Precious Metals

The Best Reasons to Buy Precious Metals

Savvy investors have always understood the importance of allocating a certain percentage of their portfolio to precious metals in order to provide a hedge against economic uncertainty. Long before paper currencies were developed, purchases were transacted in gold and silver, and the role of precious metals as symbols of wealth and value has endured for thousands of years. Gold in particular is commonly referred to as “the wealth of kings”, and even a cursory study of history will reveal that gold has always been highly prized by civilizations throughout the world.

gold ingotsOne of the reasons why gold is considered to be the universal symbol of wealth is because it retains its intrinsic value, regardless of any economic ups and downs. True, the gold price fluctuates like that of any other commodity, but never in history has there been a time when gold was worth nothing. This fact stands in stark contrast to the relatively short-lived value of most government-issued paper currencies; as Voltaire once famously quipped, “All paper money eventually returns to its intrinsic value – zero.”

To show the need for stability in today's economy, consider this statement: “Quantitative easing (QE) is an unconventional monetary policy used by central banks to stimulate the economy when standard monetary policy has become ineffective”, and the United States practiced QE from 2008 until 2014.

Uses of Precious Metal

Although gold usually grabs the spotlight in terms of precious metals investing, there are three other major metals that regularly attract the attention of investors: silver, platinum and palladium. Precious metal prices as a whole have risen dramatically over the past 10 years, due in no small part to the combination of diminishing mine production along with increasing demand for these essential metals. When most people think of the precious metals, the first thing that probably comes to mind is jewelry or coins, but precious metals have several valuable industrial applications as well.

For example, gold is commonly used in various electronics products due to its excellent electrical conductivity, as well as its resistance to heat and corrosion.

Silver is an absolutely essential component in practically every sector of modern industry, being utilized in everything from circuit breakers to batteries to photovoltaics.

Platinum is commonly found in automotive parts, medical equipment and computers.

Palladium is a major component of the catalytic converters of most modern automobiles, and is also frequently used in water purification, photo processing, and fuel cell production.

The Rise (and Temporary Fall) of Gold

Regular gold buyers are well aware that gold has been in a spectacular bull market since 2005, and a quick look at any recent gold chart will reveal that the demand for gold continued to skyrocket until QE was terminated. The historically increasing gold price is a function of two main things:

  • the fact that yearly gold mining output has been on a steady decline for several years now, and
  • the continued devaluation of the U.S. Dollar has created a situation where it takes more dollars to buy an ounce of gold now than it did ten years ago.

How to Protect Against the Challenges of the Weakening US Economy

It is no mystery that the loose monetary policies of the Federal Reserve have resulted in trillions of dollars being printed to finance the country's ballooning budget deficits, and as the money supply continues to expand, the value of each dollar continues to be diluted. This creates a situation where more dollars are required to buy the same amount of a good or service than were required in the past. In this respect, the steadily rising gold price is indicative of a weakening dollar.

Several prominent analysts are concerned that the U.S. economy is in grave trouble, and even at risk of entering into an eventual hyperinflation. As history has proven, one of the best ways to hedge against inflation is to allocate a portion of your portfolio to gold and other precious metals.

If you're not quite sure how to buy gold in a practical manner, one of the best and easiest ways to do it is to open a gold IRA. Investing in a gold IRA is one of the safest and most convenient ways to purchase gold and other metals in order to protect yourself against the geopolitical turmoil and other potential financial shocks that are becoming more common each day.

As the future of the world's economies continues to be plagued with uncertainty, it only makes sense to keep a portion of your wealth in a gold IRA as a source of stability during these turbulent times.

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