There has been much concern in recent years about inflation, along with distrust of banks and the market. The result of this has been a renewed interest in the precious metals market. None of us can foresee the future but entities like the Federal Reserve and the European Central Bank are accumulating debt, printing more money, and devaluing currency while simultaneously creating more debt. It’s a vicious cycle and this is why more people today have turned their attention to precious metals for wealth protection.
Here’s something to think about. Our monetary base consists of all printed paper money and coins. It took 200 years for this monetary base to grow from $0 to $800 billion. Leading into the 2008 United States Presidential race, the monetary base grew from $800 billion to $1.5 trillion. Every dollar we print devalues it more. Prices are raised in response to all of this money that is pumped into the system, while worker wages are stagnant. The economy is stimulated by a short-term pop as all of this newly printed money finds its way into the market. But this benefit is marginal and quickly exhausted thanks to the increasing inflationary pressure.
The level of financial distress today is mind boggling with the potential to dwarf yesteryear’s economic catastrophes like the Great Depression. Here’s one thing to keep in mind as pundits on 24/7 cable news and talk radio predict doomsday. While the dollar may be devalued more and more each day, wealth in and of itself can never truly be destroyed. It is merely transferred from one once valuable commodity to another.
We’ve been hit with a startling dose of reality in the sense that there is no longer any security in having a safe full of cash or money invested in the markets. Tomorrow is quite simply too unpredictable. The stock market is a roller coaster with crazy dips, peaks and turns. People are losing money left and right from their 401k plan whenever the market plummets. Stocks work whenever companies are profitable enough to entice buyers wanting in on the action. If nobody is willing to take a gamble on a particular stock once profit is compromised by a sluggish economy and rising prices, that stock becomes a valueless piece of paper.
Throughout history, world economies have printed more money to get out of red ink. The problem today is everyone is doing it. They are also doing it at a rapid pace that is quite dangerous. In just four years alone, Bank of England, the Federal Reserve, Bank of Japan, People’s Bank of China, European Central Bank, and the Swiss National Bank have pumped the equivalent of approximately $7 trillion into the world’s financial system. This is why many fear that we’re on the verge of hyperinflation.
With the devaluing of paper currency, it is projected that precious metals will be worth more than ever by the end of 2013. Anyone buying gold, silver, platinum and palladium right now are giving themselves significant protection against depreciation and inflation.
We are still a very long ways from an economic recovery. What we’re experiencing at this moment in time isn’t unheard of. Through the annals of history, whether they are fighting wars or lapping up amenities, governments have had a tendency to overspend and collapse their existing currency. Hyperinflation and careless monetary policies even contributed to the fall of the Roman Empire. The ability to print more money won’t save the day, and will most likely make it worse. But precious metals retain their value no matter how the financial sectors and economy are performing.
For example, gold has the same purchasing power as it did in 1913, while in comparison; the US dollar is worth 37 times less. A barrel of oil would go for roughly the same gold bullion as it did in the 60s. The worth of gold and silver may fluctuate up and down over the years but precious metals have always been the most reliable means of protecting our wealth and purchasing power from catastrophic financial shifts. Gold has gone up 580% since bottoming out in 2001. While it has dropped from some previous peaks, it hasn’t had a single losing year to date since 2001. The same can’t be said for the stock market and other investments.
Why Precious Metals
- Precious Metals Offer Protection – Irresponsibility in financial sectors threaten the purchasing power of printed money. Precious metals are a means of insurance to counter this threat.
- Precious Metals Increase in Value – As more people buy gold, and the supply diminishes, this greater demand will therefore raise the value of precious metals.
- Precious Metals Are Transferable – There will always be precious metals like gold and silver because they can be sold in a variety of forms like decorative or industrial.
- Precious Metals Provide Diversification – Diversifying your investment portfolio is always recommended. One great way to diversify is to add gold and silver investments to your portfolio along with other investments.
- Precious Metals Are An Alternative To Currency – Gold, Silver, Platinum and Palladium are not subject to bank dictated interest rates and yield the same purchasing power from country to country.
- Precious Metals Appeal To Governments and Corporations – Both China and India have reportedly doubled the gold they possess and a recent survey published in Bloomberg concluded that 12 out of 22 companies had bought gold in recent years. This is because precious metals can either play the role of currency or an asset.
So are we certain that gold and silver are recession proof? If the dollar erodes, how do we know if precious metals can truly get us through a period where the dollar is meaningless with little to no value at all.
Well, here’s what we can go by. The price of gold decreases the most when the economy under goes an organic self-sustained growth. They keyword here is organic. This means real growth, where as printing money to project growth isn’t organic or real at all.
The price of gold seems to rise with inflation in most currencies. Perhaps this is why, as of January 2012, gold bullion coin sales had gone up 94% as Americans become less confident in the security of the crumbling dollar. In fact, ever since economic uncertainty first reared its head with the 2008 meltdown of financial sectors, demand has gone up dramatically, despite a slight drop in 2012 from 2011 highs.
Moving into 2013, we are continuing to see investors flee from paper currency. They’ve seen its value decrease as more money is printed to save insolvent banks. People quite obviously fear that the Federal Reserve and Central Banks of the world are sabotaging the integrity of their currencies. As a result, the forecast in 2013 for precious metals looks quite good.
Keep an Eye on Silver in 2013
Gold sometimes gets all of the attention but some experts feel that silver is the precious metal to watch in 2013. Despite the focus on gold, silver prices have increased by 725% from 2001′s bottoming out.
For 2013, both gold and silver are expected to set new all-time price records, perhaps getting as high as $50+ per ounce. Recently silver prices have gone up from a low of $26.13 from June of 2012 to $33.00. This means that one can buy 55.76 ounces of silver for the equivalent of one ounce of gold, which is $1638 to $1694 per ounce.
There is much speculation now that silver could possibly out perform gold in 2013, with some experts feeling that prices could get as high as $90 before year’s end. Silver bullion coins like the Canadian Silver Maple, the American Silver Eagle, Australian Silver Kookaburra and Lunar, the Austrian Silver Philharmonic, and the Chinese Silver Panda are projected to take the market by storm in 2013. You can find this silver, along with other precious metals, at Monex.com.
The potential precious metals possess is staring us right in the eye. There doesn’t seem to be an end in sight for the reckless spending and continued printing of fiat currency by our current world leaders. The U.S. debt crisis seems to be bubbling to the surface with debt ceiling negotiations on the way. Not to mention that the interest on publicly held U.S. debt is set to double in the decade to come. Japan actually has a debt level higher than Greece.
The economic uncertainties are not subsiding and precious metals perform in times of acute crisis like this. Investors would be wise to monitor precious metal pricing, particularly that of gold and silver, and modestly allocate paper currencies to precious metal investments.