CASH FOR GOLD: Are You Kidding?

By Fred Goldstein, Sr. Broker SATC
October 20, 2009

For the better part of a year Americans have been besieged with television, radio and print ads imploring us to sell our gold coins and jewelry for cash. Aside from helping a poor soul in need of immediate cash, the concept is flawed and needs to be analyzed and exposed.

The ads usually say the gold price is near or at all time highs. 2009 marked the ninth year in a row the price of gold rose, up nearly $200/oz. since January 2009. Anyone who sold their gold earlier has left a good amount of money on the table.

These ads also never disclose that while the nominal price of gold is at an all time high, if adjusted for inflation gold is less than half of an inflation-adjusted price of $2,350/oz. I am not critical of companies making profits, but I am critical when ads mislead consumers and prey on the uninformed.

Since the US officially cut the tie between gold and the US dollar in 1971, Keynesian economists have harped on the concept that dollars are “money” and gold is a barbaric relic. However, in 2009 it appears the Federal Reserve note is becoming the barbaric relic, while gold is reemerging as the ultimate universal money.

An honest, trustworthy “money” system or currency must have four basic qualifications. It must be; 1) Portable, 2) Divisible, 3) Liquid, and 4) Scarce. It is obvious Federal Reserve notes do not meet the technical definition of “money” because honest money must be scarce and have intrinsic value (a store of wealth). You can’t print trillions in paper money and expect the value not to decline.

Doug Casey of Casey Research wrote recently, “Gold is particularly good for use as money, just as aluminum is particularly good for making aircraft, steel is good for the structures of buildings, uranium is good for fueling nuclear power plants, and paper is good for making books. Not money. If you try to make airplanes out of lead, or money out of paper, you’re in for a crash. That gold is money is simply the result of the market process, seeking optimum means of storing value and making exchanges.”

Since March 2009 the US dollar has lost 10%-15% against major currencies and some commodities. Steve Watson of reports (6/18/09), “The amount of US taxpayer money committed to bailouts over the last 12 months by far exceeds the combined cost of major historical events dating back over 200 years. The combined amount spent, lent, consumed, borrowed, printed, guaranteed, assumed or otherwise committed to bailouts by the government from March 2008 to March 2009 amounts to some $15 TRILLION...The cost of World War Two, the race to the moon, the New Deal, and the Iraq, Vietnam and Korean wars combined does not come close to the amount spent so far in just 12 months on the bailout of a handful of privately owned offshore corporations.”

In Demise of the Dollar, Robert Fisk of the London Independent wrote, “In a graphic illustration of the new world order, Arab states have launched secret moves with China, Russia and France to stop using the US currency for oil trading.”

Michael S. Rozeff, a retired professor of finance and an author, recently wrote on, “If one or more foreign central bankers, such as those in China, Russia, Brazil, and the Middle East, have finally decided that they no longer wish to accept dollars that are inconvertible into gold, they have no choice but to establish their monetary systems with gold as a reserve asset...In the end, no matter how the divorce from the inconvertible dollar occurs or what travails we must go through to get the final decree, the outcome is going to be a marriage to gold.” -Divorcing the Dollar and Marrying Gold

A fool and his money are soon parted, the old saying goes. Please do not be lured to a gold selling party or to a dingy hotel to sell your gold for cash or the promise of a $10 gas card and the highest prices paid!

Now is the time for savers and investors to put themselves on their own gold standard, while there is still enough confidence left in the fiat US Federal Reserve notes to exchange them for real money; gold. The window is closing fast as the gold price in US dollars is rising dramatically. Meanwhile, mine supplies cannot keep up with worldwide gold demand. Rumors abound that the short sellers are having delivery problems on the NY COMEX and the ETFs do not have enough physical gold to back their paper gold.

We have always offered resources to help educate individuals about gold and silver ownership. Whether you are new to the precious metals arena or are considering adding to your position, I urge you to act quickly. In the past gold ownership may have been considered a luxury while today we consider it a necessity.

James Sinclair of sums it up with this quote, "Gold has no agenda, no allegiance and functions as honest money in a world of lies, corruption, overstatement and spin."

Fred Goldstein, Senior Broker Swiss America Trading Corporation

* Editor's Note Oct 15, 2009: Cash4Gold Hit With Racketeering And Fraud Lawsuit: "A class action lawsuit was filed against Cash4Gold in California federal court Friday, Oct 9th, accusing the company of a "massive scheme to defraud tens of thousands of consumers throughout the nation," and racketeering. The lawsuit says there are two specific promises that Cash4Gold makes and breaks: 1) that there is a 12-day return policy and 2) items sent in will be handled with the highest care," reports Consumerist.
UPDATE: Jan 21, 2010 -- Cash for gold firms a 'shockingly bad value': On average, TV gold buyers offered around 6% of the retail price for gold, while high street retailers paid around 25%. "The poor value for money that these TV gold buyers are providing is simply shocking. The cash for gold market is unregulated, and this investigation has raised some serious concerns about the fair treatment of consumers. People should be wary of buyers’ advertisements as they could almost certainly get more money for their gold elsewhere," said Peter Vicary-Smith, chief executive of 'Which?' consumer champions to LonTelegraph.
Previous Feature Article: What would you do?
Next Feature Article: Gold: Asset of the Century

More Links

Weekly Charts

Current Spot Prices

Weekly Charts
Current Spot Prices