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Well this should come as a big surprise to absolutely nobody who chooses to buy gold bars as a primary means of investment, but the gold spot prices are, as usual, up this week.

It doesn’t take a financial analyst to tell you why, either. We’re still smack dab in the middle of the most serious economic crisis we’ve faced as a country in several decades. Whenever we suffer a recession, people want to buy gold bars. The same thing happened in the nineteen seventies. The dollar took a dive, stores were closing across the country, and American investors went scrambling for the metal.

It’s interesting to note the gold crash of the early 1980s. We had simply not seen such a severe drop in the value of the metal before. The problem was a combination of high expectations, an economy that seemed to recover almost overnight, and the impulsive "Buy! Sell!" attitude being practiced by investors at the time. Sadly, if those investors had held onto some of their gold, they’d be seeing a nice profit by now.

While you certainly want to buy gold bars and sell them as is prudent to do so, we urge investors not to simply "cash out" the minute the dollar starts to take an upturn. It is always wise to sell at a peak, but it’s never a good idea to abandon your safety net entirely. This recession is not a one-time occurrence. We’ve had recessions before, and we will have recessions again. This is a very serious recession, but it’s not even the only economic crisis we’ve had in the last twenty years.

The fact is that when you buy gold bars, you’re buying yourself an insurance policy against times like these, therefore, it’s a good idea to have some gold no matter what. You don’t wait until you get into an accident to buy insurance for your car, so why wait until a crisis to buy insurance for your financial assets?

So our advice to anyone who does buy gold bars as their primary means of securing themselves during this recession is simply this: Don’t be suckered into the impulsive market. We’ve seen record shattering demand for gold lately, with more and more investors looking to buy gold bars. This is impulse, but, if you buy gold bars for the right reason, then there’s nothing wrong with that. However, we need to hope that these new gold investors do not all simply cash out as soon as the dollar starts to gain strength.

If they do, yes, the value of the metal will see a decline, however, the real reason they need to hold onto their gold is because you still need gold, even during times of economic ease. As with insurance, it’s better to have it and not need it than need it and not have it. You don’t throw your umbrella away whenever the storm clouds lift, so hold onto some gold not only for this recession, but for the next one as well.

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Kenneth Hansen

Aug 24, 2009

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