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Gold and Silver

     It's always interesting to see investors move into gold mining stocks and other precious metals when the market gets jittery. Is this a good safe haven when the markets get bumpy? Is this a good long-term parking place for capital? What are the pros and cons of the different precious metals? Gold is where most pessimists think of parking their assets. In moderate market down turns there is little advantage to move to gold verses shifting into cash in a brokerage account, or government bonds. In a major world economic meltdown holding gold may make sense for a large amount of money, but you still can't eat it. In a major melt down you're better off with a piece of rural property, a garden, and a gun.

    The overriding problem with gold is that it is essentially where it was a decade ago, which may create a safe defense against a traumatically negative economic situation, but don't look for much appreciation. Appreciation is much easier to choreograph in the stock market. There are a couple of points in gold's favor. It reportedly costs $425 an ounce to mine and refine it, a price much higher than where it currently trades. Gold is also used for the traces on the ever-present printed circuit boards that surround us and on high-end electrical connectors, like those used on auto airbags.

    Silver has very little industrial value and is used primarily for jewelry. Like gold, it has traded at roughly the same price for the last decade. The one advantage silver has over gold in a major economic melt down (that is likely to never happen) is that a one-ounce piece has a reasonable value for bartering for common goods where you aren't likely to get change back on a transaction; for example it's a little rough trying to buy a loaf of bread with a one-ounce piece of gold worth $270 where a $5 one-ounce piece of silver makes more sense. Compared to the other metals Platinum is in relatively short supply and its industrial use is on the rise in many areas beyond the catalytic converters used on cars. For moving a large amount of money, diamonds make a lot more sense than gold, unless you are traveling by dump truck. Diamonds can be worth many hundreds of thousands of dollars per ounce.


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