Why I Buy Gold Online Every MonthMay 15, 2012
Every month, I buy gold and silver. I do this when gold and silver are going up, or staying flat, or even going down. This is a long-term strategy for me, and my goal is financial security.
I don’t own gold for the purpose of profits, short-term gain, or even necessarily because of medium-term forecasts, like a national-debt induced period of stagflation which I’ve written about in the past. Instead, my motivation for investing in gold is far more humble. It’s nothing more than a hedge against the mostly unknown.
This World is an Uncertain Place
The greatest economists have been wrong, and they’ve been wrong big time. Keynes didn’t see the great crash of ’29 until it was almost too late. Most economists didn’t see the subprime mortgage crisis until it was too late. Ron Paul predicted hyperinflation “very soon” in 1979. Nothing is certain — nothing.
This all adds up to a distasteful economic fact: the future is uncertain, whether you’re part of the Keynesian view, the Chicago view, or the Austrian view. If you’re an Austrian, you probably have a better grip on bubbles and busts, but that just solidifies the fact that you should know the world is volatile and uncertain, and there’s never any telling what’s just around the economic corner.
And, coincidentally, gold is a great long-term antidote to uncertainty.
Gold has done relatively well every time. As mentioned above, gold does well most of the time. It’s had crashes, sure, but the crash generally comes at a time when stocks and bonds are doing great, meaning the need to suddenly turn to that gold is usually diminished.
The Short and Simple Case for Gold
During times of economic uncertainty, gold is where investors often flood for a long-term safe haven. For short-term safety, cash is (almost) always king — but we’re talking about investing right now for financial security in the long term — for 2017, 2025, and 2050. Cash will be eaten alive between now and then. Gold? Probably not.
Gold isn’t tied to a specific economy. Unlike stocks, real estate, or bonds, gold prices aren’t necessarily tied to any one particular economy, corporation, or even location. Gold is a global market, with some currency and national arbitrage, but overall, it’s very global.
Gold never goes bankrupt. This can’t be said for stocks, bonds, or governments.
Gold profits from fear, and if the fear is actually a rational fear, then paper assets are likely the last place I want my future staked.
Buying 5-10 gold coins per year might not seem like a prudent investment to the equity bulls. It doesn’t earn an income, and won’t make anyone richer. But that’s simply not the purpose.
There has never been a time in the last 500 years where a box of gold coins wouldn’t have been at least a small fortune.
Gold and silver ETFs like GLD and SLV are great, but they’re also untested. I have no problem with either one of them, and I’ve used SLV to speculate in the past, most notably in 2011. But I approach them with a fundamentally different view — I can’t reach out and touch them.
So that’s why I buy some more physical gold every month. Call it insurance, call it investment, call it blind faith — it’s just me making a small bet every month that almost everything is mostly uncertain, and the only thing I know so far is that there’s a pretty darn good chance that a box of gold will retain value enough worth to fall back on.
It’s Not Either/Or
This doesn’t mean I’m not buying stocks, bonds, or cash. In my article on the permanent portfolio, I made it clear that such investments absolutely can be both secure and profitable, especially with a little more weight given toward equity in said portfolio.
But my physical gold bullion isn’t about that portfolio, and I don’t even count it anymore than I would count an insurance plan or my home or my cars. Physical gold coins, at least this particular stash, is about security and insurance and not profits.
This doesn’t mean profits are impossible. So far, the exact opposite has happened. But if suddenly the price of gold drops 75%, I’ll be buying just as much in dollars as usual, and I’ll be a little happier because that means the number of coins that year will go up without costing me any more.
This doesn’t mean everyone should copy me, because not everyone has the same set of goals. My goals are security first, and profits second, and I’m perfectly comfortable with having more of the former and less of the latter. So far, I’ve had both, but I doubt that’ll stay the case forever.
I’ve written about this mentality in my gold newsletter dozens of times. In the end, gold is an insurance in a volatile, crazy, politically corrupt, inflationary world. And that’s why I buy gold every single month.