Why Own Gold?
Its been said for decades that the main reason to hold gold was to protect your portfolio against inflation. After the dot com bubble burst, that strategy died and was replaced with what is essentially the real reason to own gold. All currencies in the world are fiat. Fiat meaning that there is nothing backing the paper that all countries issue as money. And all paper currencies eventually return to their net asset value which is ZERO.
Chart of the US National debt in trillions of dollars.
Eventually millions of people, with all their assets in paper, will lose everything they have worked for their entire lifetime.
Could this really happen? Not only could it happen, its already happening. We are told by economists that inflation in the west is between 2 and 3 percent. The defination of inflation as per the dictionary is as follows:
- a persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency.
Most countries are printing money at double digit rates. The US is printing money at a rate of about 13%. Canada's rate is about 11% and countries like China are printing at 18%. Eventually this hyper-inflationary program will collapse and the only currency left will be gold.
Right now most North Americans as well as Europeans are totally asleep when it comes to purchasing gold. Compare that to China, India and the Middle East where gold coin shops have people lined up around the corner every day trading in their paper currencies for hard yellow metal. Could 4 BILLION people be wrong? We don't think so.
As the US Federal Reserve Note begins to decline as the worlds reserve currency, its going to be a race to the bottom as all fiat currencies inflate to keep from rising too fast. In 1980, gold reached an intraday high of $895 an ounce. With the increase in the money supply since then, gold would have to be $2500 an ounce just to break even. We think gold is going to go much much higher than this and there are even quotes from the famous Dr. Marc Faber of DoomGloomBoom who have made the prediction and we quote "I feel that I will see $10,000 gold in my lifetime". Dr Faber is in his 60s incidently.