My Philosophy on Gold and Silver

Many people ask me: “is now a good time for me to invest in gold or silver?” My response is always no. One reason I say no is because I am not you. I do not know your risk aversion and cannot make decisions for you. More importantly, I say no because of my philosophy on precious metals.
I see precious metals as a form of money. After all, gold has been used as money for over 3,000 years. When you have money, you can spend it or save it. When you spend it, you either buy nice stuff that you consume or invest it in something that you hope will go up in price to make a profit. When you save it, you are holding it to spend at a later time or for an emergency.
Today, we are no longer on the gold standard. Currencies around the world are printed on paper and no longer backed by a commodity. With paper money, central banks or governments have the ability to print more of it when they want. This can create inflation and lower the value of paper money that is already in circulation. The hard-earned money you have saved over time drops in value and loses its purchasing power from this process. Since the creation of the Federal Reserve in 1913, the US Dollar has lost 97% of its value. During times of economic or political turmoil it is likely that your paper money will devalue at an even faster pace. Zimbabwe printed 100 trillion dollar notes that could not purchase a loaf of bread.
My philosophy on precious metals gives me this perspective: every person should own precious metals as an insurance policy or hedge against inflation and economic/political turmoil and as a foundation to your investments. So when you buy precious metals, you buy them to hold for the rest of your life. Unless of course you need to use them for an emergency. This is slightly different from an investment because you are not buying gold and silver in hopes that they go up in price so that you can sell for a profit. Precious metals are intended as an asset to fall back on in unfortunately circumstances, not to make you wealthy enough for retirement. Before you begin investing for retirement you must build your foundation, your insurance policy. I recommend that a minimum of 10% of your net worth should be held in precious metals. Some people recommend as much as 25%. Is the foundation to your retirement built and ready to protect the investments that will make you wealthy for retirement?
There are people who do invest in precious metals through stocks/futures in mining companies, refineries, ETF’s and physical metals. ¬†However they separate their precious metal holdings between the insurance policy and the investment. ¬†Keep in mind that the percentage of people who invest in precious metals is very small, whereas every single person should hold precious metals as a hedge against economic and political turmoil.
It seems more and more likely to me that precious metals will be needed as an emergency in the future. Government debt is rampant, pushing governments to the edge of insolvency in many parts of the world. Governments are not infallible and are at the mercy of economic law like any other individual. When you spend more than you make, you go broke. People are waking up to this and are buying gold and silver to protect themselves. If we hit the point of no return with government debt and/or inflation I believe that you will no longer have the opportunity to acquire precious metals. That will be the point in time where you must dip into your precious metals emergency insurance policy. Those who did not think ahead and plan for their future will be far worse off…
 

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