Tupperware Party? Let's Throw a Gold Party Instead!

This is the nineteenth post in a series entitled Currency, Money and the Economy.

You may recently have seen advertisements in the media about the unwanted gold that you might have in a drawer somewhere and selling it for cash. In addition, these companies hold gold parties. You would attend one of these parties with some gold that you want to sell. They would weigh and judge the purity of the gold, and then pay you cash for it.

Now since we are in tough economic times, it is understandable to have the need for cash right now. Also, these companies are more interested in unwanted jewelry and other gold items, rather than bullion and coin, for meltdown value. However, knowing what you have learned in this series, ask yourself what exactly they are doing. Simply put, they are trading you a hard asset for paper! In a time where paper assets are running rampant, they are offering you more paper!

Why on earth would a company do something like this? The financial “experts” tell us that gold is speculative and could drop in price simply because at $1000, they think it is already a superbubble. Why would a company risk paying $1000 an ounce of gold if the “experts” say the price will drop? If it drops, they stand to lose a lot of capital. That is, unless they know exactly where gold is headed, which they believe is straight up. These companies are not stupid. They have done their homework and are betting that one of those disaster scenarios we previously discussed is on its way.

So who is funding these companies offering to buy your gold anyway? That’s relatively easy to speculate on. My guess is that there is a lot of private capital out there (i.e., the rich) who do not want to own any more paper assets. So they have pooled their capital together to gather in all the hard assets they can. And us middle class folk, still believing the buy and hold mantra and not knowing any better, gleefully fork over our gold for cash that we desperately need to keep up with our lifestyles. The rich fleecing the middle class again. Ahh, capitalism at its worst.

That being said, if you have some gold jewelry or other gold items that you have no real use for anymore, these companies do pay top dollar for it. However, I would hold onto any bullion or coin that you currently have.