Picture in your mind a man in a suit sitting at a child sized table surrounded by second graders. He asks the question, “If two friends invited you over to swim, and one had a big pool and one had a small pool, which pool would you want to swim in?” One 6 year old asks with excitement and sincerity, “Does the big pool have a robot that can turn into a samurai and karate chop the water like a ninja warrior?” The man asking the questions replies with feigned confusion. “Why would it not?”
Well, “Why would it not?” is the answer to the question, “Will gold prices rise?” Let me explain. The question “Will gold prices rise?” is incomplete. The more complete question would be, “Will gold prices rise against ______” and insert the asset of your choice in the blank. The answer, however, “Why would it not?” is still the only correct answer. I’ll explain further. Gold is a constant, and other asset classes are the variables. One ounce of gold will remain one ounce of gold, and over time, that ounce of gold maintains it’s purchasing power. Many look at gold in an asset portfolio as investment insurance against adversity, calamity, and currency devaluation. Love him or hate him, Jim Cramer of Mad Money, makes this very point here at the 5:35 mark:
If you are still reading this blog, perhaps it is because your investment broker (You pay him but have you ever spoken to him?) does not give you good investment advice and that is exactly what you are online searching for. I’m going to share some things that he or she won’t tell you. All stocks go to zero and become worthless. Bonds either pay out over time, or they default. There is no middle ground. The oldest company in the world was recently liquidated. Kongō Gumi Co., Ltd., was a Japanese company that lasted 1400 years and specialized in building Buddhist Temples. Of the Original companies that made up the DOW, only one still exists, General Electric. Eventually all companies fail, and consequently, so does their stock.
Investment Bonds, on the other hand, have a set life span to them called a maturity. Therefore, if the Bond Issuer is still around when the bonds come due, you are in luck. The downside is that they will pay you in Dollars that have consistently lost their purchasing power over the life span of the bond. Remember when gas was under $1.00? Now it’s under $4.00. Perhaps your children will tell their children, “When I started driving, gas was only $6.50 a gallon.” Do you see where I am going with this? How well does a 30 year bond really pay-out when you look at it from this angle? The possible downside comes when the Bond Issuer of the Bond you are holding, goes belly up. Like Detroit. Detroit would never default on it’s Bond’s, would it?
Perhaps you can see more clearly now how if you compare the inherent value of an ounce of gold to the fluctuating and eventually failing values of assets like stocks or bonds , how the answer to the question, “Will gold prices rise?” will always have the same answer: “Why would it not?”
Oh, and for you real estate buffs out there, consider this:
How many ounces of gold do you think it cost to build this house back in 1893, when an ounce of gold was $20? How many ounces of gold (at a value of $1800 each) do you think it cost to knock that house down and haul it away in 2012?
ITM Trading would very much like to discuss strategy, truth, and diversification with you. Please call us at 1.888.OWN.GOLD and we will do our best to help protect your future with physical precious metals.