Gold is the most liquid financial asset in the world. It knows no borders, is recognized throughout the world, and can easily be transported or safeguarded. For this reason, owning gold represents financial privacy and independence. Gold frustrates the attempts of governments to completely control the finances and lives of their citizens.
Gold performs the role as the only true money. Its value can’t be undermined by politicians or the whims of central bankers who print money at will, making their currencies worth less and less each year. Unlike paper money, gold holds it’s value over the long run.
For example, back in 1933, you could buy a first class, tailor-made suit of clothes with a U.S. $20 coin or a $20 bill. Today, that $20 gold coin, worth about $500, will still buy a nice suit of clothes. The $20 bill, however, will not even buy a decent necktie.
During the Great Depression, cash was king because cash was backed by gold. In truth, gold was king. While the dollar was devalued and most assets plunged in the 1930s, the price of gold shot up dramatically.
In a depression, economic crisis, inflation or war, people seek financial security. They invest in assets that have intrinsic value. For many, that means owning gold.
The Effects of Inflation on Investors
The past few years have not been kind to investors in the traditional markets. Investors and savers have lost trillions of dollars in market declines. Unrest and instability throughout the world have created an increasingly greater need for financial security.
Will we see the kind of double-digit inflation that has plagued the U.S. in the past? Never forget the power of the central bank printing presses. Due to continuous expansion in supply of the U.S. dollar and other foreign currencies, all of them will continue to weaken.
A spastic economy, with elements of both inflation and deflation, will make more traditional investment strategies obsolete. Precious metals should be a major part of every investor’s portfolio.
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