Why Buy Precious Metals?
February 10, 2014 by Bob Livingston
As a subscriber to your monthly letter (The Bob Livingston Letter, subscription required), I come to you with a question.
It seems that a lot of games are being played with the prices of precious metals. Such is frustrating for those holding same.
Okay, my question: Buying metals against a shaky dollar and inflation is one thing, but what about selling if there is a need? What does one get for his metals? Fiat currency? It seems like a loaded question to me. What are we really buying precious metals for?
I can see paying for some goods with metals, but there are more questions than answers on this.
Dear Jack G.
There are games being played with gold, it is true. But not to worry. The manipulation has provided us with another buying opportunity.
You ask what we’re really buying precious metals for. The answer is threefold: As an investment, as a hedge against inflation, or for reasons of survival should the entire economic system collapse.
When buying as an investment you are betting that the price will rise above the price at which it was bought. Since it doesn’t pay dividends, like many stocks do, that is the only way you will see a return on your investment. I have bought gold for many years. In February 2001, when gold was in the $200-$300 range, I predicted it was coming out of a 20-year bear market and recommended to readers to buy. I have been buying despite its ups and downs and have been rewarded for doing so.
If you are buying as an inflation hedge you want to watch the value of the dollar. Historically, whenever the value of the dollar has dropped, gold’s value has increased. It also tends to move inversely with the stock market. So, while stocks do well in times of stability and economic growth, gold does better during shaky economic times and falling interest rates because it has real value.
If you are buying for survival purposes, then you, as do we, expect the worst and believe that because the Fed is printing so many dollars that money will become worthless—a situation which, as has been shown, has repeated itself many times over in history. There will be a period when the regime’s dollars are so worthless that no one will take them. But gold and silver always retain their value and can be used to make purchases in a barter arrangement.
As far as selling if there’s a need: It depends on what you mean. Is the need a current situation in which you must sell in order to pay off an immediate debt? Then you would trade for fiat dollars because that is what the regime deals in. If you are talking about after the collapse then certainly you would not trade for dollars.