Egyptian Gold Valen CoinsGold is one of the oldest investments known to man. Kingdoms and empires have been built and wiped out due to gold. Even before early societies created their own currencies, cultures like the Egyptians, Mayans, Greeks used gold as an accepted standard of currency.

1922 Genuine US Gold CertificateThroughout time, monetary systems for large countries such as the U.S. were based on the gold standard because of its limited supply, it prevented over expansion of credit and forced discipline in lending because unlike printing more money, there was a limited supply of gold.

At its core, that is why gold is a great investment. While more of it can be discovered and mined, it cannot be manufactured, so the supply will always be limited.

Gold is also one of the safest hedges against inflation and currency fluctuations, compared with any other investment vehicle. Given large fluctuations in stock market returns and loss of valuation of major companies due to mismanagement and greed, the stock market itself is riskier than ever.

Even the bond market has seen an increase in risk, as seemingly safe municipal bonds have gone belly up as local governments have gotten as close than ever before to becoming insolvent.

Its performance is indisputable….

Gold vs SP500

Buy why should you consider investing in gold now? You’ve probably heard a lot of talk about gold in the last few years as economic and political instability and uncertainty have caused people to look for safer places to protect their wealth.

Political instability and abuse of monetary policy by politicians have caused wide fluctuations and devaluation in the U.S. Dollar, which is a global standard.

value of a dollar

But there’s more to the story….

In the past decade, the dot-com bust, multiple financial scandals including WorldCom, the Bernie Madoff ponzi scheme and the 2008 stock market collapse has renewed interest in gold. The mortgage market bubble and subsequent collapse of 2008-2009 which resulted in hundreds of Billions of dollars of lost value of risky derivatives and mortgage-backed securities, seemingly safe, had a devastating effect.

Millions of people around the world have lost large chunks of their nest eggs and retirement funds, some people completely bankrupt because of these different events.

Meanwhile, smart investors who saw the storm brewing, quietly started putting large portions of their wealth into gold have been sheltered from the economic storm.

Seth Klarman

Jim Rogers

David Einhorn

Here are the main 6 reasons why you should consider investing in gold.

  1. Diversify Your Portfolio
    Diversifying your portfolio may be another aspect of gold investing that may interest you. If you have already invested in shares, savings and bonds, your next step will be to invest in gold. When you add a gold investment to your portfolio, it will certainly make your portfolio stronger and diversified. You will have a balanced mix of the main asset categories: cash, stocks, bonds and tangible assets (such as gold). This is a great thing to do, just in case one of your investments takes a turn for the worst.
  2. Hedge Against Inflation
    Gold is becoming more popular than ever, and because of this fact, everyone wants to get in on the action. There are several other reasons why people decide to get involved with investing in gold. Some people do this in order to protect their investment from inflation. Inflation has been the enemy of many in recent years. In some developed countries, inflation has increased by more than 12%. When you decide to purchase and invest in gold, you are keeping your investment safe from inflation.
  3. Hedge against Currency Fluctuations
    Currencies fluctuate on a daily basis, primarily because they aren’t backed by gold, they have a relative value which is effected by a number of variables. Many global currencies use US Dollars as their base, as I mentioned earlier. Since gold isn’t at the mercy of another country’s economic or political state, it can’t be devalued as easily as a single nation’s monetary system could.
  4. Supply & Demand
    Another reason why some people are loyal to gold is because of its rareness. Since there is a very limited supply of gold on the planet, everyone is trying to get their share. A lot of people have been doing all that they can to get their hands on a piece of gold because it is estimated that more than 50% of the gold that was within the Earth is now above ground. Even though there is no account for the remaining 50%, people are still trying their luck.
  5. Liquidity
    Another rationale why you should invest in gold is its liquidity. Gold is one of the most liquid metals in the world. It is globally recognized as a monetary asset that can be used for medium of exchange. You can easily buy and sell government-issued gold bullion coins. Hence, the benefits you derive from investing in gold might be another reason to invest in gold!
  6. No Risk of Default
    The primary reason why some people choose to invest in gold is that it still holds all its power. Unlike the American dollar, gold still has the power that it entered the market with. The American dollar has lost its value by more than 95%. Gold still remains ahead of the market, still taking charge. Gold is another way out for people who don’t trust the government. A lot of people don’t trust the government or the dollar because it can be taken away with no reason at all. Gold won’t default if a government does.

 

 

If you are convinced that Gold should be part of your investment portfolio, I recommend you check out a trusted assets management firm such as Regal Assets. They helped me convert my IRA to Gold and I couldn’t have been more pleased with the process. You can also read about them in our review here.