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Buying Gold: Reality Check 101

March 1, 2017

Acquiring and holding gold as an investment --- is not really about profit, income generation, or yield. Nor is it about a free coin, free storage, or buying the dip. These enticements do not speak to the soul of precious metals purchase motivation or to the heart of gold ownership. The reason to own physical gold and silver comes down to one simple concept: Reality.

Within the conventions of paper money, shares, dividends, rates, monetary policy, and fiscal stimulus are countless catalysts for volatility. The entire reason there are ticker tape displays scrolling across buildings and walls in every major city in the world --- is precisely because paper trading is subject to the whims of countless universal variables. There are some 60 major stock exchanges around the globe with an estimated $70 trillion in valuation hinging on earnings, outlook, and market sentiment. In such a mercurial environment, price declines tend to be infectious and market corrections can be downright contagious.

Gold and silver are the anti-thesis of Wall Street undulations. They are finite, physical assets with inherent value. Both were monetary standards and served as civilization’s earliest money. They are naturally occurring elements that must be extracted from the earth via rock and/or byproduct mining --- and their value is determined by clean supply and demand metrics. Gold has long been considered a tangible refuge from our system of free floating dollars and Big Board speculation. It is a rock-hard alternative to unbacked ‘money by decree’. It is a hedge against rising inflation and falling values. When all is not right with the world, things are very good with gold.

 

So here are the certainties that make gold an essential part of every portfolio: a) paper money is innately unstable, b) investing is inherently volatile, c) the markets are fundamentally unpredictable and d) the world is a highly uncertain place.

 

Yeah so? Well look at it this way --- NOT holding gold as part of an investment strategy makes several bold assumptions: 1) There will never be another market downturn. 2) The dollar will always be strong. 3) Inflation will always be in check. 4) GDP will always be robust. 5) America will balance its budget. 6) There will never be another housing crisis. 7) There will never be another terror hit. 8) There will never be another recession or depression. 9) The rest of the world will always be stable. 10) And we will never run out of bedrock, ore and tunnel mines from which to extract precious metals.

 

If you’re enough of an optimist (or a Pollyanna) to believe all these things, then double-down on your paper assets. But if you suspect that even one of these elements is in play – gold could provide critical diversification and a sensible safe haven for your financial portfolio.

 

Let’s face it. If I told you a few years ago that Britain would leave the EU, commercial flights would resume to Cuba, Bob Dylan would win the Nobel Prize and a billionaire reality star would be president of the United States, you would never have believed me. The point is, anything can happen in life and in the world of paper money --- and gold and silver are “anything can happen” insurance. You’d be wise to own some.

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