioned in previous articles, this has all happened before. I was there for the last big run up in gold and silver prices and got caught up in the whole ordeal at exactly the wrong time. This time around, my investment strategy kept me away from precious metals, since I tend to invest for current income as well as future growth and income. While it is possible to make some fantastic gains in gold trading, it's not something that particularly interests me, so I didn't want to spend the time learning the business. But one thing I'm pretty sure of is, now is definitely not the time to be getting in.

I suppose, in the interests of full disclosure, I should mention that I do hold silver as part of my investment portfolio, in the form of silver coins. I never really set out to be a coin collector, but I have built up quite a collection over the years. I'm not seriously expecting a great deal of return on those either, but I like the coins and occasionally add to my collection.

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