Gold frenzy: Is Glenn Beck's favorite metal a good investment?
Rush for precious metal shines, dims on investors
But if Lehrer doesn't love gold, Steve Deeds, founder of Morgan Gold in California, does. Deeds has been a rare coin dealer and an expert in the field of precious metals for about 50 years. "Gold has been a store of value for five or six thousand years," he said. "It's always had a value — even when currencies have failed. … Every currency in the last five thousand years has failed. Why shouldn't ours?"
Gold shouldn't be seen as an investment as much as it should be seen as protection, Deeds said. He recommends putting 15 to 25 percent of a portfolio into gold. And the type of gold he recommends is the collectable numismatic coins.
There are two main physical gold markets. One is the bullion market — gold bars and almost-generic gold coins with value coming almost exclusively from the content of gold.
The other is the numismatic or collectable coin market — coins that have a premium cost above the intrinsic gold value. That extra value comes from the coin's condition, rarity and even its artistic beauty. This means people pay for the gold content and the somewhat nebulous collectors' value.
The coins do have a premium price over gold bullion, Deeds admits — but he said that is an advantage because the coins do not just act according to the changes in the gold market. The coins have fluctuations according to each individual coin type's supply and demand, he said, and so can hold value when bullion might fall.
On the other hand, Haynes, the gold bullion dealer in Arizona, doesn't like the premium cost aspect of collectable coins because it is hard for people to ascertain the correct value. He also cautions against the "spread," the difference between what a person pays for a coin and what a dealer is willing to pay to buy back the coin. The spread in collectible coins is greater than the plain bullion bars and coins.
But even the price of bullion gold can be nebulous.
When Savneet Singh first looked to buy gold he found the market opaque. "I was never sure what I was getting," he said. "I would get a different price every time I called. I never felt like I was being treated like I was purchasing a financial asset."
Since then, Singh became the founder and CEO of Gold Bullion International in New York City. The company brings gold bullion dealers together similar to the way LendingTree.com brings banks together to compete for customers.
Singh also cautions against collectible coins.
Singh had a client, an NFL player, who had purchased collectable coins from one of the gold dealers that advertises heavily. The coins were 12 percent higher than the price of gold. When the person went back to sell them, the dealer offered him five percent below the price of gold.
But when Singh began investing in gold bullion he learned later he had paid six to seven percent more than he should have.
Hedging against fear
Elliott Orsillo, a portfolio manager at Season Investments in Colorado Springs, Colo., likes products that are backed by gold — such as exchange traded funds or ETFs, which are basically mutual funds that can be bought in shares. "They are scalable and easy to understand in a low risk way to get gold exposure," he said. "The disadvantage is the commission."
Orsillo recognizes gold as a way to hedge against an "orderly decline in fiat currencies," not a catastrophic economic collapse.
Part of the urgency appeal of gold is fear of the decline of the dollar. But Pat Dorsey thinks its "insurance" or "protection" value is overrated. If it is insurance, Dorsey said it is important to classify what it is insurance against. Financial collapse? A decline in the equity market? A devaluation of the dollar?
Dorsey is director of research and strategy at The Sanibel Captiva Trust Company in Chicago. He said a business with pricing power — like Budweiser or Oracle — can raise its prices and could offset a decline in the dollar as well.
"Gold is a possible insurance against a dollar decline," he said. "It is not the only type of insurance by a long shot."