Is gold safe?

By Paul Cross

Annuity National Brokerage Co.


How do you protect an investment? Gold! It's easy to buy, easy to sell, and has never been worth zero, or so the commercial goes. But is gold safe, and can it lose value? Let's make a historical review to see if you can protect an investment with gold and if it keeps pace with inflation as promoted and advertised.

Has anything out-performed gold? Before I answer that, let's first take a close look at the historical performance of gold and see if it truly measures up to its claim.

The faulty claim: The gold vein lost $40.30 a troy ounce over a long-term holding period of 25 years.

In 1981, gold was trading at $600 a troy ounce. In 1982, it dropped to $300 a troy ounce and later dropped to $250 a troy ounce. In 2006, when gold hit $559.70, it was promoted as a bull market. The reality is, you could have owned gold over a span of 25 years and it would have only cost you $40.30 a troy ounce.



What has out-performed gold?

Bank CDs and money markets have out-yielded gold. Throughout a span of 25 years, funds invested in these areas should have doubled and tripled.

What has out-performed bank CDs and money markets? Annuities! That is, fixed annuities and fixed-indexed annuities, where investor's funds would have more than tripled and saved he or she a boatload of tax dollars. And that boatload of tax dollars is money you could have spent, saved, or invested.

What's gold worth today? As of August 12, 2009, gold was $947 a troy ounce. Now, you have a gain from $600 a troy ounce in 1981 to $947 an ounce. That's a 58 percent gain. Is that keeping pace with inflation?

This represents a 58 percent gain over a span of time from 1981 to 2009, or 28 years. With a 5 percent average interest rate, your money in annuities would have quadrupled (a 400 percent gain).

It doesn't have to be one or the other, gold or an annuity. Your clients can have both an investment in gold and an annuity -- and it is the annuity that will be the balance wheel of stability, or the safety net for the more risky investment of gold.

The golden years of retirement now require more gold, but it is only the annuity that will guarantee an income for life -- now that's peace of mind, sleep insurance throughout the golden years of retirement.

So how do you protect an investment? Protect an investment with annuities, but please note that when I talk about annuities, I'm talking about safe annuities, not the risky, costly variable annuity.

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