I’m assuming that since you’re here, you’ve got your own ideas about why to own silver and gold. Just is case though, I’d like to share what I’ve come up with.
Silver and gold are money. Real money. For proof, how about this from the U.S. Constitution: “No State shall. . . make any thing but gold and silver coin a tender in payment of debts” Why did they say “No state?” Your guess is as good as mine, but I suspect that they never imagined a federal government with anything near to the power that ours has claimed.
Still not convinced? How about thousands of years of history. In the long term, governments and even countries form, rise, fall, and disintegrate. Oddly enough though, over thousands of years, gold and silver have been highly valued.
Perhaps a more pressing question is “Why buy silver/gold now?” The most commonly discussed reason is to hedge against inflation. Many gold-friendly advisors recommend a position of 5-10% of an investor’s portfolio to help offset losses due to inflation. The point of such an allocation is not to get rich, but simply to make gains in this area to help offset losses in stocks, bonds, and especially, dollars.
Another hugely important consideration is the dollar’s reserve currency status. Simply put, it means that governments around the world want to hold huge amounts of their reserves in dollars. So we send them dollars, and they send us oil, beef, consumer goods, etc. It’s a great deal for us, and OK for them, as long as we all believe the dollar won’t lose its value.
Recently though, we've seen signs of foreign governments saying outright, and implying through major gold purchases, that the dollar is no longer their reserve currency of choice. I certainly don’t know when the dollar will lose this special status, but I’m confident that it’s on the horizon, and that the price of every single thing we import is likely to skyrocket in price when it does.
Finally, there is at least some chance of hyperinflation. In that case, any dollars we hold could drop in value to a tiny percentage of their current value, or even to worthlessness.
Of course, none of this is certain, and nothing here is intended to persuade you to put everything you own in precious metals. I will say though, that I am comfortable weighting my own portfolio closer to 25% precious metals than to the more commonly suggested 5-10%, based largely on the the book, "The Gone Fishin' Portfolio." I think it is well worth the read, especially if you are rethinking, or have never considered, your asset allocation
So I'll ask again. Are you buying gold and silver?
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