Gold has historically been regarded as a haven asset, prompting a recent surge in purchases due to economic uncertainty. However, experts emphasize that investing in gold differs significantly from stock trading and should be approached as a long-term investment rather than a quick profit-making scheme.
The purchase and sale of gold involves frictional costs that can result in losses if the holding period is too short. Lark Mason, a New York-based appraiser, highlights the disparity between the purchase price and the actual return upon selling gold. Similarly, Tom Graff, chief investment officer at Facet, advises that buyers should anticipate losing around 5% of their investment if they attempt to sell their gold bars within a few months of acquisition.
Despite the potential for short-term losses, several factors support the long-term value of gold. Costco’s recent success in selling gold bars underscores its allure as a safe haven asset. The aggressive pricing and customer trust associated with Costco have contributed to this demand. Analysts at Wells Fargo estimate Costco’s monthly gold sales to be in the range of $100-$200 million.
Fear of impending doomsday scenarios has also fueled gold purchases. Cell service outages and the upcoming 2024 election have heightened concerns among some. Jonathan Rose, CEO of Genesis Gold Group, reports an “absolute surge” in gold sales driven by such fears. However, those purchasing gold in anticipation of societal collapse intend to hold onto it for extended periods or until the feared event passes. Rose emphasizes that gold’s potential as a bartering tool in such scenarios further contributes to its appeal.
Gold’s role as a hedge against inflation and its inherent value as a precious metal have solidified its appeal. Gold expert Jonathan Rose highlights the growing awareness of economic challenges and the erosion of the dollar’s value as factors driving people towards gold. However, it’s crucial to recognize that gold is not a suitable investment for quick profits. Those who purchased gold bars from Costco in recent months, like Adam Xi, may have faced losses upon selling due to the high friction costs associated with short-term gold investments. Conversely, holding gold for extended periods, like Luke Greib who gained a profit of $850 over a decade, can result in substantial returns. Graff advises that “You need a holding period that’s long enough to overwhelm that cost.” In conclusion, while gold remains a valuable asset, it should be approached as a long-term investment. Those seeking quick profits may be disappointed, as the frictional costs involved in buying and selling gold can lead to potential losses over short holding periods.
