Economic instability has many turning to gold

Years ago, a friend told me to get myself some gold. He said if the economy were to ever collapse, the yellow metal would hold its value much better than the greenback.

I offered something like, "totally," then promptly forgot everything he said.

Until last month.

Suddenly, buying gold seemed like the greatest idea in the world. Apparently, people all around the world also deemed it the greatest idea in the world. Back in August, Europeans literally lined up around the block to buy gold bullion. And the U.S. Mint suspended sales of many of its gold coins, citing extraordinary demand.

This gold rush doesn't surprise economists or psychologists in the least. They say people like me want gold to be our security blanket in times of financial chaos. Gold is something we can hold in our hands as we watch our IRAs disintegrate. And it seems people like me are suckers for that kind of something.

Christopher Barker he's a sucker, too. He's all for gold -- in bad economic times and good. Barker is a contributor to The Motley Fool, a multimedia financial services company. And he's convinced the dollar is doomed.

"It's just a piece of paper," says Barker. "And it's really only backed by debt. You know, we're seeing a real test of the U.S. dollar. And dollars are going to lose their value very quickly. I think that aspect of this crisis is going to surprise a lot of people. I do really strongly feel that gold is the only safe haven against that."

As it turns out, people like me really don't like to think about the fact that a dollar is really only worth what someone else says it is. People like me don't like to ponder the possibility that all the cash in our savings accounts could be worth almost nothing if society starts spinning out of control.

People like me, we prefer to spend our time checking out gold dealers -- like the Twin Cities Gold and Silver Exchange in St. Louis Park, Minnesota.

This place used to be a magnet for people wanting to turn their metal into money. Owner Chuck Lewensten offers cash for broken necklaces, the wedding rings of divorcees, dental gold.

"Sometimes the teeth are cleaned," explains Lewensten. "Other times they come in with the roots and everything. And we'll take a hammer and extract them."

The typical tooth yields about 20 bucks worth of gold.

"A heavy bridge," adds Lewensten, "can be $150."

These days, though, very few people come in to sell their dental work -- or anything else made of gold. Today everyone wants to buy gold.

"It's just an insurance policy," offers Lewensten, "in case everything else goes to heck."

Lewensten says most customers aren't purchasing the precious metal in hopes of making money. They just want something they think will retain its value, unlike their current 401(k)s.

If you do decide to go for the gold, don't expect it in brick form.

"That's kinda a thing of the past," says David Friedell, Lewensten's business partner.

Friedell says that gold bricks are really just for James Bond movies these days. The most common way to buy gold is in coin form.

"This is a new American one-ounce Gold Eagle," says Friedell, holding out the shiny coin.

Six years ago, one of these would have cost around $300. Today it's nearly $900. Even at that price, Friedell says it's almost impossible to keep the product in stock.

"We do get a lot of survivalists and people like that that are not only hoarding gold and silver, but they're hoarding water. They're hoarding camping food," says Friedell. "And we kinda consider them nuts. But maybe they will turn out to be the smart ones. Who knows?"

I decided not to mention the many times I've imagined having to flee the country because of some war or environmental disaster. Desperate hoards would be frantically trying to get their money out of the banks -- only to learn that banks don't really have everyone's cash right on hand. I like to envision simply grabbing my little bag of gold coins from its secret hiding place in the freezer and escaping to safety. But, like I said, it seemed best to keep all that to myself.

"I would never recommend anyone to go too heavily into it," adds Friedell. "If you've got some spare change, put it into gold and silver. But don't put your whole portfolio in."

With the gold dealer advising caution, but the analysts still yelling go, I decided to seek another opinion. I called up Nate Wenner, the president-elect of the Financial Planning Association of Minnesota.

"Gold is a real danger frankly," proclaims Wenner.

And least, he says, from an investment point of view. Gold doesn't earn interest. And, like the worth of stocks, the value of gold also fluctuates.

"It's possible it could go up more," says Wenner. "It's very possible it could come down quite a bit as well."

This here is the point when psychologists say people like me get their bubble burst. It's when people like me become overwhelmed by the varying advice and paralyzed by indecision. Then people like me simply block everything out of their minds -- in this case, refusing to acknowledge the tumultuous state of the economy -- at least until the next time the market takes a major nosedive.

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