Gold prices are again nearing a record high. Should a baby boomer buy gold now? If you own gold, should you sell? Are there easy or obvious answers to these investing questions? I think not.
But why do they need gold? Is our economy going down for the count? Will the dollar become worthless?
The pessimists think that way so they buy gold – even at record high prices – to prepare for the worst.
But let’s think about that doomsday strategy for a minute.
Let’s assume a complete collapse of our economy and currency. Now you can’t use your dollars to buy food or fuel. So someone comes to you with gold and says “I don’t have any food. Can I give you some of my gold for some of your food?” You think “What am I going to do with more gold? I need fuel and food more than gold.” So you reply: “I don’t need your gold. I need fuel for my truck and heater. I will trade you some of my extra food for some of your extra fuel.” A deal is done with no gold involved.
My point is that if the economy and dollar collapse, gold will not automatically become the currency of choice, or at all. Instead, a barter system will evolve, with people trading their own needs for another person’s needs. You can’t eat or heat your home with gold. It will sit there in your gold vault, looking nice but unused.
The more rational gold investors will say, “I’m not buying gold to save me from economic collapse. I’m buying it to preserve my wealth.” And your wealth is measured in …. dollars?
OK, then tell me – when do you sell to get those dollars? Now, at record highs, when gold has given you wealth? Or do you wait until the economic news is good again, at which time gold prices may go into free-fall? So much for preserving your wealth for the good times.
I’ve had many people try to explain to me when and why we should buy gold. I’ve yet to hear a consistent, rational explanation of when and why we should sell it. If you can’t explain that to me, I’m not buying.
If you tell me to buy when the prices fall and sell when bad news forces prices up again, I can understand that. But that’s not what most gold investors/speculators seem to do. They think “I shouldn’t sell now – there is bad news everywhere I turn.” And so it goes.
What about you? Do you have a rational plan for using gold as part of a retirement portfolio?