photo by motoyen
Written by Dave Young, President of Paragon
We are regularly asked our opinion on whether or not investors should buy gold. We’ve written about it in the past, but I wanted to give you an update of where we stand now.
Gold is being promoted on a host of television shows. There are a nonstop barrage of advertising promoting it.
Usually buying gold through the brokers that are pitching it on TV is the most expensive way to buy it. If I wanted to buy gold, I wouldn’t buy it through those costly pitchmen.
For the record, at Paragon we are not buying gold right now. That doesn’t mean we are anti-gold, it just means we don’t want to buy it right now. Over the years we have bought and sold gold many times when the valuations made sense.
Our reluctance to buy gold doesn’t mean it won’t keep going up from these already stretched levels. Once a trend establishes itself, it can keep running as long as people keep buying.
An upward trend is not a reflection of value, it simply means there are more buyers than sellers. Right now there seems to be no shortage of buyers.
We aren’t buying gold right now because we cannot justify that it is worth what it is selling for. It’s valuations are severely stretched.
Fear is driving gold purchases.
There is uncertainty in the Middle East, issues with Libya, European debt issues, endless U.S. Government spending and the all encompassing fear of inflation.
At Paragon, we make money by buying early in trends and selling when the trends start to roll over. Most trends in the market last between six and 24 months. While we don’t know how much further gold will run before it rolls over, we do know that it is not early in its trend. We also know that it is anything but cheap.
The only way I would buy gold right now would be for a short-term trading play. However, if I really wanted to make a short-term trading play on metals, I would buy silver instead of gold. It tends to follow the same trends as gold, but move a little harder up and down. Bottom line, I would not take a long-term position in gold at these levels.
Paragon Wealth Management is a provider of managed portfolios for individuals and institutions. Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy. All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not a guarantee of future results.
photo by motoyen
Written by Nathan White, CFA
Several people have asked me about gold lately.
They are curious as to whether they should buy it or not. After all, it is hitting new highs. It seems like they all know someone who bought it around $300 an ounce.
I hear radio advertisements all the time that tell people to buy gold because of- the usual litany of fears (i.e., dollar crash, inflation, etc.) The last time I heard things like this was during the tech bubble when everyone wanted Internet gold.
What happened to gold investors last time people were buying for today’s reasons?
A recent article from Bloomberg.com by Nicholas Larkin and Millie Munshi provided some interesting insights. Those who bought near the peak in January 1980 on an inflation-adjusted basis are still 79 percent away from getting their money back. That is about a 44 percent return over 30 years. The average U.S. checking account rose about 92 percent over the same period with stocks and bonds doing much better.
Gold pays no interest, has virtually no industrial use, and you must pay storage fees to hold it.
It is a purely speculative asset which ironically attracts some of the most traditionally conservative type of investors — go figure.
Do not get me wrong, I am not anti-gold, but at this point, the reward is not worth the risk.
It could keep going all the way to $2,000 an ounce for all I know making me look like a fool for writing this, but the contrarian in me does not like to buy high.
Gold is pricing in all of the fears for which people are buying it. At this point, you are just hoping some sucker will be willing to pay a higher price than you before the game ends.
I would be selling gold at this point, not buying.
What do you think? We want to hear your feedback.
Paragon Wealth Management
is a provider of managed portfolios for individuals and institutions.
Although the information included in this report has been obtained from
sources Paragon believes to be reliable, we do not guarantee its
accuracy. All opinions and estimates included in this report
constitute the judgment as of the dates indicated and are subject to
change without notice. This report is for informational purposes only
and is not intended as an offer or solicitation with respect to the
purchase or sale of any security. Past performance is not a guarantee
of future results.