A Short Case for Owning Gold

Estimated Reading Time: 4 minutes

Whether by fraud or by legitimate political will, our nation has taken a turn to the political Left.

We should all do our civic duty to the best of our ability, given the constraints of time and personal resources, to preserve liberty for ourselves and for our children. That is a duty to be fulfilled, not a leisure activity.

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But the road will be long and difficult and while we are confident freedom will win in the end, there will likely be many setbacks. These negative trends will take some time to reverse.

Therefore, each of us must acknowledge to some degree, the influence these political trends will have on our personal lives.

Without sound finances, a family has little time or resources to assist in the cause of liberty.  Therefore, we at The Prickly Pear will increase our coverage of matters relating to personal finance and the general finances of the country.

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We will convey a variety of views because no one person has the information to provide complete answers. These will be opinions to be weighed. The actual decision to implement such decisions depend on personal circumstance and thus must be determined by the reader only and his or her financial advisor.

We are concerned that our nation seems to be ignoring the soaring debts we are accumulating and ignoring the underfunded nature of our Social Security and Medicare/Medicaid systems.

It seems there has been a concern about this for years and little if anything is ever done about it.  The value of our money has slowly eroded. Using the government’s own numbers, something that cost $100 dollars in 1970, would cost today over $670.

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However, of late, both Republicans and Democrats seem to avoid discussion of the issue. Republicans generally ignore it while Democrats propose even more new spending schemes. Neither has there been much concern about inflation. An important new book has just been released in that regard has recently been reviewed at The Prickly Pear (The Great Demographic Reversal) and we urge you to read that review and think about the arguments put forward.

However, as a concrete step, if you have not already acquired some gold and silver, we suggest you consider itAmerican Precious Metals is one of our sponsors. If you have not already established a relationship with a gold provider, you may wish to look them up.

With all that being said, the following is a short case for why you should consider acquiring some exposure to the gold market. Many of the same arguments can be made about silver as well. You should consider having some of each.

No one seems to care about debt and deficits. It hardly came up as an issue in the last political cycle.

Yet, the U.S., the issuer of the reserve currency for the world, has taken a sharp turn to the political Left. Socialism is on the rise.

The U.S. will be seen to be increasingly in a new Cold War with China. Unlike the Soviet Union, which was an economic basket case, China is growing more powerful every day.

The U.S. is caught in the classic vice of ancient empires. We are stuck between large military expenditures and an expensive welfare state at home.

As suggested in the book review noted above, demographics are now conspiring to raise spending for the elderly on the backs of a shrinking workforce. Higher labor costs and higher inflation are likely ahead.

Interest rates are likely to start to rise with inflation, putting real pressure on a global debt bubble that has grown to enormous proportions because of prolonged zero interest rate policies.

The policymakers will have to choose between default and inflation, and historically, inflation is the more popular choice. Debtors are many, creditors are few. Politicians go with the popular choices if they wish to stay in power.

The colliding forces of inflation and deflation will create turbulence and uncertainty. Gold has acted well under either extreme.

There is no meaningful political or academic support to reign in excess spending. Quite to the contrary, the new radical ideas of Modern Monetary Theory are gaining ascendence.

The lockdown crisis, an ill-conceived way to deal with the pandemic, copied as it were from totalitarian China, will exacerbate all the currently negative financial, political and geopolitical trends. It is a huge supply shock, likely to make inflation worse.

Gold plays a unique role in finance. It is not issued by a government and cannot be arbitrarily increased in supply. Generally, gold does not correlate with other assets. That means it is a true diversifier. You don’t want everything you own to swing up and down together.

It is the only international asset that is not someone else’s liability. As a metal, it cannot default, and you can’t be locked out of your investment because you “lost the code” or computer systems go down.

There have been a disturbing number of serious hacks of important websites, including those of important government agencies. Large tech companies are demonstrating they can shut down service, deny access, and otherwise harass people they differ from politically. Large tech companies are coordinating their actions with political parties and political forces. And, now with trading excess in stocks like GameStop, they collude with Wall Street insiders. Billions of dollars have flowed into digital money over the past few years seeking privacy and independence from government money. Any cyber-based digital money based on the integrity of the Web is thus suspect. You may have money in cryptocurrencies but in an emergency, will you really have access to your money?

There really is no substitute for owning gold and having it in your possession or control.

Because gold is not issued by a government and is not dependent on large tech companies, is why gold remains the international bank reserve.

Gold has had value throughout the ages and with all cultures. It is not new and untested. Although silver at present is not a central bank reserve, it too has a long history of being money. It has many of the same characteristics as gold and thus should also be considered.

Gold is certainly not a sure thing. Nothing is. All investments fluctuate and timing is always difficult. But it has an excellent record at holding its value over time. Like every other investment, it fluctuates in value and thus diversification and adequate cash reserves are required before you should own it. It should not be purchased for the short term but rather regarded as long-term insurance against currency debasement.

With the political shifts we are now seeing, it is a good time to learn about your options and have that discussion with whomever you consult for financial advice and see if gold should play a role in your personal finances.

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Neland Nobel is a retired portfolio manager and Certified Financial Planner, who worked in the financial services industry for 45 years.

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