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Sound Advice: April 26, 2023

Gold Digging?

As if there weren’t enough scams working their way through the media, the latest is a play on fears driven by the recent problems at Silicon Valley Bank and other financial institutions that have been mismanaged.  That’s what happens when banks bungle handling of their investments and fall short of available funds to meet their current obligations.  Folks will recall the banking crisis of 2008-9, which led to a market slide of over 38%, followed by a 10-year recovery with average annual gains of better than 18%.

Here we go again?  Hardly, though there are certainly significant issues, one of which is the supposed guarantee of $250,000 for each depositor, which doesn’t exactly match up with banking problems in the tens or hundreds of millions.  So it appears that Washington is protecting the big guys as well as the little guys.  Something about that doesn’t seem quite right.

Back to the scam, which warns people about the possibility that today’s banking problems will lead to worthless currency, which is why “you need to buy gold and silver.”  The worthless currency pitch is relatively new, but the precious metals pitch is a tune that’s regularly replayed when times are confusing.  Yes, they’re confusing now, but when aren’t they.

The argument for ownership of gold is a tired one.  Except during times of unusual market unrest, the price of gold tends to stay on a plateau.  To no one’s surprise, gold jumped during the early going of 2020, but through the rest of the past decade, its price bounced in a relatively narrow range.  Perhaps there are exceptionally gifted folks who have precise information about the next crisis.  That’s when gold will spike.  At most other times, it’s dead money that pays no dividends.

If gold doesn’t really shine as a great investment, silver is even duller.  Its price performance over the years has been a muted version of its more valuable cousin.  Much the same can be said for platinum and other precious metals.

Best advice: Enjoy the show, but ignore the media.  Fear and greed are the driving forces behind advertising.  Tune out!

 

 N. Russell Wayne, CFPÒ

Any questions?  Please contact me at nrwayne@soundasset.com

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