Sudame pointed out that owning stock in gold-mining companies is not as safe as gold because mining faces the same economic challenges as the rest of the economy, such as rising fuel prices and high labor costs. These stocks will generally rise with the price of gold, Sudame said, but as a pure risk avoidance strategy, the bullion is better because the bullion will be sitting in a vault somewhere.
Jeff Broadhurst, of Broadhurst Financial Advisors Inc. near Philadelphia, said, I do not invest in or recommend commodities [such as gold] because the expected return for a commodity is zero. That is, a block of gold will remain a block of gold, and its value will go up and down with supply and demand, but it wont create more gold, whereas an investment in a company allows the company to produce more value from the dollars that were invested.
Of course, all metals are not created equal, so while gold has risen briskly over the past few weeks, other metals have not fared as well in the face of the economic slowdown.
So pity poor Sen. Joe Lieberman (ID-Conn.), who reported holding $100,000 to $250,000 worth of stock in Commercial Metals Co. at the end of December, a stock that was selling for about $29 at the time. By Tuesday, stock in the steel manufacturing and recycling company was trading at about $18 per share, meaning Liebermans investment has lost more than $35,000 in value assuming he hasnt sold it since December.
Of course, for the faint of heart, there are still the more traditional investment strategies. Rep. Marilyn Musgrave (R-Colo.) reported that her husband held $50,000 to $100,000 worth of precious metals/coins, Rep. Jim Matheson (D-Utah) reported a coin collection worth $1,000 to $15,000, and Rep. Jim Sensenbrenner (R-Wis.) reported a stamp collection worth about $100,000.