Wednesday, April 7, 2010

A Fool's Errand In Search Of Gold

 Buying gold is a rich man's hedge against inflation. I am not a rich man. But, I see the television ads blanketing Fox News from Goldline and Rosland Capital trumpeting the merits of precious metal investments.

For the life of me, again, speaking as a pauper, I don't understand the concept of shipping gold commodities to my home where I can finger the metals and feel a sense of financial security. Of course, prudence tells me I must first buy a small vault.

On its home page Web site, Goldline features the faces of Fox personalities Glenn Beck --  "Before I started turning you on to Goldline, I wanted to look them in the eye. This is a top notch organization that's been in business since 1960."

And Laura Ingraham -- "Goldline has been helping people buy gold for nearly 50 years. And for half a century, people have relied upon Goldline to help them diversify their portfolios with gold, especially in these tough economic times."

Fox featured guest Mark Levin -- "... I think everyone should consider owning tangible assets like gold. My choice for owning gold is Goldline."

And some guy named Joe Battaglia -- "Tangible assets - from precious metals to beautiful collections of rare coins - will help you solidify your family's wealth and prosper in the years ahead."

Beck and Ingraham's shows are anchored by Goldline ads and the devil in me wants to ask if there is some quid pro quo going on here.

Oh, that guy Battaglia. On the Goldline site, he sounds like a flack. After heralding the price of gold soon to break the $1,500/oz barrier because "the euro fell against the dollar on continuing worries about the Greek debt crisis, gold is now becoming a currency hedge for the Europeans. It is boosting general buying interest in gold." He then urges his readers to call Goldline for its variety of special commodities deals.

Since Goldline has been in the commodities business for 60 years they have a decent track record, but not without some glitches. Immediately under Goldline's Web Site on my search engine was listed this irate consumer, spelling and punctuation errors included:

I bought gold from these scum bags back when it was around $889 a OZ. The slime ball sales man talked me into buying a coin with "intrinsic value". I try to sell my coin today while gold over $1150 a Oz and Goldline tells me i will only get $299 for it! I bought the freaken coin at $374 i should have made at least $30 profit but no, the value magically went down! Screw these people, glad i only bought one coin off these jerks! 

Speaking of crooks, Howard Hunt of Watergate infamy and now a conservative radio talk show host, bangs the drums for Rosland Capital founded in 2008. This complaint may not be representative but is illustrative of the problems that apparently crop up in the business.

On a Web site titled Ripoff Report, the man said after months he still has not received his purchase.. He claimed Rosland's refund policy was only if the coins were counterfeit, that the CEO told him to stop acting like a baby and:

Then I drove over to their address in Santa Monica which is just a front – no one from Rosland Capital is even there. 429 Santa Monica Boulevard Suite 450.
Jeffery Nichols, billed as senior Economic Adviser to Rosland Capital wrote April 5 that gold was being revalued not only by the Europeans but also because of anxiety among U.S. investors with the mounting debt assumed by the U.S. Treasury as a hedge against inflation.

As concerns about the dollar mount, as central banks and foreign investors demand a rising risk premium on U.S. Treasury debt offerings, the effect of Europe's sovereign debt crisis and uncertainty about the future viability of the continent's common currency will have a diminishing effect on the dollar – and gold will be free to reflect its inherent value.

Years ago, the late comedian Groucho Marx had a running gag about the amount of gold buried in Fort Knox, Kentucky. The government says the gold bars stored there are worth $137 billion but our national debt numbers in the trillions of dollars. No independent truth seeker has been inside the 22-ton doors since the Eisenhower administration.

Says the Times of London:

Many gold investors suspect that the US has periodically attempted to flood the market with Fort Knox gold to keep prices low and the dollar high - perhaps through international swap agreements with other central banks - but facts remain scarce and the US Treasury denies that any such meddling has gone on for at least the past decade.

Last 10 years?

President Nixon took the U.S. off the gold standard in 1970 when France and Switzerland demanded to redeem their dollar holdings for gold amid the soaring cost of the Vietnam War.

The only visitors to the Fort Knox vault are government auditors who periodically test the purity of the 147.3 million ounces of gold bars the U.S. values at the bargain basement price of $42.22 per ounce. Like gold diminishes in purity as it ages? 

The U.S. Mint Web site says the standard  gold bar is 7-in. by 3 5/8-in by 1 3/4-in. and weighs 27.5 pounds.

Which takes me back to the beginning. Who in hell wants a bunch of 27.5-lb paper weights adorning your book shelves? Even if gold bars are not for homeowner consumption, the precious metals in the form of coins and trinkets remain a burglar's dream.

Alas, I am as much a bystander of the Goldfingers of the world pandered by Fox News orators as his creator Ian Fleming.

Readers comments are welcome as long as they remain civil. We reserve the right to delete any comments that are vulgar, libelous and totally irrelevant to this posting. -- Jer

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