Unlike paper currencies, gold prices are not subject to government whims — which lately has involved a lot of printing. Although gold has recently reached record highs, the inflation adjusted price was five times higher in 1980. See the following article from International Living for more on this.
Check your wallet.
What do you see?
I bet I can tell you. You see pieces of paper.
Doesn’t matter if you live in Mexico or Malaysia or Mongolia, I can guarantee that a big part of your wealth is made up of pieces of paper. (Plus bank credit, which you can turn into pieces of paper.)
I can guarantee you something else. You probably want more money.
But what you really want are more effective units of money. You want a greater command over goods and services for the money you already have.
This is an important distinction. And one that’s critical to your future wealth.
Let me explain…
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To “fix” the financial mess they’re in governments around the world are taking their own bonds and converting them into money they owe.
They call it “quantitative easing.” But it’s really plain old money printing.
This is a problem. Because the more money the central bankers create, the less each piece of paper money in your wallet is worth—the less command over goods and services it has.
Call it what you want, it’s a confiscation of your wealth. Only you don’t notice it much because it happens gradually.
But over time you probably notice that the prices of things you buy rise. Or, to put it another way, the value of the money in your wallet drops.
Luckily, there’s a currency that governments can’t devalue. And one that is accepted as a store of value in every country in the world.
That currency is gold.
There’s a commonly held view that gold is “just another commodity” (like coal…or oil…or pork bellies). Like most commonly held views, it is bunkum.
For nearly 3,000 years, since the first gold coins were made in the Roman province of Lydia, gold has been used primarily as a medium of exchange.
This is no coincidence. Gold happens to be relatively scarce, easily divisible, highly durable and portable. That is to say it is a perfect natural currency.
These qualities have pushed the price of gold to new highs. Last Friday, an ounce of gold traded for a record $1,263.70 on the New York Mercantile Exchange.
Don’t worry. There’s still plenty of upside. Gold hit a peak of $7,150 in today’s dollars in 1980. That means gold would have to rise more than five-fold to reach its inflation-adjusted high.
As the Irish dramatist George Bernard Shaw put it, “The most important thing about money is its stability. You have to choose between trusting the natural stability of gold and the honesty and intelligence of members of the government. With due respect for these gentlemen, I advise you, as long as the capitalist system lasts, to vote for gold.”
As central bankers create paper money in ever increasing amounts gold’s stability…and its status as a global reserve currency…have never been more important.
You don’t need to bury gold bars in your backyard, either. Especially if you live overseas, owning physical gold is simply not practical.
Instead, considering buying shares in the gold exchange-traded fund GLD. GLD can be bought and sold just like an ordinary stock. And it tracks the price of gold bullion.
Just call your broker and ask him to buy you shares in the SPDR Gold Trust ETF (NYSE:GLD).
I recommend you hold at least 15% of your total assets in gold. It’s a heck of a lot safer than trusting the intelligence of members of government.
This article has been republished from International Living.