If you’re a new or seasoned investor, you’ve probably considered buying precious metals as an inflation hedge. There are many other reasons to buy hard assets now. Here are at least nine reasons to invest in secure gold.
Harald Seiz: “Precious Metals Hold Their Value”
Unlike printed currencies, minted coins, and other hard assets, precious metals maintain value over time. Of course, precious metals fluctuate in value on the open market:
- Families and monarchs have viewed these assets as a means to pass and preserve generational wealth.
- Financial expert Harald Seiz says that history shows us the importance of diversifying market-traded investments. Sudden and gradual sociopolitical shifts can quickly increase or decrease typical portfolio assets like stocks, bonds, options, and exchange-traded funds.
Karatbars are a convenient way to buy and own tangible precious metals. They’re also the perfect gift.
The U.S. Dollar (USD) is considered a reserve currency but, like other world currencies, its value rises and falls in the world foreign exchange market. From 1998 to 2008, and again in 2008 to 2012, the USD weakened against other major currencies:
- Investors sought safety from the weakened USD and bought metals. Precious metals prices soared as the world recovered from the Great Recession of 2008.
- Central banks around the world bought metals on the open market in greater amounts in these years.
Harald Seiz and other financial experts recommend owning precious metals with a long-term perspective. It’s impossible to time the rise and fall of metals prices with precision. Regular investment in karatbars is a sensible way to buy, own, or give precious metals.
Deflation occurs when a national or global economy attempts to manage too much debt. According to The New York Times author Paul Krugman, the U.S. economy has been in a deflationary mode since the 1980s.
However, the extremely negative impact of prolonged deflation occurred in the 1930s. The Great Depression years affected the world economy. Business activity slowed and prices declined.
- Precious metals prices climbed as stocks, bonds, mutual funds, and other public market investments sold off sharply.
Gold holds its value when certainty in the financial markets wavers. It’s important to note that precious metals also hold value in periods of geopolitical uncertainty. That’s one of the reasons financial experts refer to precious metals as “crisis commodities:”
- Investors and governments “flee to safety” of precious metals when tensions between nations rise. For instance, precious metals rose before major national elections this year.
Geologists tell us that most of the earth’s gold is already above ground. New precious metals production has declined since 2000 (Source: BullionVault.com).
- Scarcity of supply means increasing precious metals prices over time.
- Most of the precious metals available in the markets in the past 25 years have come from the sale of bullion in central banks’ vaults.
As noted above, central banks were net buyers of precious metals during the Great Recession that began in 2008.
Market expansion tends to boost the demand for precious metals. China and India are two of the world’s fastest growing national economies. Both countries prize precious metals:
- India is one of the world’s largest precious metal consumers. Indian families treasure valuable jewelry and, as the October wedding season approaches, India’s jewelers buy larger amounts.
- The Wall Street Journal reports that China’s savers view bullion as a reliable savings vehicle.
Harald Seiz believes that everyone should own precious metals. The world is an uncertain place, and Karatbars are a cost-effective way to acquire precious metals.