Clark Howard

Warning: How You Should NOT Buy Gold

Gold has been a fashionable purchase as of late as Americans look for some stability to counteract the ebbs and flows of the U.S. dollar.

When they're in stock, gold bars at places like Costco have been known to sell out after being advertised. What's not talked about as much is the resale value of gold once you've bought it.

Check Out This Golden Advice From Clark Howard

A listener to the Clark Howard Podcast shared that he was trying to get a fair price on branded gold and silver coins that his father purchased before he died. Unfortunately, the company that his father bought the coins from has been less than helpful in striking an equitable deal.

Wain in Georgia wrote:

"My father was looking to buy some gold and ended up purchasing $50,000 of coins. He recently passed away and my mom asked me to see if I could sell them. My sister said that when my Dad received the coins, it wasn't what he thought he was buying (Gold). It appears they sell Gold and Silver coins as bundles and the Gold coins are "branded". The packaging then would appear to allow them to sell way beyond commodity pricing. It also appears difficult to sell the coins and the company has to date been nonresponsive when I reached out. Fortunately, my parents worked hard, saved money and a loss on this will not be material for my mom. It does seem like consumers should be warned about the price they pay and the marketability of the products that this company is pushing as investment vehicles."

Money expert Clark Howard said:

"Gold is a hedge, meaning that it protects you in bad times. And it has been very popular around the world the last few years because of the loss in confidence people have had due to inflation in the aftermath of COVID."

"Gold is being pitched everywhere. Gold is a product that's expensive to buy and expensive to sell… This situation that happened to your late father is more serious because he was pitched that the gold coins had special value because of how they were imprinted and that they would have value beyond just the gold itself which was a bunch of 'hooey.' You sell the gold and silver in the free market for the value of the gold and silver in it. You will be able to generate money from the sale. It will probably not come close though to making up for what your late father paid for it."

Pitches to buy physical gold are everywhere, but Clark doesn't recommend it. He explains, "I [like] the efficiency of avoiding the really expensive buy/sell spread when you buy physical silver or physical gold."

While there are several ways to buy gold, it's not the "investment" that you may think. First, we'll talk about the reasons why you should (and should not) buy gold. Plus, we'll share how Clark recommends buying gold if you decide that you want it.

Here Are the Wrong Reasons To Buy Gold

You should not buy gold if you're interested in purchasing it for any of the following reasons:

  • To get rich quickly.
  • You're panic-buying in case the economy collapses.
  • Because you see it as an investment.

Why Gold Is Not a Get Rich Quick Plan

Buying gold can pay off, but it can take years and years. The reason is that gold typically is a long-term play and accrues slowly. Plus, buying gold is one thing; reselling it is another.

“Gold is a product that is expensive to buy and sell,” Clark says.

Why Panic-Buying Gold Won’t Work

Just from reading depressing headlines, some people may panic and start to put all their money into gold. When you do that, you open yourself up to countless scams hawking everything from vintage coins, bullion, mint items and more.

Even if you panic-bought gold, where would you store it? And it’s very likely that you still are not going to capture high returns based on your risks.

The best ways to get high returns on your money are to:

Gold Is Not an Investment

“Gold is not an investment. Gold is a hedge,” Clark says. “Gold, other than the small amount used in the production of jewelry, is not something that creates productive capacity.”

Here Are the Right Reasons To Buy Gold

You should buy gold for the following reasons:

  • You're buying gold as a hedge against economic tailwinds.
  • You're into precious metals and want some gold.
  • You purchase gold indirectly.

You Want Gold As a Hedge

Now, we’re talking. Clark says it’s OK to buy gold as a hedge against inflation, but it should be part of your well-diversified portfolio — and not for straight investment purposes only.

“What is an investment?” Clark says. “Something where you put your money at risk as productive capital to an organization where you’re creating goods and services in the marketplace. A dollar invested becomes either more or less than that based on the activity.”

You Like Precious Metals

"If you want to have some gold or precious metals, fine," Clark says, but the gold(en) rules still apply: He wants you to be clear on your reason for buying precious metals.

“Nobody buys gold as an investment,” Clark says. “Gold is not an investment. Silver is not an investment. Precious metals are not investments. Is it bad to own them? No, but only as a part of what you do as that hedge.”

You Purchase Gold Indirectly

Clark prefers that you buy gold indirectly. The way to do that is to invest via a gold ETF (exchange-traded fund) or ETN (exchanged-traded note), where you pay a fee for someone else to store the precious metal.

Final Thoughts

Buying gold as an investment? Bad. Buying gold in a responsible way as a hedge against inflation / bad economic times? Good.

If you’ve been scammed into buying (or overbuying) gold items for a big payday one day, Clark wants you to sell it in the free market and live with the returns.

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