Some turn to precious metals as an investment

Dominic Debock (left), Owner of Marengo Coin Shop, weighs a silver bracelet for Carol Edstrom, of Belvidere, on January 9, 2009. The bracelet which weighed about 16 grams was worth about $4. Edstrom did not make a deal to sell her bracelet but has sold some of her other jewelry at the shop. (Lauren M. Anderson - landerson@nwherald.com)

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McHENRY – With banks struggling and the housing market slumping, some families are staying away from traditional investments such as buying a home or putting money in the stock market.

Instead, they are taking advantage of what some consider to be more stable investments: gold and silver.

The price of gold, about $400 an ounce a year-and-a-half ago, hit $1,000 in 2008 and now hovers around $800 or $900 an ounce, said Erv Beskow of Old World Coin in McHenry.

“People got scared of the traditional investments,” Beskow said. “The stock market crashed, the housing market crashed, the U.S. dollar was weak against the euro and other currencies, and all those factors scared people into [buying] gold and silver.”

Beskow, an employee of Old World Coin at Route 31 and Riverside Drive, said business had increased in the past six months, and at least half of the people buying gold and silver were first-time buyers.

Stephen Ives of Lily Lake, a longtime customer of Old World Coin, said he invested in silver because, like gold, its price tended to go up as the economy worsened. He said he preferred silver to paper money because it had an inherent value.

“It’s no good saving money; it’s not backed by anything,” he said. “Money is just paper. What’s a dollar worth? It takes about 3 cents to make, so that’s what it’s worth.”

Gold, on the other hand, “has been used as money since the beginning of time,” said Dominic Debock, owner of Marengo Coin Shop at 220 S. State St. “[People] don’t have trust in the dollar anymore.”

But buying gold and silver is not for everyone.

Old World Coin co-owner Norman Fine said it was one thing to invest in gold with discretionary income. But when a woman in her 80s walked into his shop recently after withdrawing all of the money in her savings account because she was afraid the bank would fail, he advised her against using her savings to buy 10 ounces of gold.

“If you’re 30 or 40 and have a job and know what you’re doing, it’s one thing,” he said. “But if you’re 85 and it’s about the economy and the fear,” he doesn’t advise investing in gold.

Fine said he was having a hard time keeping enough gold in his shop to meet the demand. Because the supply is low, his premiums have increased from 60 cents over the current trading value for an ounce of gold to $3 over the trading value.

Debock has the opposite problem. In the past three months, he has seen about a 30 percent increase in the number of people selling their gold, silver and platinum for cash at Marengo Coin Shop to pay their bills, he said. As a result, he has more gold and silver than he can sell.

Beskow recommended that anyone planning to invest in gold do so only with their extra income.

“The secret is not to spend more than you have that’s excess money,” he said. “Otherwise, you might have to sell too soon if something else comes up and you have to liquidate. It should be discretionary funds.”