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With this mid-week Christmas break, we won’t be going into the usual analysis as we normally do. Instead, we’re going to dive deeper into the fundamentals and a recap of why gold is a great investment tool.
Regardless of what will happen economically or geopolitically, some things don’t change and those fundamentals are what really move the gold price. Despite a lot of volatility in different investment categories and what policy makers do, gold responds and reacts to underlying fundamentals.
Who Buys Gold These Days?
There’s a misconception that people who buy gold are somewhat “weird.” And while you might hold a greater percentage of your portfolio in gold if you lose faith in the system, there’s nothing strange about owning gold.
Investors buy gold because they want to have real money that’s valued anywhere. Gold is recognized everywhere around the world. You can get on an airplane and fly anywhere in the world, hold up a gold coin and smile. Even if you don’t speak the language, people will know that you’re friendly and you have money. It’s a universal language.
Preserves Your Purchasing Power
Gold today will buy what it buys in five years regardless of the price. It’s a constant store of value. It hasn’t changed. Our friend Kevin Orrick on our McAlvany Weekly Commentary talks about how an ounce of gold buys a loaf of bread every day for a year. It’s done that for thousands of years, and it still does today.
If you’re considering owning gold, it’s smart to think of it as a legacy investment, something that you can hold.
Insurance for Your Portfolio
Gold is often described as insurance for the rest of the portfolio, but aside from the Justin Case, you went into all these different things that are, because it’s guaranteed. Just look at the track record of gold over the years, and you’ll see that it is asset preservation.
Tangible and Real
Gold gets you out of “paper promise” assets into a tangible commodity. We’re not talking about ETFs, mining shares or stocks. We’re talking about owning physical coins and bars in various forms in and through various vehicles. It could be in your IRA or in a regular account in a vault. Tangible precious metals also provide a privacy component in the instance that you are holding it at home.
What Moves the Gold Price?
Most factors that move the price of gold have to do with fear or greed. For example, geopolitical fears such as global instability and threats of war — when the future looks uncertain, fear drives demand and increases the price.
Another example is central bank demand — What do they know that we don’t know? Why are they stocking up on gold? Obviously they’re looking at the same things we see, but thinking, “wow, I don’t like what I see. I think I’m going to increase my allocation to gold.”
How Much Gold Should You Own?
If you want to fund your retirement with gold, the best way to think about it is how much you will spend per month. What’s your burn rate? You need to know your projection as well — do you need something like a 10 year or a 20 year annuity? When do you want to retire?
You can then put that amount into ounces of gold. For example, if you need two ounces or three ounces a month to live, you start accumulating that ounce by ounce.
The other way to look at owning precious metals in our Investment Triangle model. A third of your liquid wealth should be in physical gold. A third on the left hand side of the triangle is for growth and income. A third on the right hand side of the triangle is liquid
Add Gold Ounces Today
Call us at (800) 525-9556 so we can speak with you individually and walk through your own portfolio. Our team of experts can help you understand the whys and the hows with acquiring gold.
