Gold prices typically move independent of stocks and financial markets, which means that if the stock market goes down in value, gold generally will rise. Physical gold and silver are the only assets that are completely free of counterparty risk, and have historically held their purchasing power. Central banks, institutional investors, and retail investors/collectors invest in gold, which provides the durable demand, enabling gold to retain its value in the future.
Gold is the only currency which has no liability attached to it. While all paper currencies now come from debt, the value of gold comes from the natural limits on its supply. No matter what collapses, nothing can make your physical gold wink out of existence the way savings and investments can.
Throughout history, no paper currency has survived the test of time. Paper currencies have always been inflated until they eventually become worthless.
Iceland is a recent example of how paper currency can lose its value overnight. With the massive debt levels and money printing in all countries, including the USA, Canada and the UK, the risk of a default everywhere is high. Anyone who holds wealth in a currency-dependent form is at risk of losing it all. Anyone who holds physical precious metals can benefit from the largest wealth transfer in history.
The purchasing power of the US dollar has declined by 98% since 1913 and, unfortunately, the situation is similar for all other currencies. People bought homes in 1913 for a few thousand dollars – or a few hundred ounces of gold. Now people spend hundreds of thousands or millions on a home or the same few hundred ounces of gold.
Why? Whether it be for war or just excessive spending, governments and central banks can never resist printing currency – or these days “typing it into existence” – to pay for debts. No one can print gold.
Have you ever wondered where the credit card company or the bank gets the money to give you to buy a house or groceries? They openly acknowledge that they do not have that money before you spend it. They do not use deposits from savers (if here is anyone left trying to save money in a bank). Instead, you spending the money allows them to type it into existence. It is surprising.
Not only can governments create money out of thin air by printing or typing it, banks can too. In fact, most of the currency in existence was not created by central banks but by regular, everyday commercial banks. They are not supposed to make too much, but the only thing really stopping them is convention and some oversight from colleagues. There is also the threat that people will catch on and decide to trade one inflated currency for a better form of money. Yet for the first time in history, all the currencies are inflating at once.
Gold has at all times represented real wealth as well as being a medium of exchange. “Old money” has always maintained a portion of its wealth in gold because it is one of the safest and most attractive investments for storing and preserving wealth. Our way of expressing this is to “build your wealth in ounces”.
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