- Wednesday, June 29, 2016

Economic upheaval. Monetary shenanigans. Cashless society and computer hackers.

The reasons to own physical precious metals are legion, in light of the truism that governments and their paper currencies rise and fall, but gold always has intrinsic and universal value.

Individuals have long chosen to own gold coins and other precious metals because it serves as a storehouse of wealth and a solid, tangible investment.

Gold is seen as “a haven for cash,” James Steel and other analysts with banking giant HSBC told Business Insider this month.

Gold does not pay a coupon like a bond or a dividend from a stock, “but it does mean you own ounces in a physical precious metal that you can hold onto,” said the analysts, who correctly predicted a price explosion for gold if the United Kingdom exited the European Union.

Indeed, gold prices surged after the U.K.’s “Brexit” vote to leave the EU was announced June 24. Gold prices soared to $1,362 — the highest since March 2014 — before settling around $1,322 on June 24.

A June 27 article by Bloomberg financial journalist Luzi-Ann Javier said a recent survey of analysts and traders from New York to London suggested that gold would trade at prices ranging from $1,375 to $1,600. Elsewhere, writers suggested a new gold bull market could boost the metal to a $1,900 an ounce by December.

Gold is viewed as a critical diversifier because it often moves independently from stocks and bonds. As the World Gold Council said in March 2012, “portfolios containing gold are generally more robust and less volatile than those that do not.”

The U.S. Mint, citing investment experts, explained in 2010 that adding gold to an investment portfolio may improve its performance “because the forces that determine gold prices usually differ from, and in many cases, counter, the forces that determine the price of many financial assets.”

Other reasons to own physical precious metals are to pass tangible, valuable wealth on to the next generation and have a potential hedge against inflation, deflation and currency weakness.

Owning gold an American tradition

America’s Founding Fathers understood both the inflationary and deflationary dangers of paper money and believed a solid financial footing was crucial to the success of the young America. Alexander Hamilton and Thomas Jefferson were both great advocates of a gold-backed currency in the 1770s — Jefferson said gold and silver coins were “the surest resource of reliance in time of war.”

A precious metals bull market began in 2001, with gold prices increasing each year to a record high of $1,889.70 in September 2011.

With “Brexit” rocking world economies, digital currencies in wider use, and risks of “cyberattacks” on banks and other institutions rising, the appeal of precious metals is growing more irresistible.

Gold has been a preferred medium of global exchange for over 5,000 years — and that makes gold “the ultimate hedge against monetary collapse,” financial writer and best-selling author John Mauldin wrote in a June 28 commentary posted on Forbes.com.

It’s common sense to reduce one’s exposure to volatile financial markets in turbulent times, but the key, of course, “is finding a safe, profitable investment opportunity to deploy your cash,” wrote Mr. Mauldin, chairman of Mauldin Economics, which in May hosted the 2016 Mauldin Economics Strategic Investment Conference.

At that conference, James Grant, founder of Grant’s Interest Rate Observer, gave an on-camera interview in which he said gold was an investment that could stand against “monetary shenanigans.”

Certain global economic leaders take the view that gold is “a curiosity … this thing of ancient standing of no immediate relevance,” said Mr. Grant.

But in times of economic distress, and when the economic establishment takes the view that “gold is good for nothing,” that is “almost invariably a buying opportunity,” Mr. Grant said.

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