Gold: Paper or the Real Deal? (Part 1)
During my lifetime I've seen gold go from $35.00 (USD) a troy ounce to nearly $2,000. That's quite a shift and there were many ups and down in the spot price of gold along the way. There are a lot of ways to buy and sell gold these days and therein lies the heart of this post.
Been Around the Block
Before I retired from my "regular" job in 2016, I had a couple of work associates who knew absolutely nothing about gold mining (small-scale or commercial) but who thought they knew a great deal about how to buy and sell gold. In fact, these folks were "trading" gold and gold shares and stocks online in almost frenetic fashion. Since I was the only resident gold miner around, these individuals would often pick my brain about buying and trading gold as if I were an expert in these matters. In point of fact I am not an expert when it comes "digital" gold and the hustle involved buying and trading it, but I've been around the block long enough to know the difference between real gold and what I call "paper" gold. And let me say right here and now that "Never the twain shall meet."
Playing the Paper Game
There are a couple of primary ways to join the lemmings who think they're gonna strike it rich buying and trading paper gold online or with their brokers or investment "counselors:"
1) You can buy gold sight unseen and without taking actual possession of it from any number of gold "investment" companies out there; or
2) You can buy mining stocks.
Sure, there are numerous little variations to these two main themes but both of them leave a lot to be desired. If you don't understand why this is so, let me help you illuminate that little light bulb in your head. First off, I think anyone who buys paper gold for the purposes of re-selling it when the spot price increases without taking actual possession of the yellow metal they've shelled out folding green for is just plain loco. Yep, crazier than a coot and here's why. Can you say "scam?" Or can you understand the potential to be scammed in a deal like this? Although many companies who sell paper gold this way are essentially reputable, some are not. And even the reputable companies are selling you gold in amounts of 1/10 of a troy ounce on up based on gold reserves (actual gold) held in another country! Yep, you heard right. So if you play this paper game in the good 'ol United States the actual gold you bought might be sitting in a vault in Canada or Switzerland or God knows where else. There are reasons why paper gold companies do this and I'll leave it to your imagination to figure out why (although that shouldn't be too hard for you).
It Doesn't Get Any Better...
So let's see...in this deal you pay good money for gold that exists only on paper (or electronically) with the assumption on your part that the yellow metal you're "investing" in is actually sitting stacked up in a bank vault in, let's say, Zimbabwe. Then you trade or sell it on paper (or electronically) and add or subtract to your gold "investment" as the spot price of gold grows or diminishes on a daily or weekly or monthly basis. All on paper or digitally. Hell's bells pard! If you're a heavy hitter and have dumped a sizable chunk of your life savings into this gig and are a "shrewd" trader, then by God you just might strike 'er rich. On paper or electronically, that is. Now to be fair here, reputable paper gold companies will allow you to take physical possession of the unseen gold you've purchased from them with certain "restrictions" or added fees. But at least you can get your sweaty little palms on that gold should push come to shove. Theoretically speaking, that is. But with a disreputable outfit or a tried and true scammer you're gonna end up crying the blues for a long, long time after you find out all that money you invested in paper or digitally went bye bye when you try to cash out, literally or figuratively. Why? Well the gold reserves that supposedly backed up your electronic or paper investments never existed in the first place. There was no bank vault, even in Zimbabwe. You see, all that hustler had to do was play on your greed, give you special "inside" info, and cut you a deal on your paper gold purchases on the front end. Easy score, brothers and sisters. Real money for worthless paper or digital impulses. It doesn't get any better than that, right?
So listen to me. Even if you don't want to listen to anything else I have to say in this blog. If you're gonna buy gold as an investment or a hedge against the zombie apocalypse that's coming, ALWAYS TAKE PHYSICAL POSSESSION OF THAT GOLD. Always. Bury it in PVC pipe in your backyard or rat hole it away in that doomsday "prepper" bunker you built in the Ozarks. Hell, even take a big risk and shove it into a safety deposit box or stash it in your freezer. Just take physical possession of it. And I don't give a good G-damn if it's only a 1/10 troy ounce "round" or a 100-ounce bar. Ye gods and little fishes people! Don't be brain dead like those good folks I used to work with and play with fire using only paper.
There's more to come, so stay tuned.
(c) Jim Rocha 2018
Questions? E-mail me at firstname.lastname@example.org