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Gold Standard

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By Mathew Emmert (TMF Gambit)
April 23, 2003

I heard an ad on the radio this morning that said, "If gold had kept pace with the rate of inflation it would be over $700 an ounce!" Hmm, the important word there seems to be "if."

Is that really the best sales pitch these guys could come up with? I would say I've lost respect for the world of slick advertising, but that would suggest I had some to begin with.

I mean, in effect, these folks are trying to sell you an investment by saying, "If this weren't such a bad idea, it would be a good idea." Well, sure, if pigs could fly, bacon would be leaner -- though the price would be higher because those little mud eaters would be harder to catch. Not that I'm an expert in the area; they just look slippery. But I digress.

The point is this: Of course, plenty of things would make great investments if we didn't have to acknowledge that little thing called reality. Pets.com -- complete with talking sock puppet -- might not seem so bad in a reality-lite world. And, sans reality, a sunny little Baghdad bungalow sounds like a good idea. Alas, we must actually consider the real world, and even historical performance (gasp!), when making our investment decisions -- the travesty of it all.

As Jeremy Siegel's book, Stocks For the Long Run, so poignantly demonstrated, a dollar invested in gold about 200 years ago would be worth about, well, a dollar today (adjusted for inflation). That same dollar invested in stocks would be worth about $600,000. It seems one of these investments actually did keep up with inflation.

I suppose I shouldn't be surprised that some investment "professionals" make such advertisements. Fees and commissions associated with investing in gold and precious metals tend to far outweigh those of alternative investments -- at least, investing in gold will make one of you wealthy.

If the lure of shiny metal objects is still too great for you to resist, at least don't make your purchase based on moronic radio advertisements. Instead, check out Selena Maranjian's recent article, fight the blinding glare, and invest with both eyes open.

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