Are there any safe places to put your money in this time of the weak Dollar, with major financial lenders going under, with the uncertainty of the world's oil market, with wild fluctuations in the stock market? We say there is: gold. Whether it is coins, bullions, or Kruggerands, gold has historically been a safe have for your hard earned cash.
Why is gold such a solid investment? For starters, gold is real. It really exists. It's not an abstract number in a computer bank. It's not spat out by a magic money tree in the basement the Federal Reserve. It is not fiat money. It has to be mined and separated from the earth. It cannot become worthless, because it is the very stuff (along with silver) that all paper and minted money is supposed to be backed by to begin with.
Historically, whenever derivative moneys such as the Dollar have hit times of uncertainty, causing wild flux in the stocks and bond markets, wise investors have turned to gold as a place to invest their precious wealth. Gold is the rock upon which all of the derivative wealth is built. If all of that collapses one day, gold will not collapse. It is the original money of all mankind. If the Dollar becomes worth zero on the FOREX, gold loses none of its value. Indeed, since people would then no longer want to hold Dollars, they would be pushing up the value of gold, in all likelihood, but investing much more in it!
Now, is the Dollar going to zero a realistic scenario? Probably not. But we're exaggerating to make a point-a very realistic point. Gold coins and gold bullion are magnificent investments, and the more troubled times get in the speculative stocks and bond markets the better gold coins and bullion become as investment vessels.
In the last two years at the time of this writing, the S&P 500 Dividend Reinvested stock index is down 4.78%. During that very same time period, gold is UP over 45%! You see, the proof of the power of gold is in the pudding. . . or should we say, the bullion.
Now, let's look at a few hard economic realities. For one thing, the value of gold and the other precious metals reflects global inflation. Inflation is caused by the increased circulation of derivative or fiat monies. Is that going to stop anytime soon? Not on your life. Inflation, even if it gets considerably slower than it is now (very, very unlikely), is a hard reality of modern economics; thus, the value of gold should expected to relentlessly rise.
For another thing, does it seem to you that geopolitical uncertainties are going do just vanish anytime soon? Of course not. There are plenty of crazy “leaders" in the world, plenty of people who will kill you for their fanatical cause. As the planet generally grows wealthier, while on the one hand that gives more opportunities for more people to do good, it also provides more opportunities for people to do wicked things. Financial markets do not like geopolitical risk; they are threats. And yet, wise investors profit from risk. And they know that perhaps the very best way to profit from risk (and since the risk is there, one may as well profit from it) is investing in gold and other precious metals. When markets grow more destabilized, the price of gold goes up, because people value it more.
There is always risk to the stocks and bond market anyway. Smart investors know that greater risk taking, if done right, leads to greater profits. But, those bigger profits are also less certain profits. Yet with gold, the riskiness has a very strong and historically proven tendency to drive up the value of the precious metal. So it can be said that with gold investments , greater risk basically GUARANTEES greater profits!
Remember, whenever the markets experience some turmoil, people start placing their money into more solid things. They want less speculation, less derivation, and more concrete stuff. It might be pork rinds; it might be soybeans; it might be timber; it might be gold. Thus, when stocks and mutual funds are reeling, gold coins and gold bullion are rising. For they are the stuff and the foundation of true value.
The author of this article is Peter Sicoli. Peter owns and operates Invest Your Money a successful information marketing company.