Gold Ain’t So Shiny

So, you are a gold bug.

How appropriate when it comes to investing if you, the true Yukoner, see the mother lode in “them tars”.

Well, before you make the faithful jump, think again. Yes, the global markets are all in a turmoil (what an understatement). Yes, your portfolio is bleeding at the time gold has passed the $1,000-an-ounce mark.

But wait, wasn’t gold at the $850 level in the early 90s? Sure it was, and all the die-hard gold bugs were dreaming (some quite loudly) about $1,500 … heck, no, $3,000 an ounce.

Fast forward to the $220 an ounce that gold sat at for the next decade and then, ta-daaa, you broke even (before inflation) in 2007. After inflation, you’ve actually lost money.

In the meantime, those battered (today) financial services stocks have been paying handsome dividends as well as capital gains, including those ever-so-nice stock splits.

A pile of gold bullion doesn’t pay you a nickel in dividends and doesn’t generate any cash flow, which is what decides the fate of that company, whose shares you could buy today at a deep discount.

I’ll still be banking with one of the local banks, whose share price has taken a beating lately and whose dividend yield works to a whopping 4.39 per cent (better than a one-year GIC available at the same bank). Chances are the bank you use is in the same battered situation, price-wise, and paying similarly well.

All of them banks on Main, all of them hated for making fat profits off yours and my back. Well, now is the time to make them work for you.

Chris Geshev is a financial planner in Whitehorse. You may contact him at [email protected]


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