Why should gold be a product that has this unique property? Most likely this is due to its history as the first form of money and later as the basis of the gold standard that sets the value of all money. Because of this gold gives acquaintance. Create a sense of security as a source of money that always has value no matter what.
The properties of gold also explain why it does not correlate with other assets. These include stocks, bonds and oil.
The value of gold does not increase when other asset classes grow. It doesn’t even have an inverse relationship because stocks and bonds are mutually exclusive.
Reasons to own gold
1. The history of its value
Unlike paper money, coins and other assets, gold has retained its value for centuries. People view gold as a means of transmitting and maintaining their wealth from one generation to the next.
Historically, gold has been an excellent protection against inflation, as its value tends to increase as living costs increase. Over the past 50 years, investors have seen gold prices rise rapidly and the stock market fall sharply during years of high inflation.
Deflation is a period during which prices fall, economic activity slows, and the economy is overwhelmed by over-indebtedness and is not observed worldwide. During the Great Depression of the 1930s, the relative purchasing power of gold increased and other prices fell sharply.
4. Geopolitical fear / factors
Gold retains its value not only in times of financial uncertainty but also in times of geopolitical uncertainty. It is also often referred to as a “crisis commodity” because as global tensions escalate, people flee to their relative security. In these times, gold is superior to any other investment.
HISTORY OF GOLD AND CURRENCY
All world currencies are backed by precious metals. One of them – gold, which plays a major role – supports the value of all currencies in the world. The bottom line is that gold is money, and currencies are just papers that can wake up, because governments have the overwhelming power to decide the value of any country’s currency.
The future of currencies We are at a turning point
WHY do smart investors invest in gold?
1. Markets are now much more volatile after the Brexit and Trump elections. Despite all the odds, the U.S. has elected Donald Trump as its new president, and no one can predict what the next four years will be like. As commander-in-chief, Trump now has the right to declare nuclear war, and no one can legally stop it. Britain has left the EU, and other European countries want to do the same. Wherever you are in the western world, uncertainty hovers like never before.
2. The U.S. government is monitoring retirement security. In 2010, Portugal confiscated assets from a pension account to cover government deficits and debt. In 2011, Ireland and France acted in the same way as Poland in 2013. The US government. He noticed. Since 2011, the Ministry of Finance has four times taken money from the pension funds of state employees to compensate for the budget deficit. The legend of multimillionaire investor Jim Rogers suggests that private accounts will continue as government attacks.
3. The top 5 American banks are now bigger than before the crisis. They have heard about the five largest US banks and their systemic importance as the current financial crisis threatens to break them. Lawmakers and regulators have vowed to address the issue as soon as the crisis is contained. More than five years after the crisis, the five largest banks are even more important and important to the system than before the crisis. The government has exacerbated the problem by forcing some of the so-called “oversized banks to fail” to take on the violations. Any of these sponsors will fail now, it would be absolutely catastrophic.
4. The danger of derivative instruments now threatens banks more than in 2007/2008. Derivatives that collapsed banks in 2008 have not disappeared as promised by regulators. To date, the impact of derivative financial instruments in the five largest US banks is 45% higher than before the 2008 economic collapse. The removed bubble exceeded 273 billion dollars against 187 billion dollars in 2008.
5. US interest rates are already at an abnormal level, the Fed has little room to lower interest rates. Even after an annual increase in the interest rate, the key interest rate remains between ¼ and ½ percentages. Keep in mind that before the crisis that broke out in August 2007, interest rates on federal funds were 5.25%. In the next crisis, the Fed will have less than half a percentage point, may lower interest rates to boost the economy.
6. American banks are not the safest place for your money. Global Finance magazine publishes an annual list of the 50 safest banks in the world. Only 5 of them are in the US. UU The first position of the American banking order – only № 39.
7. The Fed’s overall balance sheet deficit continues to widen since the 2008 financial crisis: The US Federal Reserve still owns about $ 1.8 trillion in mortgage-backed securities during the 2008 financial crisis, more than doubling $ 1 trillion USA. I had before the crisis. When mortgage-backed securities become bad again, the Federal Reserve has far fewer opportunities to absorb bad assets than before.
8. The FDIC acknowledges that it has no reserves to cover the next banking crisis. The latest FDIC annual report shows that they will not have enough reserves to properly insure the country’s bank deposits for at least another five years. This amazing discovery recognizes that they can only cover 1.01% of bank deposits in the United States, or $ 1 to $ 100 of their bank deposits.
9. Long-term unemployment is even higher than before the Great Recession. In early 2007, before the last crisis, the unemployment rate was 4.4%. Finally, when the unemployment rate reached 4.7%, which was observed when the financial crisis began to destroy the US economy, long-term unemployment remains high and labor market participation declines significantly five years after its end. previous crisis. As a result of the future crisis, unemployment may be much higher.
10. American companies are not getting a record pace. In early 2016, Jim Clifton, CEO of Gallup, announced that the commercial failures of the United States are greater than startups that began for the first time in more than three decades. The shortage of medium and small companies greatly affects the economy, which has long been driven by the private sector. Larger companies are also not insured against problems. Even heavyweights in the U.S. economy, such as Microsoft (which cut 18,000 jobs) and McDonald’s (which closed 700 stores in a year), suffer from this horrific trend.
Why do smart investors add physical gold to their retirement accounts?
Ensuring inflation and deflation.
A safe haven in times of geopolitical, economic and financial turmoil.
Portfolio diversification and protection.
Cover-up against the decline of the printing policy of dollars and money.