Why Buy Gold?

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Gold has been real money (medium of exchange and a store of value) for over 3,000 years. It is still real money.

 

american-gold-eagle-coins

 

    • Gold has no counter-party risk. It is not someone else’s liability. It has intrinsic value that is recognized around the world.

 

    • ALL paper money systems have eventually failed. The intrinsic value of paper money is effectively zero; and all paper money has, throughout history, eventually devalued to zero.

 

    • Paper money is a liability of a central bank or a government that may be insolvent. The money issued by a central bank or government has value based NOT on its intrinsic value, but only upon people’s faith, trust, and confidence in that money. Occasionally that faith and confidence is misplaced. For example:

 

zimbabwe

    • The price of gold in US dollars since the year 2001 has been strongly correlated with the ever-increasing official national debt of the United States. Read $4,000 Gold! Yes, But When? Does anyone believe that the national debt will decrease or even remain constant over the next several years? NO! The national debt will increase even more rapidly over the next four years and so will the price of gold. Skeptical? Then look at the chart of national debt and the nearly parallel price of gold. Still skeptical? Do you remember gasoline selling for less than $.20 per gallon and gold selling for about $40? They have increased in price because there are currently many more dollars in circulation than in the 1960s – hence, it takes more dollars to buy an ounce of gold, a gallon of gasoline, a loaf of bread, a cup of coffee, or a fighter jet.

 

    • Because governments and central banks issue paper money backed by nothing but faith and credit, they are in competition with gold which is real money. Should we be surprised when they discount the importance of gold and discourage ownership? Should we be surprised when the “Oracle of Omaha” denigrates gold ownership? (Berkshire Hathaway holds huge positions in banking stocks and Goldman Sachs stock.) Should we be surprised when news stories are heavily slanted against gold ownership?

 

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Survival Investing with Gold & Silver

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    • Groucho Marx once said, “Who are you going to believe, me or your own eyes?” Who are you going to believe – the history of gold as valuable money while paper money failed, or the pronouncements of politicians, central banks, and the owners of bank stocks?

 

    • Who and what do you believe? It will be important to your financial well-being if (when) paper money accelerates its journey toward an intrinsic value of zero. Read Ten Steps to Safety.

 

  • Are you going to believe history and current facts or less reliable information from politicians, central banks, and the owners of bank stocks?

 

GE Christenson
aka Deviant Investor

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I am a retired accountant and business manager who has 30 years of experience studying markets, investing, and trading futures and stocks. I have made and lost money during my investing career, and those successes and losses have taught me about timing markets, risk management, government created inflation, and market crashes. I currently invest for the long term, and I swing trade (in a trade from one to four weeks) stocks and ETFs using both fundamental and technical analysis. I offer opinions and commentary, but not investment advice.

Years ago I did graduate work in physics (all but dissertation) so I strongly believe in analysis, objective facts, and rational decisions based on hard data. I currently live in Texas with my wife. Previously, I spent 20 years in Barrow, Alaska, the northernmost community in the United States, 330 miles north of the Arctic Circle.

There are many parallels between surviving in the arctic and investing for substantial gains in today’s market. For example:

– Preparation for surviving arctic weather is critical, just as preparation is essential when investing.

– There is little room for delusional thinking when you are subjected to a 40 degrees below zero blizzard while facing 30 mph of wind. Similarly, dangerous markets will punish delusional thinking.

– There is much to learn about survival in the arctic, considerably more than just “wear more clothes.” Markets appear less complicated and easier to understand than they actually are. Underestimating either arctic conditions or the complexity of markets can be deadly.

– Temperatures in the arctic gradually move from dreadfully cold to mildly warm. Markets seem chaotic in the short term but gradually move up and down in long cycles.

– One can experience the “midnight sun” for several months in the arctic. During that time, it seems like the sun will last forever. It does not, and several months later you will live through two months of darkness. Bull markets feel like they will rally forever. They do not and are followed by bear markets, regardless of what the Wall Street cheerleaders wish us to believe.

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