Is gold an investment that is not vulnerable to loss of value because of inflation?

Question

After all, except as jewelry, what good is gold?

If high inflation is on the way (like around 2013) then what is a good use for money to prevent loss of value of money stashed in savings accounts?

You just never know with the U.S. stock market. But what about companies that are financially grounded in China or Germany?

Seems like - here at home in the U.S. - maybe something like an inexpensive high-efficiency car or high-efficiency appliances or home energy conservation investments might be a smart hedge against inflation.

I think inflatiion is on the way! Here is why:

#1 the Obama Administration reminds me of the Carter Administration (the interest rate for my first mortgage in 1981 was 17%), and

#2 I believe that there is going to be a second wave of foreclosures caused by a wave of commercial mortgage defaults starting around 2013, and

#3 Obama seems to be unable to effectively create jobs in the US; and without jobs, there is no great tax base, so then the Federal Gov't must inevitable start printing more money in order to pay all those debt obligations that are accruing.

Answer 1

First off you need to understand that gold is not an investment. Gold is and acts more like an insurance policy. You are insuring that something in your portfolio can never go to $0.00. All paper assets have the ability to go to $0.00. This is what you are insuring against. The only other asset to not go to zero is real estate. But real estate is illiquid. Because of the debt time bomb you better own gold. The best way to own gold is to buy and take physical delivery of the gold itself. Silver is also in the gold realm as well, so when talking about gold, silver is included.



It is always a good idea to own some gold and silver at all price levels. To truly understand gold and silver, and why you should own it you have to understand the economy and get the movie of life on the largest screen possible.



Gold is money and a store of value. It is the "Currency of last resort" as Greenspan has stated many times through the years. Gold doesnt pay interest, dividends, doesnt restate earnings, has no lawyers, accountants, CEOs or CFOs lying to you on television. Gold doesnt ask for bailouts, doesnt go Bankrupt and cannot cook its books. Gold cant be debased or printed at the will of a company or governmetnt and holds its purchasing power.



Gold sits there as a store of value, is labor intensive, and a one ounce coin will not split into a bunch of half ounce coins at the direction of the pin stripped bandits on Wall Street. Also Gold is the ONLY asset class in the last ten years to increase in value and retain every dollar of its purchasing power.



Do not look at gold in terms of price. Look at prices and money in terms of gold. Paper currency doesnt gain in value, neither does gold. In 1999 when gold was at $280.00 an ounce, a one ounce gold bullion coin bought about 400 gallons of gas. Today with gas prices up and gold at $1250.00 an ounce the same one ounce gold coin still buys about the same amount of gas. This is true for food, energy, and other basic items needed for living. The gold didnt gain value at all. It stayed the same. It only takes more paper to buy the same amount of goods and services. If gold were to fall say down to $400 an ounce again then that would mean all prices would fall as well. Do you see gas going back to $1.00 a gallon anytime soon? Look at gold as a currency and as insurance of buying power and a store of value not as an investment. Therefore dont worry about the price of gold in paper terms. As Alan Greenspan former Chairman of the Federal Reserve said ....



"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.



This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."

Answer 2

It is not scarce. There is about 40,000 tons in jewelry, coins, and gold bars that consumers hoard and about 30,000 tons hoarded by central banks around the world. Industry uses another 1,200 tons annually that is produced by gold mines.



During the first half of this year, central banks have dumped 391 tons of gold on the market to raise $14 billion and several new gold mines began operations.



The only reason that the gold price is high is due to hoarding. When the hoarding ceases or oversupply occurs, the price of gold will dramatically drop like it did in 1981 from $850 per ounce to about $300 per ounce not to recover above $500 per ounce during the next 20 years. The low gold price occurred during the time of very high inflation during the 1980s.

Answer 3

Its scarce, so intrinsically it is valuable, Unlike Dogsh1t which is found in every street all over the world. This substance is not valuable.