Some have worried about gold’s low prices. The market has been in a two year correction and during that time prices have remained at industry support levels.
Many leading analysts don’t think so. In fact, many are predicting that prices could rise substantially in the coming years. For the investor, the time to get in may never be better. Even if gold doesn’t experience a precipitous rise in value, its present low price is still a blessing and not a liability.
It’s been argued by many that gold, even going back as much as 15 years, is “a grossly mispriced asset.” Gold is not like other investments and shouldn’t be judged like other investments. In fact gold shouldn’t be considered an investment at all – think of it more as a kind of wealth insurance, a protector of value.
Let’s start with the devaluation of currency.
Over the last 100 years, every major currency in the world has fallen against the value of gold. (Source: IHS Global Insight, Thomson Reuters Data stream, World Gold Council) And not by just a little either – every currency has dropped between 97% and 99% against gold.
Not the least of these currencies is the dollar.
Looking at history, until 1933, people carried gold coins in their pockets, and paper bills were exchangeable for gold and silver coins at any bank. Prices remained remarkably stable, and had for a hundred years or more except during periods of war or other calamities. In 1933, the year gold of U.S. citizens was confiscated by the government, the dollar was devalued by 41%. The U.S. also entered a period in which the treasury attempted to hold the value of the dollar at 1/35 of an ounce of gold.
This value of 1/35 of an ounce of gold held well until the late 1960s when so much gold was required – too much – to buy up all the dollars in foreign countries. But as there were so many dollars, the U.S. government simply gave up and “closed the gold window” in 1971. The value of the dollar collapsed over the next 10 years, hitting bottom in 1980. By paying high rates of interest and reducing taxes, the dollar slowly recovered some of it’s value over the next 20 years, but expansive money policy in the 1990s eventually caught up with the dollar in 1999.
Since 1999, the dollar has fallen in value from about 123 mg of gold to less than 21 mg today – a drop of more than 80%! Overall, from 1900 to 2010, the dollar fell from 1500 mg to 25 mg, losing over 98% of it’s purchasing power. Penny candy now costs 50 cents. The “Five and Dime” is now the Dollar Store.
Why has the dollar devalued – and all currencies for that matter – to such an extent? Because of all the money printing. How do things look for the future? Well, don’t get your hopes up for the dollar. Recent comments from the Federal Reserve indicate that near-zero interest rates and “quantitative easing” (Fed-speak for money printing) can be expected to continue “for an extended period”.
Gold As Protection Against Inflation
Historically, gold has been an excellent hedge against inflation. This is because its price tends to rise when the cost of living increases. Since World War II, the five years in which U.S. inflation was at its highest were 1946, 1974, 1975, 1979 and 1980 (as of 2014). During those five years, the average real return on the Dow Jones Industrial Average was -12.33%, compared to 130.4% for gold.
Every day you wait to protect yourself, your family, and your wealth against future financial uncertainties is another day of putting your retirement at risk. Don’t let your portfolio be missing the one thing that can provide you with a hedge and serve as protection in all seasons and under most circumstances – gold.
Transferring a portion of your IRA or other retirement accounts to gold can help to protect your retirement from the highly fluctuating stock market. But before you do anything with your money make sure to do your homework and get the best information available. You can begin by downloading a FREE mini-course that was designed to help answer many of your questions and provide investors with the ABCs of gold and silver investing and coins. Full of important money saving investment tips, this gold investing guide has helped teach many of our clients to invest like experts.
This is how you start investing in gold – by getting the right informaton. If you’d like to save precious time and possibly thousands of dollars, you need to read this today!
