This is my essay on why we should consider gold and silver as part of a hedge investment and portfolio diversification.
Also, view this article as a video here and check out Enlight8’s YouTube channel:
1. The Federal Reserve and currency money printing.
As it currently stands, the United States national debt is up at $26 trillion dollars and counting. That is equivalent to almost $80,000 for every 329 million 820,000+ plus people in America.
To express how big $1 trillion dollars is, if we count 1 number every second, it would take 31,709 years to count from 1 to 1 trillion. Now times that number 26 times. This is how huge the U.S. National Debt is.
With the start of the pandemic, the Federal Reserve started to print an additional $3.5 trillion dollars by the end of this year into money circulation. Aside from propping up the economy with money printing, the Federal Reserve has also started buying stock ETFs and most of the money printed has been elevating the stock market to melt-up.
2. Bureau of Labor Statistics Faulty Reporting
Recently, the Bureau of Labor Statistics reported a 2.5 million increase in jobs. This news skyrocketed the DOW up over 1,000 points. Aside from the BLS’s faulty number crunching, the rise in employment was the result of the recent government bailout, which was like a shot of adrenaline to the economy.
The Payroll Protection Program, known as the PPP, is a program that gives small to large businesses grant money to stay open with the provision of not laying off their employees. Business owners cannot layoff employees under the grant; otherwise, the grant converts to a loan that they have to pay back.
However, as businesses do not make a profit, these employees are furloughed, or retained at a part-time basis, and there are zero guarantees for long-term employment. The 2.5 million job increases were primarily within the service sectors and low-paying jobs. There is still a permanent job loss.
3. Gold and Silver Has Real Value
The Federal Reserve has controlled the economy with interest rates and currency money printing, creating the bubbles in real estate and the stock market. Based on the current data, the stock market is going up due to the rosy outlook in the misleading job reporting by the BLS.
Due to currency money printing around the world, the dollar will most likely suffer a melt-up effect, wherein alongside gold and silver increase, it will continue to increase compared to other fiat currencies.
However, only gold and silver will most likely retain its value, while the dollar is currently only backed by faith in the currency, there is no underlying value to it as it is no longer pegged in gold.
In 1971, President Richard Nixon canceled the convertibility of the dollar to gold, which meant the dollar lost its peg in gold.
From 1970 to 1980, gold went from $35 to $500. This will most likely happen again as the dollar is in its last leg as a fiat currency.
4. Gold and Silver Are Rare Elements
Gold is not only rare on Earth, but it is also rare across the universe. Gold is a natural element, represented by the “Au” symbol in the periodic table. Since gold is an element, it is not reproducible, and we cannot create it in the lab. Unlike diamonds with their manipulated rarity, diamonds are different as they are easily created in the lab and are only valuable due to manipulated marketing.
Earth has 0.004 ppm or parts of gold per 1 million of the Earth’s crust.
Silver with the periodic table element symbol of “Ag” is also relatively rare and estimated at 0.075 ppm. Silver has another advantage as it is an industrial metal used in many products and technologies.
Industries often consume silver in making many electronics, computer processors, solar panels, electric cars, medical devices, and so on. Therefore, silver may become rarer in the future as demands increase.
If we compare gold and silver to the U.S. dollar, the Federal Reserve prints dollars at an alarming rate, there are currently $23 trillion in U.S. debt. The Federal Reserve has done $17 trillion in money printing for its current quantitative easing efforts. Banks has a whopping $683 trillion in derivatives in the books.
While the Federal Reserve prints the dollar to oblivion, gold and silver continue to retain its value against the dollar. I believe we will see gold, silver, and the dollar continues to move up. However, only gold and silver will survive. In the future, the dollar may go to its real value, like many fiat currencies before it, which is to zero.
5. Gold and Silver Are Overlooked Investments
The company Apple has an annual market capitalization of almovest $1 trillion dollars. If a company like Apple decides to buy all the gold and silver produced in the world, they can spend about $200 billion, that’s only 22% of their total market cap to corner the market.
Most investors currently do not own an ounce of gold and silver. This means, if most investors decide to buy gold and silver, its rarity will force prices up.
Gold and silver is a hedge from the inflation of the dollar. In many ways, most of us put our money in the stock market or real estate to avoid losing our currency’s purchasing power.
Currently, most people ‘don’t even know gold exists. There is a minimal amount of gold and silver that exists in the market, and most who invest in gold and silver do so via stock ETFs..As the current gold and silver stocks are also heavily manipulated it best, therefore, to own actual gold and silver assets at hand.
In the future, as more people discover gold and silver and the currencies around the world experience problems, most will rush to hard assets like gold and silver. The limited availability of these assets will drive up the price.
Gold and silver have done very well against fiat currencies historically. “Fiat currencies” are defined as currencies with no gold or silver backing. Gold and silver have been known to preserve and even enhance purchasing power over inflation.
Most personal finance advisors recommend that everyone should have at least 5-10% of our portfolio in gold and silver for a good reason.
A rule of thumb recommendation is owning 5-10 oz of gold and with 200 to 1,000 oz of silver at hand.
6. Gold and Silver Are Accepted Worldwide
Gold and Silver are real money and not currencies. Throughout humanity’s 5,000+ years of history, gold and silver have been used as money from the beginning. Due to its rarity, and the fact that it takes work to dig it off the ground, refine it, and mold it into jewelry, bullions, or coins.
Wherever you go around the world, gold and silver are accepted as money. Gold has the convertibility to every other currency. Gold and silver can be converted to other forms of currencies or used to trade for goods and services.
The dollar gained its world currency status by tailgating gold. However, after it lost its peg in gold it became what is known as a fiat currency. And we all know fiat currencies eventually go to zero.
Gold and silver have always retained their value throughout history. Civilizations have always relied on gold and silver and in this coming unpredictable times, gold and silver still remain a safe haven.
7. Stocks Overpriced: The Warren Buffet Indicator
As it currently stands, the Warren Buffet Indicator showing the U.S.’s Total Market Capitalization is over 145% from the country’s GDP. Usually, anything over 100% means that stocks are way overvalued compared to the country’s productivity.
As the Federal Reserve continues to print money and starting to buy U.S. stocks to flood the system — the safeguard haven for our money’s purchasing power continues to be gold and silver. This will only get worst as the Federal Reserve continues to prop up the economy by currency money printing.
8. Gold and Silver Is REAL Money
There is no question that Gold and Silver is real money, and has always been throughout civilization. Check out Mike Maloney’s video about what real money is to educate ourselves.