Now is the time to buy ____________ (fill in the blank). Everyone is buying it. Big profits are being made. The prices just keep rising. It’s a hard asset, not a paper security. There is a limited supply.

Four years ago you would have filled in the blank with real estate. Today the word is gold. If you want to gamble, go ahead. Gold is a better bet than Las Vegas. In the casinos, mathematical geniuses design the game so that you will lose. It’s called a “handle” and the handle is limited by law. There is no such machination in the gold market. But there is a broadly overlooked cost. It’s called the spread. Before you buy, ask the dealer how much he will pay to buy the gold you already have. Only then, ask the price you will be required to pay if you buy.

Now you know the spread – for today, — and provided the dealer gave an honest quote. When the market gets weak, the spread widens. When the market gets really bad the gap becomes a chasm.

There are just two reasons for investing in anything, current income or price increase. In the stock market, company shares pay dividends. In real estate there is rent to collect. These are sources of current income. How much income does a coin or bar of gold pay? None. With gold there is no current income. That leaves only price increase. The price of gold is set by fear. How do you predict if fear will be higher or lower when it’s time to sell? The amount of gold that goes into jewelry and industrial use is but a pitiful pittance of the total ounces of gold that trade every day. Gold is strictly a speculator’s commodity.

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