Some experts are saying that gold will be the next bubble to burst. They may have a point. According to The Street, before the financial crisis, in January 2007, gold was priced at $650 per ounce. The average price of gold had fluctuated between $300 and $500 per ounce during the 10 years prior. Today, the price of gold was approximately $1352 per ounce. That is over 100% growth since 2007.
Is gold overpriced? I have no idea. What I do know is that investors are obviously buying a lot of gold-linked investments and based on my experience representing investors who have been defrauded, I predict that these investments are being mis-sold to investors. I am sure that sales agents who are earning a healthy commission, are telling investors that the returns on gold are guaranteed or that the investments carry very low risk. That is simply not true.
While it is true that historically, the price of gold has gone up in bad economic times, that does not mean that gold currently is not overpriced. Consider the following comparisons of the price of gold per ounce to prior recessions in U.S. history:
Judging by history, it seems to be just a matter of time before the price of gold falls significantly from its current ultra-high values and investors will be left holding the bag.
Keep this general rule in mind: Rewards sell investments, not risks.
In other words, if your financial advisor tells you to invest in gold and focuses on the rewards but minimizes the risks, you need to ask more questions and probably get a second opinion.
If you believe that you have been a victim of bad financial advice or worse, financial fraud involving gold investments, feel free to contact us for a free consultation.
Jason Doss is the owner of The Doss Firm, LLC, an Atlanta-based law firm devoted to representing consumers across the country in a variety of areas including investment disputes and consumer class action litigation. Mr. Doss earned his J.D. from Florida State University in 2002 and his B.A. from the University of Florida in 1997.