6 Reasons to Own Gold and Gold Investments
Steve Sjuggerud is a respected financial analyst and also editor for Daily Wealth and a number of other publications that the company Stansberry and Associates publishes.
This was an excerpt from The January 2008 edition of Daily Wealth but I felt it was still valid now.
6 Reasons to Own Gold and Gold Investments
1. It’s super cheap.
Gold is cheap, while stocks are expensive. In January of 1980, both the Dow Industrials and the price of gold were at the same level: 800. Now, nearly 27 years later, the Dow is above 13,000, and gold is above $ 750.
2. Governments will make our money worth less to pay off their record debts
Governments can print money to pay off their debts. But they can’t create gold. The supply of paper money can be infinite. But the supply of gold is extremely limited (they say that the entire gold production in the history of the world could fit on the basketball court at Madison Square Garden). And it’s difficult to extract.
3. Precious metals do well in major international conflicts
The price of gold was fixed during World War I and World War II. But silver, for example, rose by over 100% in both world wars. Gold has risen for the duration of the War on Terrorism. It all comes back to No. 2, above… governments utlimately print money to pay for wars.
4. Gold should do well in extreme bear markets
Silver more than doubled in value from 1932 to 1936 during the Great Depression (the price of gold was fixed by the government). The next long bear market was 1968-1980. Silver rose from around $2 in 1968 to a peak near $50 in 1980.
5. Gold will rise during inflation… and during deflation
Gold is good inflation protection… gold rises as the value of the dollar falls. But what many people don’t understand is that gold will do even better during deflation, as the government lowers interest rates and wildly prints money (creating inflation) to offset that deflation… leading to substantially higher gold prices.
6. Gold lowers risk in your investment portfolio
In the past, gold has tended to do the opposite of stocks: It skyrocketed in the 1970s , when stocks did horribly. Then in the 1980s and 1990s, when stocks soared, gold lost over half its value. Now, in the new millennium, gold has soared while stocks are still near their year 2000 highs. Holding a portion of your portfolio in gold will smooth out your portfolio fluctuations.
You should own some gold, even it it is purely to lower some of your risk in your investment portfolio, as gold and stocks often move in opposite directions. If you’re not here right now, it’s time to make the move.
His recommendation: Buy high-quality graded gold coins, particularly the Saint Gaudens at MS65 grade or higher. Don’t pay more than 200% over the intrinsic value for the MS65…
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