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Wall Street Journal Gets Gold Wrong, Once Again
(November 7th, 2003) In a November 5th article entitled “Putting Pork Bellies in Your Portfolio,” WSJ staffer Peter A. McKay repeats a few misconceptions about gold investing. No deliberate conspiracy here, just a lazy writer doing his job of filling up the space between the ads.
First of all, this article leads off just above the fold of the “Personal Journal” section, which is the only part of the WSJ which my wife reads. It is illustrated with a darn cute photo of a free-range pig rampant amidst flowers on a sunny hillside.

The caption next to that pig kind of sets the tone for the gold attitude in the article: “Instead of directly owning a resource like gold, it’s safer to buy shares in a gold mining company.” Not a gold fund, mind you, but a single gold mining company. Now is this the most ridiculous piece of investment advice ever committed to print?

What was it Mark Twain once said, something about a gold mine being a hole in the ground with a liar standing next to it? The vast majority of gold mining stocks are the epitome of volatility, mostly supported by promises, prospects, and a roll of the dice. Could there be any worse advice than to buy shares in a gold company, rather than to diversify through a gold fund, of which there are more than a few?

Mr. McKay does go on to say a few positive things about gold and its performance over the past couple of years. Not that he would want you to own any gold, of course. For instance, he brings up the old storage chestnut,

“For investors who want direct exposure to metals prices without owning mining shares, the question is whether to store the metal, which can be cumbersome, or use one of several financial instruments.”

Cumbersome, indeed. Friends, I ask you, are you personally, or do you know anyone, who would consider themselves "encumbered” by the mass, weight, or sheer bulk of their gold holdings? Does having gold really strike anyone as a burden to be endured? And don’t people in the real world realize that you can safely store, say, $100,000 worth of the shiny yellow stuff at a convenient local bank safe deposit box for a total yearly cost of about one-tenth of 1% of its value?

Later, Mr. McKay dismisses the efficiency of gold bullion coins in one swift sentence in which he confuses the special Proof limited edition collector coins with the standard bullion issue Eagles put out in bulk by the Mint:

“The U.S. Mint sells American Eagle coins made of each of those metals via its online store at www., though the coins sell at big premiums to the price of the underlying metal.”

Had he done a few minutes search of the U.S. Mint website that he refers to, Mr. McKay would have found the following information about the millions of standard bullion value Eagles that the Mint cranks out every year at a modest mark-up:

“An American Eagle's value is based on the (precious metal’s) price, plus a small premium to cover coinage and distribution costs. You can purchase… American Eagle Gold Bullion Coins from most major coin and precious metals dealers, as well as brokerage houses and participating banks.”

There’s also a toll-free number (1-888-USAEagles) prominently displayed on multiple pages of the Mint’s website. By dialing this number, you are put in touch with a real human who will give you a list of local Eagles dealers in your area, any of whom will sell you gold bullion at a reasonable mark-up. Really, Mr. McKay, it’s simple. Give it a try.

Early on in this WSJ article, it states about metals that “This is perhaps the easiest area of commodities for the average investor to get into.” A true statement, certainly, but by the conclusion of the article an innocent, uninformed reader would be led to believe that the only feasible way to own physical gold would be to store it halfway around the world in Australia.

-Richard Smith


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