Since the earliest days of United States history gold and silver have been thought of as the only real money. The American dollar was backed by gold until the United States ended the Gold Standard in 1971. Since then, the dollar has been backed by nothing but confidence and its purchasing power has moved backward fast. The consumer price index tracks the rise in prices. Prices rose immensely when the US ended the gold standard in 1971 as seen in the graph.
Fortunately in 1974, laws were changed that enabled US residents to buy gold in the United States. Throughout these decades, gold has maintained value but the dollar has not.
There are many reasons to buy gold coins and bars. Here are five reasons why gold is an ideal investment for our times.
- Gold maintains its purchasing power over time.
According to the World Gold Council, since 1971 the price of gold has increased 6% when inflation has been 3 or lower for the year, and has increased 15% per year when the inflation rate has been higher that 3%. During the Dotcom Stock collapse of 2000 and the 2008 market crash, owners of gold saw their gold skyrocket to compensate for the declining value of the dollar. Gold is in a league of its own when it comes to preserving your purchasing.
- Gold is an extremely undervalued asset.
What makes physical gold coins a bargain is that they are extremely undervalued. The spot price of gold is supposedly based on the amount of tangible gold held on major gold exchanges. However the exchanges sell more derivative products than they have in gold. If holders of the derivative products ever ask that their gold be delivered to them, gold prices will skyrocket. There is no possibility of gold going to $0 value like securities and other intangible assets. This makes gold a perfect complement to crypto currency in your portfolio. When you buy gold bars or coins the premiums on them are low, ranging from about 5% to 15%. Currently you can get a $50 American Gold Eagle coin at The Gold Marketplace for as low as $2,046, which is about 7% above the current spot price.
- Gold has excellent liquidity.
In fact, the only money that is more liquid than gold is the American dollar; however the purchasing power of gold is not going backwards like the dollar. Gold is universally accepted and can be easily exchanged for cash. Trusted coins like the Eagle or even gold bars can be liquidated in any country in the world. Gold coins can easily be transported internationally because the currency stamp on the coin is well beneath the actual value of its gold content, the owner can declare $50 for example instead of the actual value of the coin, which is well above $50.
- Gold adds diversification of your portfolio.
Gold belongs in the savings/investment portfolio of every American. Most Americans are heavily invested in the stock market via retirement plans and also hold considerable savings in dollars due to their dependence on the banking system. Gold is outside the banking system. Also, gold is inversely correlated to the stock market and the dollar. When they go backwards, gold goes forward. Gold performed well during the 2000 financial collapse, the 2008 collapse, and will perform will in the next financial collapse.
- Gold has a longer performance history than any other asset.
Cryptocurrency are unproven and we have yet to see how it will perform in a crisis. History has proven that fiat currencies like the Dollar that are not backed by gold or silver will inevitably go to zero value. Gold has been used as reliable currency at least 700 years before Jesus Crist was born. By all available evidence, gold will continue to be reliable money long after the unbacked fiat currencies of the world collapse.