Ask Chuck: Time to stock up on gold?

By Chuck Bentley, CP Guest Contributor Friday, March 03, 2023

Dear Chuck,

We are senior citizens. My wife thinks we need to start stocking up on some gold. I am not so sure; plus, I would not know how to do it without getting ripped off. Any advice?

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Gold for the Golden Years

Dear Gold for the Golden Years,

The Bible speaks to a number of the issues raised by your question. Let’s look at the market for gold and then some advice. 

Insurance or investment

People buy gold for two primary reasons: insurance or investment. Typically, when the value of the dollar goes down, gold prices go up. When demand goes up, prices rise, and vice versa. Owning some gold helps as a hedge against the falling value of the dollar. Trouble happens when people rush in thinking they will get rich quickly or hastily liquidate other assets that are losing value in order to buy gold. This dangerous mindset leads people to make poor decisions about things they do not understand. As a result, many suffer significant losses. Truly, “The plans of the diligent lead surely to advantage, but everyone who is hasty comes surely to poverty” (Proverbs 21:5 ESV).

Be on your guard against gold fever

History is filled with stories of people who got “gold fever” and were subsequently scammed. The Bre-X gold mining fraud occurred in 1997. An initial private offering at 30 cents per share jumped to more than $250 on the open market. J.P. Morgan, Lehman Brothers Inc., Fidelity Investments, Invesco Funds Group, and other companies jumped in, believing Egizio Bianchini, one of Canada’s top gold analysts, who said, “Bre-X has made one of the great gold discoveries of our generation.” What they did not know was that the project manager was tampering with core samples. All that glitters is not gold! He mysteriously fell to his death from a helicopter, Bre-X collapsed, and the shares became worthless. Here is more on the bizarre story.

Fast forward to today. Tyler Gallagher was recently CEO of Regal Assets, a company that let customers convert retirement accounts into metals like gold and silver. The company claimed that the program was a hedge against downturns in the stock market and inflation. Many who feared recession invested with Regal between 2020 and 2022. Most were in their 60s or 70s and trusted Gallagher with their life savings. He appeared very successful and talked the talk. They gave him their money but have yet to get the gold. Not only can the gold not be found, but neither can Gallagher. He has vanished. For more on this crazy story, read this.

Unfortunately, other scams exist, and seniors tend to be the most vulnerable.

Central bank holdings of gold on the rise

On January 27, 2023, the International Monetary Fund released a working paper entitled: “Gold as International Reserves: A Barbarous Relic No More?” Here are some notes:

• Gold appeals to central bank reserve managers as a safe haven during volatile economic, financial, and geopolitical times, when the return on other financial assets is low.
• Gold reserves increase when financial sanctions are imposed by the U.S., the United Kingdom, the European Union, and Japan.

Here is an excerpt from David McAlvany’s weekly commentary on February 8, 2023, titled “Why Are Central Banks Buying So Much Gold”: “For the global central bank community, gold maintains a 10% allocation of total reserves. That’s an average, and it’s a bit misleading because as an average, that includes the US, Germany, Italy, and France that keep a range of 58 to 66% of all their reserves in gold ... When you have slowing GDP, you have an increased interest in gold, the acquisition of it. When you have a weakening fiscal position in a country, the central bank says, ‘I think we should have some gold.’”

On February 1, 2023, the Financial Times featured a commentary on the increase of central bank gold holdings in 2022. Total demand across all categories came in at 4,741 tons — an increase of 18% from the previous year.

Invest, but wisely

Gold bars (bullion) are sold by gram or ounce and should be stamped with purity, manufacturer, and weight. Bars that are investment quality must be at least 99.5% pure gold, especially if storing them in a gold IRA. Smaller-sized bars and coins offer greater liquidity and are common among those who own gold. Storage must be seriously considered, as well as insurance. Gold exchange-traded funds (ETFs) and mutual funds can be purchased and sold like other stocks. Many consider it the easiest and safest way to diversify one’s portfolio.

Avoid Craigslist, Facebook marketplace, dealers offering massive discounts, pawnshops, telemarketers, pushy salespeople, or dealers without a physical building. Avoid offers of free storage or delayed delivery. In addition:

• Establish legitimacy by validating the company. Conduct an online search. Research thoroughly and read all reviews. Check their Better Business Bureau listing and buy-back policy.
• Shop, but wait to commit. Sale pressure, markups, discounts, guaranteed principal plus returns, and digitization claiming to be backed by gold are all red flags.
• When buying coins, research specific coins. Do not accept word-of-mouth verification.
• Get the gold in hand. Pick up in person if possible.

Key biblical principles 

• Diversify, but don’t bet the farm: “Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land” (Ecclesiastes 11:2 NIV).
• Faith is more precious than gold: “These have come so that the proven genuineness of your faith — of greater worth than gold, which perishes even though refined by fire — may result in praise, glory and honor when Jesus Christ is revealed.” (1 Peter 1:7 NIV)

To gain more wisdom and insight into how you can effectively steward God’s resources—both time and money — the Crown Stewardship Podcast can be valuable. You can subscribe for alerts of new episodes. I hope you find it beneficial.