An outlook on gold and silver markets
Hindsight on what is happening to gold and silver concerns several readers. One writes that she inherited a number of gold and sterling silver items -- too late, she says, to take advantage of top prices. Now, she wonders what to do with them. Should she hold them in anticipation of another price rise? How can she store them when safe-deposit boxes are not available and insurance won't cover their full expected value?
Another reader watched the rush to sell "scrap" gold and bought a gold certificate. He watched the price rise and then fall and now wonders how to get out, because he is retired and lives mainly on interest. He wonders if gold will ever again reach $800 an ounce -- and when.
Different answers apply to these two readers, but for reasons other than those they might consider pertinent. The woman with her inherited gold and silver collectibles is in an ideal position to hedge against inflation. Rather than rush into a sale of her gold and sterling at 50 to 80 percent of their spot-market price, she should consider holding it. Many persons attempt to collect things of value for their rarity and potentially higher value later. Art, depression glass, gemstones, stamps, and numismatic coins are collectibles. But gold and sterling silver pieces can be collectibles, too.
Holding onto gold and silver can be a problem, as she has already discovered. Two risks are involved -- theft and loss from fire or other physical damage. A safe-deposit box big enough to hold bulky pieces would be a solution, but a shortage of boxes and their cost rule them out for most items. My suggestion is to bury valuables not used regularly in a watertight container where only the owner will know the location. It could be a backyard under a bush. Keep the exact location in a safe-deposit box out of the house. Two sources of suitable containers are Outdoor Food & Equipment, Box 4727, Carson, Calif. 90749 and Investment Rarities, One Appletree Square, Minneapolis, Minn. 55420.
The reader who was swept up in the desire for woning gold should not have bought a gold certificate. If he depends on income from his investments, then gold is not suitable. You only make money buying gold if you sell it later at a profit after commisions, which tend to be greater than for stocks or bonds. Gold is a long-term investment, not a short-term speculation. Fortunately for this reader, the price of gold has once again climbed higher than the price he paid. He can get out without losing, and I suggest he sell and move the resulting cash into an income-producing investment.
Both readers asked if the price of gold will ever reach $850 again. And will silver reach $48? Chances are that, given our continuing inflation and ts concurrent destruction of paper money values, both gold and silver will climb far higher than past peaks when priced in dollars. When gold is priced in Swiss fancs or German marks, who knows how high it might reach? Gold should be considered as a long-term store of Value and not primarily as a medium for investment gain. Gold shares are more appropriate for investment. Gold is a hedge against inflation, but only over a long erm. Prices are unpredictable; thus, if you wish to acquire either gold or silver, buying small amounts regularly as a form of dollar averaging will likely produce better results than attempting to forecast price movements. Because of silver's industrial uses, some long-range forecastes believe its price will someday appraoch the price of gold.
The rush to sell scrap gold ans silver surprised some analysts. High prices will bring gold and silver out of the attic. The laws of supply and demand are still functioning. I wouldn't be in any great rush to dispose of family holdings of gold and silver until well into retirement. These holdings could be a means of countering the excessive reliance on fixed-income securities, such as certificates of deposit and US Treasury bonds.