What is price? “Price is what the greater fool is ready to pay” (Trading for a living by Alexander Elder)
Recently, I have heard a lot from my clients talking about investing in Gold. Some of them have bought the Physical Gold years back and saw the value soared and some are regretted not buying and eager to jump into the wagon.
There are some “smart” business people started business a few years back to sell people gold with “guaranteed returns”. Companies, such as Genneva Gold and The Gold Label, sells Gold Bullion at a 2% discount to the market price with a buy-back guarantee. To my shock, the scheme seems to be on high demand. I have a client whose friend recently invested in 60kg gold with such company. The value is, based on current price US$1400 per oz, near 3 MILLION US DOLLARS
Where the scheme might sounds too good to be true, it probably is. Such companies was recently placed on MAS alert list.
Given the soaring gold price, it is very difficult for some people to resist such offer and they simply ignore all the early warnings, such as MAS alert list. One can argue that they are holding physical gold or gold price will never drop in the long run etc.
People are just very forgetful. Lehman Brothers did not collapse over night in Sep 2008. Their financial trouble was raised as early as 2007, but investors were just saying, Lehman Brothers will never collapse, the same faith with Gold.
Don’t get me wrong. I am not against investing in Gold at all, in fact, I am a strong advocate for commodities. However, investor just has to be more vigilant when investing their hard earned money. Diversification is the key.
To me, such scheme is just using new money to pay the old clients, the cash flow problem is foreseeable once the trend reverse. After that, there will be complains, litigation, liquidation, people crying about losing their retirement fund, etc. Sounds familiar?
Yes, you may still have the Gold, but remember, Gold is just a metal, Price is what the greater fool is ready to pay.