Gold May Be a Good Hedge, But it Doesn't Taste Very Good!

in Gold

When I think of gold, I am reminded of the cheesy 1970's and early 80's -- the day of big hair bands, platform shoes, disco dancing, and cheap salesmen with gold teeth, gold necklaces, gold bracelets, chains, ropes, and gold-inlaid plaid jackets. "Have I got a deal for you!" the salesman would say as he flashed his gold tooth and winked, both fingers pointed at you like a couple of six-shooters.

Pretty Cheesy.

I have to admit it though, cheesy or not, I was part of the gold culture. In fact, I still have my gold rope chain and arrowhead nugget in my dresser drawer; I know because I just spent an hour looking for it. Its funny, in today's world of bead necklaces and tattoos, grunge dressing and pants-that-are-falling-off-to-look-cool-but-just-makes-you-look-like-an-idiot fashion, nobody seems to appreciate gold anymore, at least not as an adornment. It's rare that you see somebody wearing yellow gold nowadays (and if you do, odds are they are in their 40's or better).

But Mr. T. may have been clairvoyant after all, or at least he was on to something. Why? Because even though people don't wear much gold anymore, they are certainly buying it in unprecedented amounts today.

But they aren't wearing it, they're hoarding it. This gold is for safes, not for teeth.

According to Reuters, consumer demand for gold is off the charts ("Mints coin it as consumers scramble for gold," March 31st.) "Gold coin production is being cranked up in mints around the world to satisfy customers believing the assets may be immune to the global financial crisis," note Reuters, citing that demand for the American one-ounce Golden Eagle was up 400 percent in 2008.

"The demand for gold and silver has been unprecedented," said Carla Coolman, a spokeswoman at the US Mint. And according to most experts in the field, the demand for gold, which is teasing the $1000.00 per ounce threshold, will continue to rise at hair raising levels in 2009. Most mints admit that they are struggling to keep production at a level where it can meet the ever burgeoning demand. Indeed, Gerald Celente, an iconoclast and futurist with an impressive track record of seeing into the future, is betting the farm that gold will reach $2000.00 per ounce by 2012, (see Trends Journal 2009).

Why the sudden interest, (read obsession) for gold and silver?

Well, obviously people are scared; they are scared that the economy will continue to spiral downward, inflation will continue to rise and devalue the dollar (as well as their savings), banks will fail and take their money with them, and so on. People just flat don't seem to trust institutions like they once did, and they are converting their hard-earned dollars into commodities of real and enduring value -- gold and silver -- and keeping it in safekeeping. (What they intend to do with this gold should the economy really collapse has yet to be clearly defined).

While it is well beyond my expertise to give financial advice to my readers and customers, and I certainly do support any effort to invest money in commodities of real value, I do want to throw a dash of cold water onto the gold fever for a minute...

Why would I want to put the kabosh on gold and silver?

Because, quite frankly, you can't eat, nor can you drink, precious metals. You can just look at them...

As people take measures to become reasonably prepared for our uncertain future, and there are a lot of reasons why we should be taking preparation seriously (See my article titled: Readiness & Survival in an Uncertain World, Top 5 Trends You Can't Escape!), it is important that we think first about the emergency supplies we should have, and then think about the supplies we could have. Hedging your bets on a devaluing dollar is one thing; starving because you have no food or water stored away during a significant depression is quite another.

When I was in the fire service (21 years as a professional firefighter), we used to break down complex tasks into acronyms of order, this made them easy to remember and simple to apply. For example, at a medical call, every paramedic is trained to follow the ABC's as their initial triage order: A-Airway, is it open and is the patient breathing; B-Breathing, is the patient moving air and does he need supplemental oxygen; and C- Circulation, is the blood moving and the heart working, because no amount of oxygen is going to help if the heart isn't pumping it around. It's tempting to walk up to a patient with a major fracture of the femur (the long bone of the leg and a serious injury), and immediately begin bandaging and splinting. However, if the airway is closed and the patient isn't breathing, it doesn't matter that you controlled bleeding of the leg, the patient is still going to die.

Why the fire service analogy? Because your limited financial resources should be put through the ABC's of emergency preparedness before you begin buying gold and sliver. If you don't your patient likely will not make it...but in this case, the patient is you (or your family).

Here are the ABC's of Emergency Preparedness in these extremely uncertain times and what you should be thinking about before you spend your money on gold and silver:

A: Non-perishable food supplies and water storage and treatment capabilities.
B: First Aid Kits and Hygiene Products.
C: Survival Equipment and Off-The-Grid Supplies.

(For a detailed description of the ABC's of Emergency Preparedness, see my article: Readiness & Survival in an Uncertain World, 3 Things You Can Do Right Now! )

For the price of two ounces of gold, you can purchase enough ABC's of Emergency Preparedness to equip you and a family of 4 for one year! That's one year of food, water storage and treatment capability, necessary survival equipment and off-the-grid supplies. One Year! That's a lot of insurance for the price of a coin or two...

Never forget Maslow's Hierarchy of needs: need Number One is always survival -- food, water, shelter. The human body can only last a few days without water; a few weeks without food; a few weeks without shelter; a few months without equipment and supplies.

But the human body can last a lifetime without gold or silver...Now there is something to think about as you watch the Monex ticker.

Stay Safe. Stay Informed. Stay Prepared.

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Kevin Baum has 1 articles online

Kevin Baum is co-founder of SurvivalOutpost.com, an Austin-based on-line business specializing in Emergency Preparedness Supplies, Non-perishable Survival Food and Survival Equipment for individuals, families and businesses. The SurvivalOutpost philosophy is to balance reason with readiness, and to encourage knowledge, independence and self-sufficiency as tools to survive in an increasingly uncertain world.

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Gold May Be a Good Hedge, But it Doesn't Taste Very Good!

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This article was published on 2010/04/04