Precious metals such as gold and silver are utilized as a hedge against geo- political uncertainty by investors around the world. Gold and silver are used as investment vehicles to protect against fiat currencies and arbitrary government policies. When the U.S. abandoned the gold standard in 1973, the 1970’s brought an oil crisis and skyrocketing inflation followed. From 1973 to 1980, geo-economic uncertainty and inflation were present, and gold climbed from $42.22 per ounce to $850 per ounce.
The gold spot price retracted after 1980 as inflation fell and geo-economic volatility subsided. By the late 1990’s the U.S. dollar was the strongest currency in the world and reaped the benefits of a balanced government budget, and gold fell to $260 per ounce. In March 2000 came the dot-com bubble and in 2001 the 9/11 terrorist attack. After the war effort began in Afghanistan, the U.S deficit ballooned, and the dollar began to fall in value again. The 2000’s then brought the Great Recession, quantitative easing, and covid-19 lockdowns. Since 2001, gold has gained 700% in value to date. Moving forward, precious metals are expected to skyrocket in value due to continued government deficit spending.
Gold and silver have been utilized as a store of value for thousands of years, and a review of the past 50 years in the U.S. reinforces why investors should continue to own precious metals.
Wealth Insurance
In 1966 Alan Greenspan wrote:
“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”
According to Philip N. Diehl, former director of the U.S Mint:
“Gold outperforms other asset classes when hard times come and often rises when other assets are crashing.”
Health insurance, auto insurance, and home insurance protects you against the uncertainties that come in life. Diversification of precious metals acts as an insurance policy to safeguard the investment portfolio you own.
The Surety of Owning a Physical Asset
Precious metals have a comparatively low or negative correlation when compared to stocks and paper assets. This means that if the prices of other assets decrease, the value of gold increases relatively. Precious metal diversification helps ensure portfolio balance and is used to promote financial stability.
Precious metals are not prone to mismanagement or mishandling by corporations or government entities. Precious metals are not subject to government policy changes. When you own precious metals, no one can borrow or loan against your holdings. Precious metal investments are free from the risk associated with debt.
Unlike a conventional retirement plan, a precious metal IRA gives you the ability to know exactly where your physical asset is stored and located.
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