TAKING STOCK: Betting it all on gold

Dear Mr. Berko:

I want to invest $20,000 in gold. I have listened to many radio and TV advertisements in which all of these companies say they sell gold at the cheapest prices. How do I know which firm to pick so I can buy at the cheapest price? I called several of these firms, and each sent me color brochures that are beautiful but don't say anything about how much I have to pay them for buying gold, what the commissions are, the shipping expenses, the insurance and so on. I don't want to make a mistake, because this money is nearly 80 percent of everything I have, including my IRA, which is where the money will come from. I'm buying gold because I believe, as I have been told by every gold professional I've talked to, that there will be a war with Iran. Please help me select the best company from which to buy my gold.

SB in Kankakee, Ill.

Dear SB:

Did you know that if you collected all the gold that has been mined in the entire world during the past 5,207 years and melted it into one yellow cube, it would fill a box measuring 70 feet deep by 70 feet wide by 70 feet high?

But you have to be dumber than a Louisiana fruit fly to put 80 percent of your worldly assets into gold. Still, if you must, do not compound your stupidity and buy gold through those shyster organizations that spend millions on radio and TV advertising, mailing expensive color brochures to potential buyers and then paying smooth phone solicitors 10 percent to 20 percent of your purchase price as a sales commission.

If you must purchase gold, consider SPDR GOLD TRUST (GLD-$161), an exchange traded fund trading on the NYSE. GLD owns $71.2 billion of gold bullion, so the market value of this trust will change daily according to the price of gold. You can invest $20,000, which will buy 122 shares, and the commission cost using Schwab, Fidelity or Vanguard will be less than $10 for the entire $20,000 kit and caboodle.

This makes so much more sense than doing business with those "here by day and gone by night" advertisers on Sirius Radio. There's no markup, and there are no advertising costs, and when you buy GLD, you're purchasing gold at the current market price. And when you want to sell GLD, it's liquid as water. Meanwhile, there are no storage fees, and it does not need to be assayed or insured like gold bars or ingots.

However, on the flip side of that coin, you may be wiser than Balthazar, Melchior and Gaspar because gold could explode to $6,000. Even Bloomberg and Citigroup believe gold could exceed $3,400 an ounce in the next two years. I hope they are wrong.

Citigroup's FX Technicals group recently published "The 12 Charts of Christmas," which contains some blockbuster predictions for the coming year. One of those predictions is that gold will reach $2,400 by the second half of 2012 and will exceed $3,400 in the coming two years. Then Citi goes on to say that it believes gold has the potential to move as high as $6,000, suggesting that recent monetary expansion (printing money via QE 1, QE 2, QE 3 plus Congress' continuing expansion of the money supply) will turn our paper money into "fertilizer." And your congressman is aware of this.

Bloomberg agrees with Citigroup and suggests that the continued printing of new money is significantly devaluing the dollar. But with a cheaper dollar, paying off trillions of dollars of existing debt plus trillions of dollars in new debt to be approved by Congress will be like water dripping off a duck's back.

Some believe war with Iran may be unavoidable and, combined with the expansion of the money supply, provides good reason for much higher gold prices. Congress knows that a major war involving many nations would be wonderful economic stimulus providing good factory jobs and millions of Americans with all sorts of war stuff to make. War is wonderful for business and corporate profits.


Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate website at www.creators.com.

© 2012 Creators Syndicate Inc.

Published: Wed, Mar 28, 2012