Asset Acceleration Planning, LLC

Asset Allocation

Education Funding

Health Insurance

Tax Reduction

Retirement Funding

Legacy Building

To Gold Or Not To

Over three decades ago, George Gmuer gave his son Tom the following sage advice, "Always keep 10 to 15 percent of your money in gold." As a Swiss banker for more than 50 years, George Gmuer helped many a grateful client avoid the pitfalls of turbulent economies and markets. But gold was not selling at $1,000 an ounce back then.

If you listen to the barrage of ads on TV and radio, gold is a must buy today. They point out the price of gold is up 800% since 2000. Yes, it's above $1,000 and yes it is fear of our shaky financial system which has caused part of its rise. But it's also driven there by speculators in the market.

There is a lot of marketing hype by those who sell gold coins. In fact, if you listen to one of the advertisements, it talks about a "recent find of rare gold coins in a vault in Europe." The ad goes on to say these US minted coins escaped being melted down during the FDR administration. In the 1930's under the FDR administration there was a nation wide banning of the "hoarding of gold coin, gold bullion, and gold certificates". US citizens were forced to sell their gold to the Federal Reserve at $20 an ounce. Subsequently the Fed raised the price of gold to $35 an ounce. Given the parallels between the economy of the 1930's and the present one, there are concerns that the same tactic may be used again.

The Yellow represents the FTSE Gold Mine Index and the Blue represents Mutual Global Discovery A.

Both started in 1992 with a $10,000 initial investment.

Now let's address the longer term performance of gold. If you look back from 1992 to the present, one sees a much different picture. It turns out gold performance is volatile. When compared to Mutual Global Discovery Fund it underperformed (See chart).

Most households already have 10-15% of their money invested in gold whether it be in jewelry or other assets. Others who do not have faith in the US dollar might want to buy big into Gold and Precious Metal Funds. We here at AAP do not believe the dollar will collapse and therefore we recommend Mutual Global Discovery, because it clearly outperformed gold whether gold was up or down.

This chart from S&P 500 Composite Index clearly displays the volatility of gold when compared to other broader indexed investment options. While Gold's high was unparalleled, its low was equally unmatched, bringing its overall average down.