Should You Buy Gold, Silver, or Diamonds?

Should You Buy Gold, Silver, or Diamonds?

Should you invest in gold, silver, diamonds, or other precious metals or stones? Some investors have lost a great deal of money investing in such commodities.

Many of these items were once promoted in a superaggressive fashion with little protection afforded the small investor. There was no SEC to protect against exaggerated, or possibly fraudulent, claims made by some dealers in precious metals. Many books were written boldly pre dieting gold would bolt to several thousand dollars and our country would go down the drain.


Gold, silver, diamonds, and other items of this nature are commodities.In recent years, they became highly speculative commodities. When the frenzy died down, many investors were left with investments they had bought at inflated price levels.

The dealer's profit markup in these investments was excessive in some cases. Furthermore, these investments did not pay interest or dividends during a period of very high interest rates.

Gold, silver, and diamonds all made very major long-term tops in 1980. At some point these commodities will rally back to a degree. However, due to the wild speculative furor that occurred, there is no way to know how much time must pass to completely clean out past excesses.

There will be periodic short, quick runups in gold, caused by fears or panics regarding potential problems in certain foreign countries. But, this type of commodity trading can be a pretty emotional and unstable game, so I suggest extreme care and caution.

Silver may find fewer uses as photography companies convert to discs and films that no longer use silver. Diamonds were hawked to the public with almost fraudulent sales pitches, claiming diamonds are guaranteed to go up every year in price because they had always gone up. People were erroneously told that the diamond-market price is totally controlled and set by DeBeers.

As you can surmise, I do not normally recommend investing in metals or precious stones. It is possible at some point that small investments in such items will become timely and reasonable. However, even in this case, investors still may have to contend with large price markups and a
lack of ready marketability. Marketability becomes a vital issue when you decide to sell and have trouble finding a willing buyer. 


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