New CD product backed by Gold

[BobinSFCA]

Knowing I am an iTulip follower and hold assets in PM, a friend sent me this link today on a new CD product that is FDIC insured and backed by PM. It almost sounds too good to be true, so I thought I'd post the link in hopes of soliciting some feedback from other iTulip readers:

http://www.everbank.com/001Certifica...?referID=11671

[pianodoctor]

Re: New CD product backed by Gold

Thanks for mentioning this product. It's interesting. But I'm thinking it's large flaw is it's a big risk trying to time the PM market, especially forecasting 5 years out from June 2010. You buy the CD, you're out of it in 5 years no matter what the market is doing in 5 years. If PMs haven't peaked yet, or are peaking- then fine. But what if they peak before that and have gone down the other side of the slope by then? And is it a guarantee that silver and platinum will follow the gold track? Even if gold continues in a bull for 5 years, could silver or platinum crash and cancel out the gold gains? Risk, risk.....

But OK, the worse that happens is you get your initial cash back. But if PMs do soar in the 5 year span, will it be because of high inflation, greatly devaluing those dollars? It's likely.

Your principal is protected, but if you just held it in savings or Treasuries it would be protected. To me, it's a lot better to allocate some money to gold, then watch what happens and get out of gold when it's time to get out, whenever that is- 2 years, 3 years, 4 years- whatever. Allocate other money to safe cash equivalents, collect the pathetic interest on it. And so by analyzing the pros and cons of that CD product, we find ourselves full circle back at EJ's cash+gold port concept. Simple, more flexible, safer, and better.

[BobinSFCA]

Re: New CD product backed by Gold

Thanks pianodoctor - you made some very good points. I was concerned they capped the upside, which could be a problem in a high inflation scenario. I agree EJ's gold/treasuries is probably the better approach over the long term.