When is the Right Time to Invest in Gold? 


Why Precious Metals?

From the dawn of time, people have sought precious metals such as gold, silver, platinum, and palladium as ways to preserve wealth, for industrial uses and the basis of a country’s currency. They do this because in all their forms, whether coins, jewelry, bullion, silverware, or other, they are, in the words of Lynette Zang, Chief Market Analyst of ITM Trading, all monetary at their base.

Centuries before the country of Lydia minted the first coins in 700 BC, precious metals in nugget or bar forms were frequently used worldwide in commercial transactions. Not surprisingly, countries that based their currency on gold and silver have had highly stable economies. For example, the United States established its currency entirely on gold from 1787 until 1913, the year the Federal Reserve came into being. During that time, the purchasing power of $100 in 1787 dropped to $106.45 in 1913. As the ties between gold and the dollar loosened, the dollar’s purchasing power declined to $477.42 in 1973 when the Federal Reserve cut all ties to gold and $2,871.55 today.

Precious metals will always have an intrinsic value, in addition to their importance in modern industrial processes, so they generally avoid the wild fluctuations of other investments. In fact, stability is the number one reason many invest in precious metals.

When is the “right time” to start investing in Gold?

For decades, the U.S. government has been spending more money than it has taken in. However, since Joe Biden has become President, the printing press is working overtime. Because the U.S. dollar is a fiat currency, it is backed by nothing but debt; it is fundamentally a worthless piece of paper or digits on a computer and has no real value. The only thing supporting it is the people’s willingness to continue to use it as a medium of exchange. And since the central bank has decided to create an unlimited amount of dollars, the dollar is racing towards its actual value, which is zero.

We see the diminishing purchasing power of the dollar in the form of rapidly rising prices. This inflation may turn into the hyperinflation seen in other countries. The cost of almost every item we use in modern life is rising at a frightening pace. Leading the way is lumber which has tripled over the last year with no end in sight. Following close behind is corn, which rose to its highest price in eight years, oil, wheat and soybeans, copper, and a host of other hard assets. Suspiciously absent from that list are gold and silver.

While the PTB has denied manipulating the prices of the silver and gold markets for years, the evidence certainly disputes their claims, especially with the massive increase in their demand over the last few years.

Silver’s popularity as an industrial metal is rising. Silver is the best thermal and electrical conductor of all metals; it is also incredibly malleable, which allows it to be flattened into sheets or drawn into thin, flexible wire, making it ideal for electronic equipment. Silver is also used in film photography, medicine, jewelry, silverware, and mirrors, making it the most commonly used metal on the planet and causing demand to outpace supply. Even as its use as an industrial metal continues to climb, it is as an investment that will truly drive silver up in value, according to Jeff Clark, Senior Analyst for GoldSilver.com, and Lynette Zang. While silver as an investment is an excellent choice at the moment, many people will want to look at gold for their investment opportunity.

The demand for gold in the form of jewelry has exploded in India over the last year. Reuters reported that India imported 471% more gold for jewelry in the first quarter of 2021 than in the same quarter the year before. They went on to say that in the first three months of 2020, India imported 124 tons of gold; this shot up to 321 tons this year. Central banks are also on a buying binge for gold. China which bought 100 tons of yellow metal since December 2020, and Russia added 106 tons over the last year.

While it is not surprising to see China and Russia leading in buying gold to move away from the dollar, they are not the only central banks doing it. Hungary increased its gold holdings from 31.5 metric tons to 94.5 metric tons since last year, and Poland purchased 94.9 tons in June 2019.

 

Precious Metals as a Hedge of Protection

14K Solid Gold 4.4mm x 2.5mm Heavy Link Chain Necklace

14K Solid Gold Handmade 4.4mm x 2.5mm Heavy Link Chain Necklace

As the song by Bob Dylan states, “times, they are ‘a changing.” And the prudent will plan the best ways to prepare for those changes. As the world’s central banks continue to drown the economic system with fiat currency, inflation is guaranteed. Precious metals have helped people survive and even prosper in uncertain economic times in the past, and this time should be no different.

On a side note, it is essential to understand that investing in precious metals means the actual, physical metal, not Exchange Traded Funds (ETF’s). ETFs are essentially a promissory note saying that at someplace, someone has the gold the ETF represents. As with any such prospectus, there are enough loopholes and escape clauses to protect the metal’s “possessor” while leaving you with all of the risks. Holding physical metals protects you from those losses while keeping them available to you for opportunities and available when you need them.

Whether it’s gold, silver, palladium, or platinum, holding precious metals is an intelligent way to confront troubling times. And even if the economy doesn’t implode for a few years, it is always better to have some precious metals and not need them than to need them and not have them.

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