Is Gold Really a Safe Investment?

by Robert Haskell

Although owning gold can be a sound part of an investment portfolio, there are risks that need to be carefully considered before making this investment. Savvy investors may understand the fraud risks but often overlooked are the more practical aspects of gold ownership.

Of major concern are investors that buy into gold as a substitute for the greenback because they feel gold will be one of the few investments that will still have any value in the event of a catastrophic market collapse. While the national debt and over-spending are a major concern, gold as a complete substitute for paper money also carries significant risks. If the value of USD (US Dollar) completely fell, gold would not be as safe as one would expect. The exchange rate would likely be abysmal. Do you really want to trade gold coins for basic commodities? With no practical way to fully breakdown the currency into lesser denominations, many exchanges would be very uneven.

Likewise, gold ownership can potentially even make you and your household a target. Unfortunately, it is only human nature to want to share what we feel are good investments with others. Even if every person you communicate with is trustworthy, all it takes is one overhearing you that is not while chatting at a social event or getting a haircut and you could have a major problem on your hands.

Of course, these are not the only concerns you should have when thinking about making a gold investment. The product is bulky and must be carefully scrutinized to ensure you are dealing with real gold and not imitation gold or simply gold-plating. Likewise, there are a number of known scams that have been going around involving gold. Seniors and novices are often targeted by charlatans with no remorse. In one recent case, a woman reported by ABC News even lost her 700K life savings to an unscrupulous crook claiming to be an undercover agent working for the government.

Despite the risks, gold ownership can be rewarding provided you do your due diligence. It may not be my preference but for some, the rewards outweigh the risks. Just make sure you have enough insurance if you plan on keeping the gold on-site and factor this into the total cost of the investment. As an alternative, a gold backed IRA account or safe deposit box may be useful but nothing is 100% without risk.

Nevertheless, there are plenty of well-respected and trustworthy financial institutions that deal with gold but if you cannot keep this to yourself and limit that knowledge to an absolute need-to-know basis, then maybe investing in gold is not for you.