In 1919 U.S. $20 would buy you about an ounce of gold. Today an ounce of gold is over $1,697. Over that nearly 100 year time span, which would you rather have held onto, the paper dollars or the gold? Which one was a reliable store of value?
A hundred year trend like that one is often described as a “secular bull market”. The fundamentals that have driven that market are not only still in place, but are more pronounced than ever. The primary fundamental driver of the secular bull in precious metals is the debasement of our currency, also known as “monetary inflation” or an “expansion of the money supply.”
Sure, use the dollar to trade with. It’s a great trade item and is still accepted in exchange for goods by most of the world’s population. However, don’t use it as a store of wealth, don’t keep your savings in dollars. It is a depreciating asset, an asset that is rapidly losing its purchasing power in most commodity markets (not necessarily in its position against other inflating currencies).
Store your wealth in assets that retain their value, hard assets, not dollars or more accurately, “Federal Reserve Notes” (FRN). FRNs are guaranteed confiscation of wealth. They are debt notes, not real money. They have no intrinsic value. Silver and gold have been money for 5,000 years around the world. Don’t be fooled, our currency is losing it’s value (it’s down 28% in purchasing power over just the last three years). When I was a boy two dimes bought a gallon of gas. They still do buy a gallon of gas, but only if you use pre-1965 U.S. dimes that are 90% silver. If you use today’s debased coins and diluted currency, a gallon of gas is near $4 per gallon. A pack of gum that used to cost $.05 now costs $1.00. Bread, rice, sugar, cotton, lumber, autos, etc. have all escalated in price across my entire lifetime relative to the dollar. Sure, there are some cyclical bear markets within these long term secular bull markets, but the primary driver of higher prices, monetary inflation, is alive and well under Bush and especially under the great deficit creator, Obama. Buy some silver and gold; it’s likely to increase in value relative to the dollar for decades to come.
Update 9-13-12: Helicopter Ben just announced Q.E.3 — See: http://money.cnn.com/2012/09/13/news/economy/federal-reserve-qe3/index.html
Investing in stocks and precious metals is risky and could result in losing money. I am offering ideas for your consideration and education. I am not offering financial advice. Please do your own due diligence. I am not an investment adviser. Precious metals is not for everyone. I broker precious metals. You should do your own due diligence when making investment decisions of any kind. You should consult your own financial advisers before making any investment decision. I make no guarantees that by following any advice or suggestion I might make that you will realize any return. Beware, all commodity markets and other markets carry risk of loss.