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Investing in gold or Colt SSA

Discussion in 'General Firearm Discussion' started by bshnt2015, Nov 5, 2009.

  1. bshnt2015

    bshnt2015 CA & WA Member

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    An interesting read on gold vs Colt SSA investment

    My Colt SSA investment,

    IMG_5104.jpg

    http://www.marketwatch.com/story/how-the-colt-peacemaker-outshone-gold-2009-11-05?link=kiosk

    Nov. 5, 2009, 1:27 p.m. EST

    The gun that beat inflation
    Commentary: How the Colt Peacemaker outshone gold
    By John Ittner, MarketWatch
    NEW YORK (MarketWatch) -- There is an old and apocryphal saying that "a good handgun is worth an ounce of gold" and it turns out to be true -- at least it has for the past 136 years.

    Because it is basically unchanged after 136 years of continuous production and because there is a healthy, liquid market for it, a good example of this case can be made by tracing the price of "The Gun that Won the West," the Colt Single-action Army revolver. The venerable Peacemaker turns out to be a better gauge of inflation than gold is and a better investment. President Ronald Reagan even named a missile after it.

    The correlation of gold and guns can be traced back at least to 1873 when Colt's Manufacturing Company of Hartford, Conn., introduced the most technologically advanced handgun of its time, a six-shot revolver that used metallic cartridges. The Army adopted it as its standard side arm, a position it held until 1892. The innovation of metallic cartridges made it easier to reload in a hurry. Reloading had always been an issue because it was slow, unwieldy and required some expertise. Now anybody could do it.

    In 1873 the Colt SAA sold for $17.50. The complete kit with a holster and some ammunition could be covered by a $20 gold piece. The $20 Double Eagle of 1873 contained 0.9675 ounces of pure gold. Today an ounce of gold is about $1,090 and a new Colt SAA can be special ordered from Colt's custom shop for about $1,500.

    As a collector's item the Colt fares even better. A recent check of Collectorsfirearms.com found scores of listings at a wide variety of prices from $1,699 at the bottom to $175,000 asked for a Colt "Pinch Frame" called "the Holy Grail of single action collecting." This gun carries the serial number 58. So your $20 gold piece spent on this gun in 1873 would have returned 874900%.

    Gold Double Eagle $20 coins from that year can be found on line for $1500 to $5000 depending on condition about the same price as Colt SAA's of similar age and condition.

    Gold's price is fixed

    Gold was in the midst of one of its many upheavals when the Peacemaker arrived. In 1873, Congress put the United States on the gold standard with the Fourth Coinage Act, which de-monetized silver and made gold the only metal by which to fix currency. President Grant signed it into law in February of that year. Gold was set at $20.67 an ounce where it stayed until 1934 when President Franklin Roosevelt devalued the dollar to 1/35 of an ounce of gold. During this period gold lagged behind the handgun.

    What To Do If the Fed's Wrong On InflationJamie Cox of Harris Financial explains the apparent disconnect between the high price of gold and the Federal Reserve's lack of alarm about inflation. Interview with Simon Constable of "The News Hub."
    The handgun/gold equation was introduced to me by Bob Taber in 1987 when he and I worked at The New York Post and an ounce of gold was worth about $370 and a Colt SAA had jumped to $763.

    Bob did not specify a Colt Single Action Army. He merely said, "A damned good handgun is worth an ounce of gold. That's always been true."

    Bob was a night-side copy reader at The New York Post and a fantastic character and a holdover from the days when The Post was considered a leftwing newspaper. He'd had a journalistic career that included following Fidel Castro and Che Guevara in the Cuban revolution from the mountains to Havana as a special correspondent for CBS television. He also wrote a book on guerrilla warfare, "The War of the Flea" that is still read by the military and intelligence services.

    There is film of Bob interviewing Castro after the fall of Batista in 1959 that can be seen in the documentary "David Halberstam's the 50s". In it Bob holds a microphone and sports a beard even bigger than Castro's.

    He had survivalist mentality, a guerrilla fighter's point of view. I generally believed what he said on matters dealing with firearms. More than 20 years later I put his statement to the test.

    For the most part, it's still true. It does depend on the gun and what you consider to be "good." A Glock similar to the one Plaxico Burress was carrying when he accidentally shot himself in the thigh at a nightclub, can be found on line for a little over $500 and the gun that made Dirty Harry's day, the long-barreled .44 magnum Smith & Wesson 629, sells for about $825. The other gold-standard pistol, also made by Colt's, is the .45- cal. Colt Automatic Pistol. The Army bought about 2.7 million of these from 1911 to 1985 when it was replaced by the Italian-made Beretta 9-mm which can be bought for about $750.

    The Colt .45 ACP could be called the standard now and it hits the price of an ounce of gold pretty close to the bull's eye if you go for a top of the line model, but don't go too crazy. A Web site sells the stainless steel Colt 1911 Gold Cup Trophy 45 for $1050 (NYSE:GLD) .

    Gold and politics

    Gold, despite its longevity as a trustworthy container of value, has proven more readily manipulated by the government than handgun prices. Congress was in inflation-fighting mode in 1873 when it voted to cease using silver to back paper money and established gold as the sole criteria. This act created a controversy that lasted for decades between those who were pro-inflation and those who were against it.

    Silver had its own fanatical backers and they were for a bi-metallic standard that favored easy money. Farmers liked inflation because it raised the price of crops and lowered the cost of debt. Laborers and factory workers also wanted inflation to make it easier to pay off debts. Silver was favored by politicians from states producing silver and by many Democrats, and Southerners. The issue was embodied by William Jennings Bryan, who ran for president and lost on the Democratic ticket in 1896, 1900 and 1908. His acceptance speech at the Democratic National Convention of 1896 ended with the famous, "You shall not crucify mankind upon a cross of gold!"

    The gold believers, sound money advocates, won the day. This victory kept the price of gold artificially low as evidenced by the 1956 price for the Colt Equalizer of about $125 when gold was still set at $35.

    The victorious pro-gold standard bearers held sway until 1971 when President Richard Nixon took the U.S. off the gold standard altogether. He was concerned, among other things, that foreign governments held more U.S. currency than the $10.5 billion in gold the Treasury had on hand. A run on the bank was not out of the question. From then until now the dollar would float against other currencies on the open market.

    The inflation that followed these policies would have done Williams Jennings Bryan proud -- from 4% in 1971 to 11% in 1973. And Nixon was a Republican!

    Gold was traded freely again and rose quickly. But the Colt stayed ahead where it remains to this day. By 1980, gold had topped $600 an ounce as inflation headed to 14%. Today the standard, blued single-action Army six-shooter goes for $1290, or $1490 for the nickel-plated version. Can gold be far behind?
     
  2. Gunner3456

    Gunner3456 Salem Well-Known Member

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    Very interesting. Thanks for posting.

    There's a missing link in the equation, and that's the industrial revolution which is on steroids with CNC machines, mass plastic molding, etc.

    You can't mass produce gold but you can guns.

    I also have concerns about expensive "collectors" guns. I've seen the collector value of items, including 50's and 60's muscle cars crash when the economy goes sour, but not gold. Gold seems to go the other way in hard times.

    Silver is interesting in that it's needed for manufacturing. Worldwide we use each year about as much silver as is newly mined for manufacturing but not so with gold.

    Electronics manufacturing uses some gold for contacts on CPU's, RAM chips, etc., but uses much more silver. Silver has a true supply/demand dynamic while gold's price is based on investor demand.

    $.02
     
  3. harleyvrodguy

    harleyvrodguy Portland Member

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    Informative, thanks for sharing.
     
  4. raindog

    raindog Portland, OR Active Member

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    Absolutely. "Collector" items - guns, comics, trading carts, fine art, whatever - is much more variable. And a lot less liquid. If you have a collectible gun and want to sell it, you are depending on finding someone who wants to buy.

    Cash is the most liquid commodity. Gold is somewhat less liquid, and typically you pay a fee to sell to a broker. Something like a comic book or a Van Gogh involve finding someone who wants to buy it and has the money. Often you end up paying a broker's fee - an auction site or a broker or an advertising fee or whatever. And as the value of your collectible goes up, the number of potential buyers goes down.

    You also have all the work/cost of storage and insurance.

    Gold is also variable, and it jumps around based on investor's personal or herd predictions about the future. Gold could be $500/oz. in a year or $2000/oz. in a year, and no one can tell you for sure.
     
  5. Gunner3456

    Gunner3456 Salem Well-Known Member

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    Interesting and good thoughts.

    I'm actually buying silver, or at least keeping what I have. I have two reasons. First, it's available in much smaller denominations. How do you spend a bar of gold? Second, as I said above, we are using all of the silver which is mined each year in commerce. The supply isn't growing as gold is.

    I believe that both gold and silver will keep going up but of course no one knows for sure. But, as you so aptly put it, how do you spend gold?

    $.02
     
  6. Just Jim

    Just Jim Well-Known Member

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    There have always been bubbles. The houseing bubble broke when housing cost too much for joe average to buy. When you talk of exspensive guns( or houses) you have to ask "yourself who is going to buy it". Joe average isn't

    Colt stopped production of the SAA when they couldn't sell them new for $450. They moved the production to special order. Could you sell an ounce of gold or a Colt SAA easier? Well that all depends on the times LOL LOL and which you want to hold onto the most.

    Odd though, You can buy a Colt copy much cheaper than the real thing.

    jj