Three Good Reasons to Own Precious Metals Now
Many investment experts have long recommended portfolio diversification and that 10% to 20% (and sometimes more) of an investor's assets be devoted to tangible assets such as gold, silver, platinum and palladium bullion and bullion coins. In today's uncertain political and economic environment, there are many (and very sound) reasons to consider investing in precious metals now. Here are three:
Precious metals have been a solid hedge against a declining U.S. dollar
The value of the U.S. Dollar declined more than 30% from 2001 through 2004, plunging 5% in just a few weeks. For a long list of reasons, including massive increases in U.S. government deficits totaling trillions of dollars, the cost of a prolonged war against terrorism and a massive trade imbalance, this trend may be just the beginning. This means U.S. Dollars could now be worth less and less every day. Which also means that investments pegged to the U.S. Dollar could be worth less and less every day. Gold, silver and platinum, though, are held and traded throughout the world...and their true value (that is, their purchasing power) is not solely or directly dependent on the falling fortunes of the U.S. Dollar. Precious metals, therefore, have often been a form of protection against a falling U.S. Dollar. As demonstrated during 2003 and 2004, as the value of the U.S. Dollar declined, gold and silver prices and the value of precious metals expressed in dollars increased.
Precious metals have been a proven safe-haven in times of war, political strife and uncertainty
Today's financial markets are increasingly at risk from terrorism, political instability and war. As we saw after the 9/11 tragedy, financial markets can be closed down, and remain closed down, for extended periods of time. As terrorism incidents continue to increase around the world, it is not unreasonable to expect further (and potentially more severe) disruptions in financial markets, banking and commerce in the future. Whenever and wherever tension or hostilities break out, people everywhere quite naturally gravitate toward the assets they trust most. And today, even in our high-tech-driven 21st century, the asset class millions rely on in times of trouble is gold and silver. Precious metals have always been, and likely will continue to be, a valued form of "wealth insurance" in good times and bad.
Precious metals can offer outstanding price appreciation and profit potential
Between early April of 2001 and early September of 2011, the price of gold increased from a low of approximately $250 per ounce to a high of nearly $1,900 per ounce - an increase of over 600% in about 10-1/2 years. During a similar time period, from late November of 2001 to late April of 2011, the price of silver increased from a low of approximately $4.00 per ounce to a high of over $48.00 per ounce - an increase of over 1,100% in just 9-1/2 years. These are just two examples of the long-term profit potential possible in the precious metals markets. Also notable is that recently, there have been periods of significant price volatility in the precious metals markets where prices have moved suddenly and dramatically, both higher and lower. In such volatile times, precious metals can produce impressive short-term investment returns as well. And many financial experts have predicted and continue to forecast volatile gold, silver, platinum and palladium prices in the months and years ahead.