People often ask me about the best way to buy gold. I’m going to show you this week exactly how I like to do it.
First, though, let’s review why it’s a very good idea to be buying gold in the first place. Right now… before the Super Crash.
Gold is key because it offers protection against both inflation and deflation. It is one of the few assets to do that. It’s insurance.
It’s surprising how few investors get this, because it’s really not complicated. I promise it will click for you today in five minutes, with my help. And then tomorrow you’ll see how I get my gold.
You should think of gold as the anti-paper currency. Gold is insurance against the destruction of the dollar (and all other paper currencies) by central bankers. The destruction of the value of paper money is a certainty. It is as certain as death and taxes.
Since President Richard Nixon took the United States off the gold standard in the early 1970s, the U.S. dollar has lost more than 90% of its value against gold. I believe before central banks are done with their monetary experiments that are destroying the world, the U.S. dollar will lose another 90% or more of its purchasing power against gold. (More on that soon… a lot more.)
Federal Reserve Chair Janet Yellen as well as European Central Bank President Mario Draghi and Bank of Japan Governor Haruhiko Kuroda have publicly stated that they want inflation to rise. That means that they want the value of paper money to fall. While official inflation statistics say that inflation is low, real world prices are rising quickly. These central bankers are completely failing in stimulating economic growth, but they are succeeding in destroying the value of paper money.
Gold will protect you from what they are doing. Gold will protect you against the inflation that is destroying the value of your paper currencies, as well as the value of your stocks and bonds that are denominated in paper currencies.
But it will do something even more important too.
There are two types of inflation. The type of inflation that central banks are trying to create is in the prices of products and services. But there is another type of inflation going on in the price of financial assets such as stocks and bonds, high-end real estate, and art and collectibles. But it is not the intrinsic value of these assets that is increasing – rather, it is the value of the paper currencies used to buy them that is declining. This is what the economist Irving Fisher called a “money illusion” in the 1920s.
The factor that is driving the value of these assets – the devaluation of the dollar – is the printing of trillions of dollars of cheap debt by central banks. Sooner or later, this money-printing will stop – and the value of these financial assets will collapse in what we call a deflationary bust.
That’s what happened in 2008-9 during the financial crisis.
The good news is that the value of gold did not collapse during the financial crisis. It actually increased and is likely to do so during the next crisis.
When investors lose confidence in the financial system, as they did in 2008/9, they flock to assets they consider safe, like Treasury bills and gold. When the global financial system fell apart in 2008, the price of gold rose sharply from a low of $732.45 per oz. on November 6, 2008, to over $1400 per oz. by mid-2011 when the crisis was over. Gold subsequently traded as high as $1921 per oz. in September 2011 before dropping back below $1200 per oz. in 2013. It’s now trading at around $1060-1080, almost a six year low. But when investors lose confidence in the system again, they will again seek safety in gold.
And there’s nothing that will rattle that confidence like the coming Super Crash.
I’ll be back tomorrow with my specific recommendations for you.