Tuesday, June 8, 2010

MSNBC's John Schoen Counsels Caution In Gold Buying

MSNBC is, of course, part of the mainstream media. Yet, an article by John W. Schoen is fairly even-handed. He starts off by conceding that gold may well rise further, but his caution is based upon the volatility of gold.
Were you smart enough to sell your tech stocks in March 2000? Or your house in July 2006? If so, you should seriously consider buying some gold. A lot of it.

But if — like most people — you don't have the gift for knowing when a financial bubble is about to burst, you may want to take a deep breath before calling the 800-number on that infomercial, selling your jewelry at your friend's "gold party" or converting 5 percent of your hard-earned savings into shiny Maple Leaf gold coins.
Note how he conflated buying and sellling, as both are popular right now. The article points out that any purchase of physical gold is likely to entail a short-term loss because of mark-ups and the spread. He doesn't say so explicitly, but he seems to suggest going into a gold ETF so as to minimize the spreads. Unlike the typical MSM commentator, who ridicules the end-game scenario, Schoen dispenses some common sense about it:
Some gold investors say owning the precious metal gives them peace of mind. Still, if you're worried that your community is headed for a period of social unrest worthy of a Cormac McCarthy novel, you might be better off investing in firearms.

“I don't think anyone is going to go into a store and exchange an American Eagle worth $1,300 for a bottle of water,” Tom Pawlicki, a gold analyst at MF Global.

Junk silver is another matter, of course.

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