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How Much is Too Much to Pay for Gold?

Anyone who remembers the show "Thirtysomething" or now watches "Mad Men" understands the curiosity surrounding the advertising business. Life in any ad agency consists of creating messages that compel consumers to buy. Usually, that consists of positioning the product in the best possible light by showcasing its uniqueness and why it's a "must-have" for a person's particular lifestyle.

Another approach is to craft the message so the target audience is convinced that they are not only missing out, but they are also literally missing the boat and could be in deep trouble if they don't buy it. It's that second approach that's recently gotten the attention of countless people, including the government concerning the selling of gold.

If you've tuned in to any conservative talk radio or TV shows lately, you've no doubt heard hosts, such as Rush Limbaugh and Glenn Beck, talking about the need to have gold in your investment portfolio. Those personal pitches (for which, of course, the spokespeople are compensated) are accompanied by pre-recorded advertising for the various companies who can sell you the precious metal. There's certainly no shortage of firms willing to do so.

The problems that have arisen are twofold. First, some have noticed the content of the sales pitch by some of the conservative spokespeople. Glenn Beck has been particularly colorful in his approach for why people should own gold. On one show, Beck noted the potential for the United States to experience a recession, depression or economic collapse. In that case, he advocates what he refers to as the "three G's: God, Gold and Guns." He also suggests that his listening audience, "... think like a German Jew in 1934."

Wow. There's certainly not a lot of gray area there. But who's to say he isn't right? After all, gold is considered to be the primary global "safe harbor" should currencies and other means of trade collapse. The only modification I might make to Beck's reference of German Jews would be noting that rare postage stamps proved to be just as good or better than gold for Jews trying to export wealth. Those who had rare stamps were able to sew them into the lining of coats and transport them virtually undetected, even when searched. But that's another story.

The current red flags concerning the buying and selling of gold is not so much about how the companies or spokespeople are advertising (aka "warning," "threatening," "cajoling" or "manipulating") their message, but how they are doing business.

In fairness, the number of stories I've heard from independent coin dealers about how much some customers have paid from national gold sellers is nothing short of staggering. For a single 1-ounce coin or bar, some people have paid up to $250 or more over the current price of gold. That's what's gotten people, including New York Congressman Anthony D. Weiner, to take a stand to begin setting guidelines about how much is too much to charge for gold.

Weiner has since issued a report, held a press conference and sent a letter to the Federal Trade Commission asking for an investigation into allegations of overcharging gold consumers to the tune of up to 35 percent. That concern I can understand and support. If a person wants to buy 10 ounces of gold — which, in today's market, should sell for around $12,500 depending on the form the gold takes, be it coined or bullion bars — having to pay an extra $1,000 or $2,000 premium is ludicrous.

As I've written before, some of the "fees" may come in the form of exorbitant shipping, handling or insurance charges, or "alternative investment fees" — which are completely bogus.

Whether a federal law is necessary or not is another matter. For me, it's a simple matter of doing some homework and knowing the person or firm you're dealing with. Call around. Compare prices. Find out the reasonable price to pay and establish a relationship with a dealer. People do it every day when buying anything from a home appliance to a car.

If you live in a small town without several local coin dealers, it's definitely worth a trip to a bigger city with a better selection. Best of all, when buying in person, there's no shipping, handling, delivery or special fees, and there's NO RECORD of the transaction. It's always been my belief that it's no one's business if you own gold or not. In other words, there's no reason to advertise it.

Editor's Note: A visual of gold bullion coins has been sent with this column.

To find out more about Peter Rexford and to read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com.

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