“Gold has intrinsic value. The problem with the dollar is it has no intrinsic value. And if the Federal Reserve is going to spend trillions of them to buy up all these bad mortgages and all other kinds of bad debt, the dollar is going to lose all of its value. Gold will store its value, and you’ll always be able to buy more food with your gold.” — Peter Schiff
About 95% of my money is invested in cash-flowing assets or gold and silver.
I don’t want to sit in cash.
A lot of people love sitting in cash.
In my opinion, there’s a huge cost to that due to inflation.
People might say gold is just a relic.
There’s no value.
There’s no return.
However, central government banks have been buying gold like crazy for the last 10 years.
Just look at this chart!
If you want to be an insider, look at what the insiders are doing.
Central bankers are the true insiders.
This Bloomberg article reports Americans are sitting on over $5 trillion in cash.
That’s both bank accounts and investment accounts!
Today, I’m going to make a case for why owning gold is a better option than sitting in cash.
Let’s jump into it.
1. Why Cash is Not Money
Around 5% to 10% of my wealth is in gold and silver.
I do this because I am very bullish on metals.
I think the dollar will continue to devalue over time.
Dollars are not money.
They can always create more.
Dollars used to be a unit of measurement.
A 1928 bill says $100 is payable in gold coin to the bearer on demand.
That means it was a claim check.
In 1933, it became illegal for a US citizen to own gold privately.
Instead of gold being the money, the bill became the money.
We think of it as normal now, but it wasn’t always normal.
Now, most dollars are created digitally, typically entered into a ledger.
That’s why just the dollar has lost 97% of its purchasing power since 1913.
Dollars don’t store value at all.
If you look at this chart, you can see a huge spike of created currency in the last few years.
2. Gold is Money
J.P. Morgan once said: “Gold is money. Everything else is credit.”
What does that mean?
Gold has value.
If you have a loan or a bond or some other financial asset, that’s not really money.
Gold actually stores value.
Nothing else really does.
We have a 5,000-year history of gold and silver being money.
If I have a gold coin, someone will buy it for the value they place upon it.
If I have a bill, it has no intrinsic value.
It didn’t cost much to print—maybe a few cents?
Bills don’t store value.
There’s also the idea of counterparty risk.
Counterparty risk means that if anything fails within that whole process, like a bank or company, then you could lose the value of what you have.
Another thing to keep in mind is that gold is not the same as owning metals in an ETF (exchange-traded fund).
That means they’ll possess one ounce of gold or silver and they’ll sell you 20 or 30 shares on that one ounce.
What happens if there’s a run-on the supply?
When everyone tries to get their money, there’s nothing there.
That’s a total loss of value.
That’s counterparty risk.
There’s no counterparty risk with gold.
Obviously, somebody could steal your stuff.
But other than that, there’s no counterparty risk of owning physical metals.
You should also remember that central governments are buying gold.
Why would insiders be buying gold?
A lot of BRICS nations want to get off the dollar standard.
Around 70% of international transactions are settled in dollars.
There’s a lot of incentive for these groups to work outside of the dollar.
Gold gives a way to do that.
There’s also no third party you need to use.
Transactions are easy, other than the weight of the metals themselves.
3. Getting Started With Gold Investing
How does gold investing work?
First, you need to contact a reputable gold dealer.
Find good, trustworthy people who can sell you reliable products.
Keep an eye out for counterfeit bars.
Because of their design, there can be many gold– and silver-plated bars in circulation.
Coins, however, are tougher to counterfeit.
In terms of storage, you have many options of where to put your physical metals.
The first is a home safe.
Just don’t tell anybody where it is or that you have one!
You can have a safety deposit box and insure it through a third party.
One challenge is with holidays where the bank is closed. Also, deposit boxes are uninsured, so you need safe deposit box insurance to cover the value.
My favorite way to store metals is actually a third-party vault.
There are a couple of reasons why.
With third-party vaults, you order products from a dealer and have them shipped directly to the vault.
The company will store the metals for you and insure them for a small fee.
It’s very similar to the cost of an ETF, but you actually have the physical metals in your name.
If I have $100,000 in gold at one of these vaults, I can borrow against the value at 75% LTV.
That means I can borrow $75,000 anytime I want.
I can get a check or wire within a few days.
The current rate is around 7% to 9% and only for the days the money is out with typically no fees.
It goes to show that gold really gives you liquidity.
We hold cash because we want to buy stuff when we need it.
Having gold and silver also hedges and insures against inflation.
For these reasons, I recommend you stop hoarding cash and start buying metals.
As a summary: Gold stores value, central banks are buying, and the BRIC nations are trying to get out of the dollar.
Get yourself some gold and silver.
Look into what you can do to get started.
Now I want to hear from you!
What are your pros for buying gold?
Before you leave, make sure to check out our special report about inflation investing. It shares the best choices to invest during an inflationary environment.
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Disclaimer: I am not your investment advisor. This is for educational purposes only. I am not giving specific advice on what you can do. I am simply giving my opinions.