By Maurice H. Rosen
“Gold, gold, you’re making me old,” is the refrain a friend of mine who is an active commodity trader often vocalizes. He’s lamenting the frequent volatile nature of gold’s short-term price movements. While he’s immersed in gold’s day-to-day price changes, we are better served by focusing on the long term: that is, years ahead, not days.
That is why the present turbulent nature of the economy suggests we set aside some portion of our wealth into physical holdings of gold. As numismatic enthusiasts, we typically have an affinity for the appreciation and worthiness of owning gold. We can credit this to our knowledge of monetary history through the study of our coinage. The noble yellow metal has served humanity well for thousands of years as a measure of wealth storage and preservation as a safeguard from the dangers of government-issued money debasement and overreach.
Since 1975, when U.S. President Gerald R. Ford allowed Americans the right to once again own and trade in gold coins or bullion, new, non-physical forms of taking a position in gold were created. Such “paper gold” vehicles included my friend’s trading of futures contracts on the commodity exchange and, later on, Exchange Traded Funds (ETFs), which attempt to track the price movements of gold.
While these gold derivatives may be attractive vehicles for active traders and savvy investors who are attentive to manage the risks of price volatility, they do not diminish or replace the importance of owning physical gold as a means of insurance and wealth preservation.
Unlike gold in paper form, physical gold in or near your hands is not someone else’s liability. While gold will clearly not solve all our problems as the world economy experiences severe economic and social jolts, it is prudent to hold the only money that has survived in history. In virtually every period of crisis in history, the ownership of physical gold has been a surety. The phrase, “Gold, if you don’t hold it, you don’t own it,” is not something to ignore.