I spend a lot of time each year in Alaska. Much of the time I am spinning in circles trolling for salmon or jigging for barn door-sized halibut. Needless to say, when I get home I love to show off pictures of my catch. Bragging rights are the currency anglers use to value their wealth. Lately though, I have had a tough time getting anybody to accept my currency. All they want to hear about is Alaska’s gold.

“I hear there is still a bunch of gold up there,” they inevitably say. “Do you ever find any?”

With the economy convulsing up and down, most investors are wondering if their savings are going to be able to stand the ride. Not wanting to see their net worth destroyed because a national bank made immoral loans for the past five years, they are fleeing towards traditional safe havens. Gold is the vehicle of choice.

It is a horrible move that will cost countless investors huge sums of money.

There is an economic principal called frenzy buying. Basically, it is a label for soaring prices caused by artificially high demand. In the case of gold, thousands of investors are falling to media hype, speculation, and fear and are dumping their money into a so-called safety play. What they don’t realize is they are investing in something far more speculative than any nation’s currency or any company’s stock.

Why? Because I said so

Remember, gold is traded like a commodity yet it has very few industrial or household uses. Therefore, it is only worth what the market is willing to pay for it. Even the most speculative stock has some intrinsic value. But gold prices could plummet and there would be no fundamental value to stop the freefall. It is only expensive because we say it is.

It does not take a financial genius to realize the recent gold run is overdone. All you have to do is open your ears and listen to the average Joe. Nearly every day, I hear somebody discussing the gold rally. And these are not savvy traders, investors, or analysts. They are the mechanic installing new tires on my car, the lady that gave my dog his rabies shots, and the soccer mom I sat beside on a recent flight to Phoenix.

Nearly everybody thinks gold is a good, safe investment right now. And when the herd is grazing on one side of the pasture, you know there is better grass on the other. This is not the time to be buying gold. It is the time to be selling gold.

If you are truly looking for safety, head to the cash markets. CDs, money market accounts, and bonds are the only true safety nets right now. Gold is just another speculative fad that is going to cost a lot of folks an awful lot of money.

Andrew Snyder
Today’s Financial News