Buying Gold in 2009

BUYING GOLD IN 2009 might just be the worst financial decision you ever make.

Why? Because governments worldwide might suddenly come to their senses, and cancel the $3,000 billion in new debt they need to meet the "stimulus" plans already announced so far. Buying gold then might not look so smart.

Central banks might also wake up – and reverse course altogether – defending the value of cash with double-digit interest rates, rather than turning your savings to dust with sub-zero real rates of return. Choosing to buy gold to defend your wealth would no longer make sense.

Gold mining output might suddenly leap – lowering its value for everyone buying gold as 2009 starts – rather than drifting lower as it has since 2003. The green lobbyists and political risks facing gold miners could simply evaporate, too.

And other investors who might buy gold in 2009 could decide to choose over-geared stocks, defaulting bonds, and over-supplied real estate instead. Other, more complex investment assets might seem to offer a safer, more secure, home for their money than a rare, precious metal owned outright with no risk of default.

But just note all those "mights" however...and buying gold in 2009 comes down to whether you trust gold – used to store and defend wealth worldwide for 50 centuries and more – ahead of paper assets, securitized debt, and tax-funded promises.

Either way, anyone choosing to buy gold in 2009 has other concerns to deal with on top. Concerns over costs, safety and liquidity.

Buying gold at 6% above spot prices, for instance – which is what coin investors across the US and Europe are doing today – means you need a sharp rise in 2009 prices just to break even.

But owning merely "exposure" to gold via a trust fund structure – rather than buying gold outright – might not give you the safety you're seeking in 2009 either.

And the availability of a deep, liquid market – so clearly absent from retail gold products like coins and small bars for the last 6 months, as the dealing spreads show – will prove essential if you want to maximize gains (or minimize losses) from buying gold in 2009.