Your financial advisor has warned you against buying gold bullion! It's a a terrible investment, you've been told. Gold has a real rate of return of practically zero over the past one hundred years! It's midnight cable tv's investment "snuggie!"
Investment advisors, who are ignorant of or dismiss the value of investing in gold are known for making assertions like the ones above.
Let's look at the metal from the perspective of an insurance policy against the loss of purchasing power and not as simply an investment that has appreciated substantially against all of the world's currencies as well as tripled in price over the past six years.
Think about this for a moment.
To protect your home against destruction, you purchase an insurance policy, right? Gold bullion is a form of financial insurance and should be regarded as so. Not as an investment but as insurance against the erosion of purchasing power caused by the declining dollar.
Dollar convertibility into gold ended on August 15th 1971, when President Richard Nixon forever closed the gold window. No longer tied to the gold standard, the U.S. dollar could be printed in unlimited quantities or in other words just 'float.'
Today, after 38 years of being backed by absolutely nothing but the full faith and credit of our U.S. government, our beloved dollar is worth a fraction of what it used to be. If you compare the buying power of that one dollar bill in 1971 versus today, you would be able to buy only EIGHTEEN CENTS, after adjusting for inflation.
Why The Dollar Will Lose Even More Value
The government put its printing presses into turbo drive to counteract the financial crisis that struck last year. The United States monetary base ballooned from $800 billion in August of 2008 to $1.7 trillion as a result. That means that there are now more than two dollars in existence for every one dollar that existed a year ago. Never before in monetary history has the money supply increased at such a sharp rate.
Our federal budget shortfall has now increased to a new record high of $1.42 trillion dollars, thanks to our government's massive spending fling in their endeavor to steady the financial system and jump start the economy.
If that wasn't deplorable in itself, our national debt is at present over $11 trillion dollars. And unfunded liabilities like programs such as Medicare and Social Security stand at an astonishing $58 trillion.
In order to ante up for all of this, the government is either going to have to trim down spending (not likely), increase taxes (very likely) or crank up the printing presses a lot more and attempt to print their way out of this jam. And that deficit is calculated to climb to $9.1 trillion over the next ten years.
The dollar simply cannot maintain it's value when a country participates in the unrestrained printing of money. Inflation will climb higher the more the dollar is debased. It is for this reason that you must own gold. As an insurance policy to ensure the value of your savings is maintained.
Since 1971, the purchasing power of gold has endured and increased. History books are ladened with instances of paper money whose value has been annihilated. But not gold. Gold has endured through wars, inflation, hyperinflation, recession and depression.
Gold bullion is the ultimate store of value and protection of wealth. The value of gold has never been ZERO. Never. It could very well be the most important insurance policy you'll ever purchase.
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