Monday, August 9, 2010

Fighting inflaction with diamonds or gold

Should you invest in diamonds or gold to hedge against inflation?

It seems like any time you listen to the radio or your television today all you hear is that gold is predicted to reach $2,000/oz in the next 12-months and that gold has increased over 40% since last year, therefore its time to buy now. And of course the best prediction of them all is that gold will never be worth zero as some of your other investments might. Well, it's true that gold will never be worth zero and yes, gold has moved in the last 12-months from $860/oz to $1,100/oz, that's a 28% increase in one year. But will gold hit $2,000/oz by the end of next year is just a hopeful thought, but possible, all depending on how the US dollar does against the Euro. So it is safe to say that gold is a hedge against inflation and if you believe that the dollar will continue to decline than gold is what you should be buying. Of course the big question is, in what form should you buy gold; coins, bars, or commodity stocks? It is my belief that your best choice would be to buy gold coins, either US Gold Eagles,Krugerrand or Maple Leaf. You can buy these coins at any coin store or over the internet, but make sure you take possession of these coins and not let some company hold them for you. This way if you decide to sell any portion of your investment you can do so easily by going back to the place you originally bought them or go any coin store around. Make sure to shop around before you buy to get the best possible price as well as when you are selling.

Now diamonds are a whole different breed of investment, not even sure I can call them an investment. Remember, one thing that is different about diamonds, you can wear and enjoyed a diamonds for many years as compared to gold that just sits in a safe deposit box and accumilates dust. I know that many sellers of diamonds will pitch you the concept that diamonds are easy to sell when you need money and that is absolutely not the case at all in my opinion. Even if you manage to purchase diamonds at a fair wholesale price, but when you are ready to sell, that same dealer will offer you less money than what you originally paid because he needs to make a profit when he resells it. Now of course if diamonds have appreciated by say 30-50% over the life of your purchase than you might get back what you paid or slightly more. The problem is that if you need to try to sell that diamond somewhere else because the dealer is no longer is business, than you will find out that you will not get anywhere close to what you originally paid for the diamond. A diamond is "not" like an ounce of gold that has a world market price, it is dictated by supply and demand as well as what someone is willing to pay for it on that particular day.

So if I were looking to "strictly" invest some money against inflation, than gold is my recommendation. It is easly to buy and easy to sell with very little commission involved coming or going. Make sure you buy only gold coins that are either US Gold Eagle, Krugerrand or Maple Leaf. The most popular size is one ounce denominations

Hopefully this was informative and useful information that you can use in planning you future investments.

Drop me a line and let me know what your thoughts are.

Sol Dunst


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