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Golden Moment or Golden Growl?
April 01, 2011



Does gold have a positive or a negative effect on your life?

Seems like a strange question to ask, but bear with me.

Gold is known as a hedge against inflation. Prudent financial advice says 10 percent of one’s investable funds in gold is a good idea.

Why?

Gold is a safe haven. It rises when other investments fall.

It often provides capital gains when Wall Street’s equity shares are dishing out capital losses.

So far so good.

Actress Mae West said too much of a good thing is a pleasure.

Some gold buyers follow West’s advice.

If 10 percent gold is good, 100 percent gold must be great.

As long as the price of the precious metal is rising, these buyers look like geniuses.

But a funny thing happens to these all-in gold buyers. They start to worry. Instead of providing prudent diversification, gold becomes the whole show and a great risk.

Since gold tends to rise in times of panic and uncertainty, the first step for worried all-in gold owners is to look for panic and uncertainty in everyday news.

If that isn’t enough, they try to sow panic and uncertainty among individuals who wouldn’t otherwise give it a thought.

All this is to goose the price of gold and allay their own worries about being concentrated in one asset.

This robs gold of its primary function – that of being a hedge against financial uncertainties and worries.

So gold owners who happen to be worried need to examine the source.

Are the worries hedgeable with gold, or is gold the root source of the worry?



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About the Author
David C. Harper has been a coin collector since 1963. He joined the Krause Publications editorial staff in 1978 and is currently editor of Numismatic News, Bank Note Reporter and World Coin News. He also edits two books annually, North American Coins & Prices and Coin Digest. He is the author of the Class of '63 column that runs each week in Numismatic News. His first bylined numismatic article appeared in the June 1971 issue of Coins Magazine and his various Krause Publications assignments included a stint as editor of the magazine 1980-1983. Harper received a bachelor of science degree from the University of Wisconsin-Oshkosh in 1977. He had a double major of journalism and economics.

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