Investment: Precious metals – Gold

Precious metals have been one of the best investment opportunities of the 21st century simply because rich nations seem hell-bent on continuing to live beyond their means for as long as at all possible. This entire financial fiasco has been created by our fiat currency systems which, as explained earlier, gives various members of society the godly power of creating money. Giving godly powers to mortal humans never ends well and this time is no exception.

This is where precious metals (gold in particular) come in. As explained in the previous post, gold is real money that has to be earned before it can be spent. Our economy is breaking today primarily because our fiat currencies have allowed Western nations to spend trillions of dollars before they have earned the right to do so. It really is as simple as that.

Despite these undeniable facts, all indications are that governments will keep indulging in this complete madness of trying to borrow, print end spend themselves to prosperity for the foreseeable future. Just recently, Mario Draghi of the European Central Bank (ECB) announced that the ECB will print Euros to buy the debt of struggling European nations who want to continue living in the fantasy-land where you can pay taxes like Americans, have welfare like Scandinavians and produce like Greeks. Not to be outdone, Ben Bernanke of the US Federal reserve has just announced QE3 on the back of two totally ineffective rounds of quantitative easing (a.k.a. money printing). The only difference is that, while QE1 and QE2 were limited, QE3 will be totally open-ended and will run for “as long as is necessary”.

The problem with all of this borrowing, printing and spending is called inflation. Basically, inflation is caused by the devaluation of a currency, seemingly making everything else more expensive (take a look at this page for a nice example of how inflation works). And yes, as countries keep on devaluing their currencies through excessive printing and borrowing, all assets denominated in that particular currency lose value as well – everything except for precious metals. This is the primary reason for buying gold: it protects you against inflation, thereby preserving the purchasing power you have earned through honest production.

But aside from this wonderful security offered by precious metals investing, it can also be highly profitable. You see, there is only enough investment grade gold on earth to give every person about one third of an ounce (about $580 at the moment). As more and more people wake up to the fundamental fallacy of fiat currencies and seek to preserve their purchasing power in precious metals, this increased demand will boost the price tremendously. It is true that gold has seen 500% in gains over the past decade, but its fair value when compared to the global fiat currency supply (called the shadow gold price) is currently over $20,000 per ounce (more than 10 times the actual gold price) thanks to the massive money printing going on in the US and now also in the EU.

Really, everyone should own some physical precious metals (please avoid paper gold promises like ETF’s). It is the ultimate form of saving, is set for further gains and has virtually no downside risks. Go to Goldmoney.com, open yourself a proper bank account and start saving some real money.

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