That was one of several times on this blog when I've urged people to consider adding a component of precious metals to their investments in order to protect their wealth should stocks tank or the dollar plummet. Now that printed money has become our national diet and counterfeiting (in essence) our primary economic engine, a primary source of hope and subsistence for our fiscally insane society, the time of accounting must come when trillions of fiat dollars in the economy pulls down the dollar even further. Every nation that has relied on the printing press to support its appetite for spending has seen their currency erode or even fail catastrophically (e.g., Yugoslavia, Zimbabwe, the Weimar Republic). The factors that have helped us defy economic laws of gravity could change overnight or gradually over the next couple of decades. China may no longer feel it is wise to rely on the US dollar. Trading in petrodollars may fall out of fashion in the world of oil. People might notice that we're flooding the earth with trillions of dollars created of thin air - or rather, our of your thinning wallets.
While we have been told over the past few years that deflation is the primary threat and that inflation is not occurring, the cost of many real goods has continued to climb. In spite of the collapse of the government-created housing bubble and other economic challenges, the monetary pressures that threaten to weaken the dollar have not gone away. Are you prepared?
For those of you who have followed my advice over the years and invested in or acquired precious metals as part of your preparations for the future, you may be a little better off today. Maybe you bought some silver around March 25, 2006, when I issued the post mentioned above, "Food Storage Yes, Wealth Preservation No: A Mormon Enigma in Preparing for Hard Times?" If so, you bought when the spot price of silver was under $11 an ounce. Today it's over $23. Or maybe you bought some gold later that year when, on July 14, the price had run up to $666 an ounce, prompting another tongue-in-cheek reminder from me about the importance of adding a little precious metals to your savings. If so, you'll be happy to know that today, gold is at $1,350 an an ounce, also more than double. If you also picked up some gold or silver stocks, you might be feeling very grateful now also, if you held onto them while they and everything collapsed for a while in 2008.
These prices can come crashing down for a while, but for the long-term, the fundamentals are strongly in favor of continued investment in precious metals as a component of your portfolio. In my opinion, some of your savings really ought to be in something that doesn't depend on other nations propping up the US dollar and sustaining our voracious appetite for debt, an appetite that is eroding the future of the country. Even a handful of old silver coins, "junk silver," can be a great start if you're not able to use your 401k to invest in previous metals (e.g., exchange-traded funds or the Canadian gold and silver bullion-backed fund that I prefer for its safety, CEF, which trades like a stock).
The economic experts will tell you that I'm insane (do your own investigation, they may be right) and that it's crazy to invest in commodities that are now at highs and have run up wildly this year. There certainly is a possibility of a sharp correction and a slide in price. For the short term, I expect that--maybe a 10% drop or more, but don't rely on that happening. Have the prices reached dangerously high levels that would make investing foolish now? That was what the experts were saying in 2003 when the price of gold was at $350 and silver was around $6 an ounce, after having run up from lows of $250 and $2, respectively, over the preceding couple of years. It's what experts were saying when gold went to $400, %500, $700, and $1000. But the fundamentals for precious metals have only gotten better--meaning the economic practices of our country have only become less responsible. But do your own diligence. I may be crazy and have often been wrong, and many unpredictable events could change the landscape in wild ways.
Food for thought--or maybe I should say metal for thought. Hope you've got the food storage part down already. But challenging times are ahead--a few little steps to diversify your portfolio could really help.
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