Horizon, Host: Ted Simons

January 31, 2011


Host: Ted Simons

Gold Investment Risks


  • The Arizona Corporation Commission wants to remind consumers of the risks associated in investing in gold. Wayne Stutzer, senior vice president of RBC Wealth Management, gives his take on gold as an investment.
Guests:
  • Wayne Stutzer - senior vice president, RBC Wealth Management
Category: Business/Economy   |   Keywords: gold, investment,

View Transcript
Ted Simons: The Arizona corporation commission wants to remind consumers of the risks associated with investing in gold. Prices for the precious metal are down today, but in recent months they've been on the rise. That makes gold increasingly attractive to investors who see gold as a safer alternative to stocks. Here to give us his take on gold as an investment is Wayne Stutzer, senior vice-president and financial consultant for RBC Wealth Management. Good to see you again. Thanks for joining us.

Wayne Stutzer: I have to correct you, it's not only been good the last couple months, but let's talk about the last decade. This is a price that has gone from $220 an ounce back in 1999, 2000, to as high as over $1400 an ounce just a couple months ago. So it's a historic rise. Especially in light of the fact the stock market from the year 2000 to today has basically been flat with a lot of volatility. But if you draw a line from 2000 to today, it's pretty flat.

Ted Simons: It's big-time. So the corporation commission urging caution for those investing in gold. What do you make of that?

Wayne Stutzer: I think it's funny. Are they trying to get into the predicting of the market? I thought that was an interesting bulletin. Except for the fact of, be careful of calls during the nighttime about selling a gold mine, send us your money, we'll give you a certificate. You too can go out and dig away. That type of stuff, I haven't heard that, but if it's out there, yes, those are just pure scams.

Ted Simons: Those are those exploration deals, like we're on the way to exploring Nirvana somewhere, and you can get in if you're lucky.

Wayne Stutzer: That's right, strike it rich.

Ted Simons: What about the guy on the street corner with the sign saying "we buy gold." Is that something that is -- you should look twice at?

Wayne Stutzer: No, I think those are legitimate places. They basically buy it, melt it, and sell it. It's like a pawn shop. It's a modern day pawn shop.

Ted Simons: So you can buy the actual gold, work in that particular field, you have gold-related market investments, you can work in that particular medium, exchange trades and funds -- it makes sense of it all for us. Are there pitfalls other one spot than another?

Wayne Stutzer: Again, the scams that come in will sell you a gold mine. But there's two primary driving forces right now to gold. One is it's plain momentum. It's going up. Everybody is talking about it. And when I see and hear people say to me, I have to own this, one way or another, be it by buy can the bricks or buying the coins or a mutual fund or -- it can only go up. It will never go down. It reminds me very much of the condo craze or very much of the tech stocks back at the beginning of the last decade. So -- so you get the momentum chasers. And then you get another group of people buying gold that really believe that the currencies, paper currencies will be worthless. And eventually there will be no more cash registers, and so when you want to go shop, you either have to have your gold or silver coins or a brick that you can shave into a scale. Because of this fear that there will be no paper currencies, they will all be worthless and the dollar will be a non exchangeable way of buying goods and services. I think that's purely ridiculous, but there is that logic being portrayed.

Ted Simons: Why is that? That's been around for years. Why is it always there? Where does that come from?

Wayne Stutzer: Budget problems, printing of money, money will be worthless because it used to be backed by gold, but it's no longer backed by gold, you get what happened after the first world war in Germany, even in Russia, after the Soviet union fell, it went into hyper inflation. So it's the hyper inflationery scare where the dollar will be virtually worthless if not worthless.

Ted Simons: So when the corporation commission comes out, and says gold may not provide long-term returns, first of all, that's true, nothing can guarantee that. But why again is that warning out there? Is there something bubbling under the market here?

Wayne Stutzer: Well, I haven't seen it other than the fact this fear that the dollar is going to be worthless. But if you want to buy a gold brick, buy one. I haven't heard of any scams that have come to our attention, and on our radio show on Sundays on KATR, if somebody were to be scammed they would call and say I got a call about this, what do you think about it? I haven't heard anything about that. So it was sort of a surprising press release, I agree.

Ted Simons: It is the kind of thing maybe where the commission and others are concerned that folks who may not be as savvy as they should be are dabbling into something that could be and often is highly volatile, especially with a long-term -- or maybe they're looking at folks, maybe folks that are older and trying to look at a way to pad resources for family and that sort of thing, and they don't know what they're getting into?

Wayne Stutzer: Well, I think a lot of people don't know what they're getting into. Speaking of market volatility, you saw Friday's action, we went trough a stock market flash-crash. You and I talked about it. We went down a thousand points in 10 minutes. So anything in this marketplace is volatile. The one thing about buying precious metals though is that there doesn't really pay a dividend. You can't live on the returns. The only way to make money in my mind buying gold is eventually you gotta sell it. Most people never do sell it. They just hold it forever, and then your children inherit and it they sell it. They want to know why mom and dad had this stuff. But it's an interesting phenomenon, and again, I'm somewhat surprised by the press release.

Ted Simons: Last question, real quickly, you mentioned -- we've all seen bubbles, boy we've seen them recently as well. Does this look like a bubble to you?

Wayne Stutzer: To me it does, because again, when you get people saying, I don't care what the price is, I just want to own it because it's going to continue to go up, that's -- whatever you want to call it, there's a lot of momentum behind it, and any time something comes on in a commercial at 2:00 in the morning telling to you do it, I always get leery. My thinking here is, don't buy anything that shows up at 2:00 in the morning.

Ted Simons: All right.

Wayne Stutzer: You should be sleeping.

Ted Simons: Wayne, we'll take that advice. Thank you for joining us, we appreciate it.

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