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Why Gold Should Be Part of Your Holdings--but Not As An Investment
Dear Santa,
Give me GOLD this Christmas.
Amidst all the ruckus this holiday season, I have come to ask myself one very important question:“What should I ask Santa to give me for Christmas?
I want something that has real worth. I want something I can hold in my hand. I want something shiny, that can’t get broken, and which won’t be worthless in a year.
Santa Clause--you great, generous, saintly, secular representative of the Christmas season. I appeal to you. Come through for me, bro. You jolly old soul.
The best thing I could ask you for is the gift that gives me security and peace of mind… the timeless store of value which has, for millennia, provided stability for households, nations, and kingdoms.
GOLD. SILVER. And other PRECIOUS METALS.
Most people I’ve talked to about gold think that it should be bought as an investment.
They're thinking about it all wrong. Gold is not an investment. It is a wise form of savings.
Everyone from the mainstream media to pawn shops to jewelers may try to tell you otherwise. That’s because they want to make a buck off of you. They want you to either buy their overpriced gold, or for you to sell them your gold at a discount price, so they can turn around and churn it to someone else.
Even respected investment legends like Warren, or “financial gurus” and radio hosts like Dave Ramsey tell you that metals are a poor place to put your money.
That’s because these guys aren’t thinking about gold in the correct way.
Let me reiterate: gold is NOT an investment.
Why gold is not an investment
An investment is something you buy, which either gives you a return, or dividend, or it is something you hold for a while, then sell for a profit. Gold in the real world has neither of these functions, and let me tell you why.
You get a dividend for an investment which produces cash flow. Gold is simply a precious metal. It collects dust on a shelf. It is not productive. It does not produce a profit for you (well, it CAN if you sell it, but that’s beside the point). Therefore, there is generally no cash flowing into your bank account because of it. Instead, gold serves a different purpose entirely.
It is a form of savings, a store of value. How so?
Do you realize that every dime you have in the bank is losing value, especially when interest rates are so abysmally low? Inflation is eating away at the value of your dollars or Euros or rubles every second of every day. This is especially true for countries that do or have printed a lot of money (i.e., the USA). For every dollar they print to take on more debt and more ridiculous spending projects, your dollars become worth less.
You’ll notice this was the case from 2011-2014 when quantitative easing, AKA money printing, was in full force. The U.S dollar lost a ton of value. Europe is now following the same course, ensuring its own demise.
Listen closely.
The dollar, and gold which is denominated in dollars, have an inverse relationship. This means that when the dollar becomes more valuable, gold loses nominal value. When the dollar becomes weaker, through action like quantitative easing, gold becomes stronger, i.e., goes up in price.
Most countries like mine no longer back their currencies with gold, so they can basically print money at will. This bodes well for gold in the long term. So far, the U.S. has experienced no repercussions in the form of inflation from the quadrupling of its monetary base, but we can only assume that eventually, this all will come home to roost.
Why exactly?
The economic “prosperity” you all think we have been experiencing, which we think we see in the form of higher home prices, lower unemployment rates, and lower gas prices, is all a freaking farce. It has all been fueled by low borrowing rates. Companies have been able to get cheap debt for years now, and all that debt (also known as false wealth) has propped up prices and purchases by companies and individual consumers.
Once rates start to rise, this spending and “growth” will slow, and at one point in the near future, the world economy will come to a screeching halt. And all the money you have in the bank will be in jeopardy.
Not that I think the government will just steal the money out of your retirement or bank accounts (although obviously, that is not out of the question). Your money will be in jeopardy because it will lose purchasing power. It will lose substantial value, because you will be able to buy less stuff with it, including, most importantly, the basic necessities of life.
Here’s where gold will comes in to save you and I. Gold and silver are economic hazard insurance of the best sort against hard times.
Let me demonstrate.
If you get in a car accident, and your vehicle becomes instantly less valuable, or even worthless, your auto insurance will protect you against most of the loss, or sometimes even replace your vehicle outright.
That’s how gold functions in relation to your dollars in the bank.
Gold is a crisis hedge, not an investment
In the midst of a financial crisis, all hell breaks loose. The stock market gets demolished. We have all observed this in recent history. Also, if the economy is having a conniption, and investors are losing faith in the value of the economy, they are going to ditch things which don’t hold value very well, like paper dollars, along with the stock market.
Let’s say the stock market lost half its value, like during the most recent crisis. If you owned a 401k, IRA, brokerage account, or basically any other type of investment product, you lost a ton of money, and it took forever for you to get your money back.
On the other hand, from the height of the crisis, until things started to “get better” in 2011, the price of gold TRIPLED. If you’d held just 20% of your wealth in gold and precious metals, you could have recouped your losses, even made money, very quickly, then moved on. While everyone around you was wallowing in self-pity, you would be sitting pretty.
It isn’t coincidence. It was direct correlation. The direct relationship between economic uncertainty and the price of gold has never been more proven than in recent times.
The smart money runs to emotional freedom and safety during a time of crisis. Gold has always been a safe haven throughout history.
The dumb money stays in something that can lose value at the push of a button.
Gold and other precious metals are finite resources. They can’t be inflated away. They can’t be revalued permanently or arbitrarily by governments. As inflation rises, the value of gold rises. Gold can’t be created out of thin air, and not even jolly old St. Nick or his elves can pull this out of the magic sack or the workshop—sorry Santa, you’ll really have to put out to give this one for Christmas.
So in conclusion, Grandpa Frost, can you please deliver to me a few Krugerrands this Christmas? Some Canadian Maples? American Eagles? Now is the best time… gold is especially cheap, cheaper than it’s been for a couple of years. You’ll save a bundle if you buy some for me RIGHT NOW.
It’s far better than a big screen TV, an iPad, or some cheap crap from China… you’ll be giving me peace of mind and financial stability. What better gift to give? Plus, you’ll be contributing to my growing pirate treasure stash.
Santa, if you need a connection in the gold sphere, check out this website. You'll be glad you did.
Sincerely,
Jeremiah
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