Why Buy Gold When it's So High?

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Jason Whitney, CEO and President of First Fidelity Reserve, states his views on the high price of gold. The common wisdom is that the seemingly astronomical price of $1,500 per ounce is probably just an interim value point on the way to even higher prices.

It is an inarguable fact

Jason Whitney, CEO and President of First Fidelity Reserve, a leading coin and precious-metals dealer in Beaumont, Texas, answers questions about the high price of gold. "Why buy gold when it's so high? This is typically the first question an investor asks when considering purchasing gold," states Whitney. That question he has heard more times then he can remember. "There are numerous factors to consider," he says. "The first factor is the actual price of gold in today's dollars, as compared to its price in years past."

Whitney explains, "While the projected price of $1,500 an ounce in the not-too-distant future seems quite high, compare it to 1980, when the price of gold peaked at $850. That $850 would actually be closer to $2,500 in today's dollars! And the When you consider that U.S. coinage was tied to gold prior to 1933, and the price of gold was stable at $20.67 per ounce, the historical growth has been phenomenal, and there's every reason to believe in its potential for a continued increase in value."

Another factor is that no matter how high the price seems now, it is almost certain to go even higher, due to the previously-noted substantial increase in demand for gold. Whether instigated by the falling value of the dollar, by the surge in private gold ownership domestically and abroad, or in response to a concerted multi-national effort to "de-dollarize" the world economy, it's a safe bet that increased demand will force the price of gold up even more than it already has.

"It is an inarguable fact," says Mr. Whitney, "that while additional dollars can be printed indefinitely, in spite of the devaluing effect of such actions, the world's supply of gold is finite, and it's conceivable that it may one day simply run out. Even if the end of supply is a couple hundred years in the future, it is human nature to gather and hoard anything of even minimal value. This emotional factor plays no small part in the fluctuation of the dollar's value, as well as in the selling price of an ounce of gold. The more uneasy the world gets about the dollar's stability, or the closer some perceive that we are getting to the end of the gold supply, the higher the price of this precious metal will go."

One of the inevitable domino effects will be an upsurge in advertisements by dealers in bullion and gold coins. And while it is relatively easy to establish the value of an ounce of gold itself, the task of determining the value of a gold coin, over and above its worth as precious metal, is much more of a challenge, requiring extensive knowledge above that required for trading in commonly valued commodities such as precious metals. "The $1,000-an-ounce gold price that people gasp at today could well constitute an unimaginable bargain next year, or even next month," says Mr. Whitney. "At the same time, the 'incredible bargain' they think we got on a supposedly rare numismatic could end up being worth no more than - or even less than - its purchase price. While we cannot determine for certain the future value of anything, it only makes sense to know as much as possible about your investments, even if that means knowing whom to trust to help you make your decisions."

It is on the latter subject that Jason Whitney becomes most animated in his responses. He says, "I am continually amazed at how readily some people will throw their money at things that have little or no real collector value, simply because they saw it discussed in a glossy magazine ad or on an infomercial. First Fidelity Reserve strives to educate our clients, because we know that the more an investor knows going in, the happier they will be with their investments down the road. And since it's infinitely more pleasant dealing with a happy client than a disappointed oneā€¦ well, it just pays for us to do whatever it takes to make sure our clients stay happy!"

Whether the dollar is under attack, or just being re-evaluated in comparison to outside factors; whether gold will be the new oil, or merely a stable measure of wealth, what it all really comes down to is this: where will the wise investor place his or her bets? In a rapidly changing global economy, it would seem that few things are more precious than gold.

For more information about First Fidelity Reserve visit their web site at http://www.firstfidelityreserve.com, or call them at 1-800-336-1630.


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