The Middletown Press (Middletown, CT)
‘Ship of Gold’ saga shows the metal never loses its luster
In 1857, a ship carrying 30,000 pounds of gold sank off the coast of South Carolina. Later dubbed the “Ship of Gold,” the SS Central America was scheduled to deliver the gold to New York City banks, just as the Panic of 1857 was getting under way. The hurricane that took all that gold to the bottom of the ocean, along with 425 of the 578 people aboard, contributed to the nation’s first major financial panic.
The repercussions continue to this day. On Jan. 27, the U.S. Marshals Service arrested Tommy Thompson, the treasure hunter who located the wreck in 1987 and brought up thousands of pounds of gold. Thompson disappeared in 2012 amid charges he had fleeced investors and cheated crewmembers. Investors who had given the Ohio treasure hunter $12.5 million sued him in 2015, and several members of his crew sued in 2006.
Thompson already had endured a massive lawsuit brought by 39 insurance companies that laid claim to the booty, based on the fact they had paid damages 130 years earlier. A drawn-out legal battle resulted in a 1996 award of 92 percent of the gold to Thompson’s team.
An Ohio court wants Thompson, who was arrested in Florida, to explain where all the profits went. The value of the gold and other artifacts Thompson brought to the surface has been estimated at more than $100 million.
Only about 5 percent of the gold on the ship was recovered, experts have estimated.
A court receiver who took over Thompson’s company recently selected another recovery firm, Odyssey Marine Exploration, to carry out a new salvage operation. Improved technologies presumably will result in a massive new haul of gold.
Gold has long held a special place in the world economy, and continues to play a role in wealth management and financial planning. Turn on your TV day or night and you’ll see commercials extolling the virtue of investing in “GOLD!”
If you think about answering these ads, don’t do so out of some romantic notion of the lasting lure of gold. Gold is not an investment so much as a hedge against investment losses, a very important distinction.
Investing your money in gold in hopes of longterm returns is not a solid investment strategy. The value of gold rises and falls on a cyclical basis; it’s not like a corporation that generates profits through ongoing operations.
Gold also carries additional costs such as insurance and storage.
Some investors place a small percentage of their funds in gold, whether physical gold or gold funds, to hedge against losses in other asset classes such as stocks or real estate. The theory is that the value of gold rises when the value of currency, stocks and other assets falls.
There is nothing wrong with owning some gold as a hedge against losses. I would advise consulting a financial adviser about the amount that makes sense for you to buy as part of a broad retirement planning strategy.