Recently, I have started lifting the precious metals exposure (especially silver) of my investment portfolio from the traditional 10% towards 50%. This is a pretty radical move for someone as conservative as myself, but there are some good reasons for this move:
1. Our totally unbacked fiat currency system cannot last
All fiat currencies eventually die a death of hyperinflation. This much has been established throughout history. There is a very fundamental reason for this: fiat money brings out the worst in human nature. When this fraudulent system ends, it is highly likely that everyone will rush back to the money that has been used for millenia; money that cannot be loaned into existence by bankers, printed at will by government or stored in the trillions as ones and zeros on a computer. This ancient money is gold and silver – sound, honest, real money.
2. There is a very limited supply
If the world switched back to the gold standard today, there would be about a third of an ounce of gold and about a seventh of an ounce of silver for every person on earth. Currently, you can get a third of an ounce of gold for a little over $500. However, the global wealth is around $34000 per person, implying that a person who owns $5000 of gold today would be able to buy $340000 worth of assets if we return to a gold-backed currency system again.
3. People are rapidly waking up to these facts
The internet is spreading the understanding about the unsustainability of our current fiat currencies and the cconomic system they have created all over the world. Currently, only 1 or 2% of Americans and Europeans own physical precious metals. As more and more people wake up to these facts and start buying real money in order to preserve their purchasing power, massive shortages will develop and the price will skyrocket.
It used to be that the precious metals market was reserved exclusively for the West. Now, however, millions of Asian investors also have the required purchasing power to get their hands on the tiny little pile of precious metals on earth. More people wanting fewer resources always leads to much higher prices.
5. What else is there?
Just like there are lots of reasons to own physical gold and silver, there are just as many reasons to cut down on everything else. Stocks are incredibly risky in the current economic environment, real estate bubbles have been building and popping violently throughout the world, fiat currencies cannot be trusted and even government bonds are losing face simply because the governments of several western economies are actually insolvent. Precious metals really is all that is left.
How to invest
Buying physical gold and silver is very easy nowadays. Many online services are available (e.g. Goldmoney.com) where you buy the physical metal and pay the company a small fee to store it securely in a vault for you. Alternatively, you can also buy bullion coins from a local dealer and keep them in a safe place somewhere close by.
So, get your hands on some gold and silver and sleep just a little easier in these times of unprecedented economic uncertainty.
Filed under: Solution analysis