Wikinvest Wire

Shocker: Jason Zweig doesn't bash gold

Monday, November 03, 2008

In the shocker of all shockers, Money Magazine and Wall Street Journal financial writer Jason Zweig didn't bash gold as an investment after being provided with the perfect opportunity to do so when he recently appeared on the PBS Nightly Business Report.

For many, many months (perhaps years) Mr. Zweig has dismissed the yellow metal as a relic of history, better suited to a period back before governments and central banks had tamed economic cycles and eliminated financial crises.

Apparently, recent events have changed his view. If not completely, at least a little bit.

When asked by Susie Gharab "why gold doesn't always glitter", here came the reply:

With stock markets being blown to bits worldwide, should you move your money into the safe haven of gold? Many investors are doing just that, but there are a few things you should know first. Gold is supposed to go up when stocks and the U.S. dollar go down. It's also supposed to glow more brightly when the economy goes dim.

But just look at what has happened lately. Let's say you bought gold in March, when you were worried about the exploding U.S. budget deficit, the erosion of the dollar and the collapse of the global financial system. Many pundits were predicting that gold would go to $2,000 per ounce. You paid just $1,000 an ounce.

Since March, two of America's top five investment banks have gone under. The Dow has lost roughly a third of its value. Housing prices have continued to plummet and the government has committed roughly $1 trillion to bail out the financial system. Every one of your fears has come true, and then some. So is gold at $2,000 an ounce yet? Far from it.

Gold is now trading well below where it did in March. The lesson here is that you can be 100 percent right and still lose money if you pay too much for an investment in the first place. The best time to buy gold is not when everyone is going ga-ga over it, but when nobody wants it. Nothing can be trendy and a safe haven at the same time. I'm Jason Zweig.
Knowing what he'd written on the subject (I've had a file full of anti-gold comments by Jason but have never gotten around to writing up anything on the subject) it seemed sure that "the lesson here" was going to be that the yellow metal was as useless as ever, but it wasn't.

The lesson was to buy low ... interesting.

And that part about "you can be 100 percent right" ... even more interesting.

Mr. Zweig is also known for having provided the excellent commentary for revised editions of Benjamin Graham's classic The Intelligent Investor.

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Anonymous said...

Yep, governments and central banks have tame human nature and greed. Oh, maybe not. Gold it is.

Chuck Ponzi said...

Jason's response is well reasoned.

Very few people know what's going to happen or the magnitude, and that includes one of my idols, Peter Schiff.

Zweig is still right, and points out the most basic, and most difficult concept to grasp in investing; timing is EVERYTHING.

Gold will go up. Maybe next year or the year after that, maybe not for 20 years, but it's not going to happen right now, IMO.

Not investment advice. If you listen to me, you will probably lose money.

Chuck Ponzi

staghounds said...

" you can be 100 percent right and still lose money if you pay too much for an investment in the first place."

Now THAT is exactly the sort of incisive, specific, precise investment counsel that's worth whatever they are paying him, and more.

Sheer genius.

Anonymous said...

I recently read the central banks have increased the number of leases they offer on gold in order to keep its value down. The fear is that if gold spikes and keeps increasing, it could draw people away from holding dollars. If left on its own, the trend could develop into what Peter Schiff predicts, a run on the dollar and resulting collapse. A Canadian analyst recently noted the gap between paper gold and actual tangible gold is increasing. This disparaty would be realligned once paper holders asked for gold instead of paper money, sometime in December or early next year. I'm surprised this information is not quoted more often when dicussing gold, its value, and the ongoing risk to the national currency.

staghounds said...

I suspect that the "gap" between paper gold and real gold is caused by the fact that dealers in and holders of real gold bought heavily at $900, and they aren't ready to take a loss yet.

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