The price of gold has been dropping lately, creating quite a buzz. Never one to shy away from a buzz, Jim Cramer, star of “TheStreet,” gave his opinion on gold during a June 26th interview with Joe Deaux. In the interview, Mr. Cramer states that he has shifted his investments from gold stocks to gold coins. Cramer says of gold stocks: “I hate the stocks; the stocks are just deadly here because refining costs are way up and the things that can go wrong with gold mining are just horrendous.”
Even though Mr. Cramer distrusts gold stocks, he is bullish on gold coins and states, “…gold coins are integral and I have shifted from GLD, which I don’t trust anymore…I don’t like the gold stocks at all, I just think that they’re toxic. Gold bullion, gold coins I want to use that decline to get in for people who don’t own any gold because I like it as insurance.” Cramer cites the fact that gold prices are dropping while mining costs continue to rise as exhibit number one in his case against owning gold stocks.
Mr. Cramer also speculates that the unexpected drop in demand for gold in India and China is playing a major role in the gold slide. He says, “The natural buyers seem to have gone away. I know India has discouraged use of buying gold and I have no idea what’s going on in China, no one does.” While he acknowledges that there is typically a “summer weakness” in the gold market, he feels strongly that this drop is not just that, but something “extraordinary.”
Nevertheless, Mr. Cramer does see a floor for gold coming eventually due to reduced refining and a slowly dwindling supply. For this reason he is recommending that investors diversify now and buy physical gold, but the volatility of gold stocks and ETFs (exchange-traded funds) make them much too risky at the moment for his taste.
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