Should You Pass Up Gold Investing?
Precious metals, specifically gold and silver, have been considered real money and have been used as monetary mediums of exchange for thousands of years. In the United States, for example, the currency was based on the gold standard until the 1970s. During difficult economic times like the present, many investors are very concerned about the stability of the dollar and turn to precious metals as safe havens to protect their wealth.
As the new decade begins, the United States is still struggling to get out of what many have referred to as the Great Recession. Prices for both gold and silver have been steadily increasing for the last several years, and numerous commercials on radio and television insist that everyone needs to purchase precious metals immediately to protect their wealth and take advantage of the coming explosion in gold and silver prices.
Should you pay attention to these predictions? Should you fear that you will lose your wealth or a significant portion as the result of inflation and a declining dollar? These are not easy questions to answer, and no one really knows what the future holds. However, we think it is important to point out two different motivations behind the purchasing of precious metals.
That is, some investors are purchasing these commodities as short-term assets in order to take advantage of the increase in value over the next few years. These kinds of investors, who probably like to practice similar strategies in the stock market, are looking to time their investments as best as possible in order to sell at the right moment for a significant profit.
Gold and silver have done very well during periods of moderate to hyper inflation such as the 1970s, but over the long-term their annual rate of return has not been very good. This has been pointed out by financial critics such as Dave Ramsey, the popular talk show host and financial counselor, and Eric Tyson, the author of numerous personal finance and investing books.
Another separate motivation behind precious metals investing is the desire to protect wealth from the possibility of hyperinflation (and the resulting collapse of the currency). In this case, there is still a great potential for profit to be made, but this is really more of a bonus.
This may seem like a doomsday scenario promulgated by conspiracy theorists, but it's really not so far-fetched considering the enormous national debt and the inability (or unwillingness) of the federal government to rein in spending. Also, the extreme scenarios do not have to take place in order for precious metals to be a wise investment. We are not suggesting apocalyptic or fanciful scenarios here, and many countries throughout history (including a few in the 20th century) have experienced economic decline due to the devaluation of their currencies. These events always led to significant demand (and thus, price increases) in gold and silver.
We recommend that you take a look at including precious metals in your diversified investment portfolios.
About the Author
Jacob Lumbroso is a world traveler and an enthusiast for foreign languages, history, and foreign cultures. He recommends http://mensreadingglasses.org/ for anyone looking to buy mens reading glasses.
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