Here’s Why You Should Buy Gold Now

The remains of the Spanish galleon Nuestra Señora de Atocha sat on the bottom of the ocean for over 380 years. The famous treasure-laden ship sank in 1622. In 2005, Capt. Jack Jowers of the R/V Dare lifted a 4-foot-long golden chain from the sea floor.

The gold sparkled in the sunshine as if no time had passed.

It was a fantastic discovery that whetted the appetites of treasure seekers all over. There’s nothing more alluring than seeing a diver, still in the sea, holding up sparkling gold.

The fact that gold keeps its luster even in the ocean speaks to the secret of its longevity and desirability. 

The Superman of Elements

There aren’t many substances that don’t break down in seawater. Most metals in seawater become something else. Silver, zinc, copper and iron all happily combine with oxygen and rust.

Gold, on the other hand, does not rust. It takes high temperatures and pressures to make gold form compounds with other elements. The reason is simple: It’s a happy element.

Most elements are unhappy with themselves — they need to add or drop electrons to feel good. That means they turn into something else by combining with other elements. Most metals want to join with oxygen to get those extra electrons. The result is metal oxides — rust.

Gold isn’t like that. It’s happy all by itself, which makes it the Superman of elements. It’s so durable that nearly all the gold ever mined is still around today. That’s roughly 187,200 metric tons, according to the World Gold Council.

To put that in perspective, we produced about 3,100 metric tons of gold in 2015, a record volume. That means, on our best year ever, we added just over 1% to the total gold available.

For investors, that means we can’t rely on fundamentals such as supply and demand to give us hints on the direction of gold prices. The price of gold is much more about economic conditions around the world.

To understand the price of gold, we have to understand money …

Scraps of Paper and Cloth

Money is actually just a fiction that we all agree upon. We say that this scrap of paper and cloth with writing on it has value, so it does. The price of gold, on the other hand, is set by people hedging their bets on that fiction.

Sometimes we feel less confident about the value of a currency. When that happens, we want to own fewer scraps of paper and more “stuff.” Gold is a good choice. It has a long history of being a store of value because of its appearance and utility.

The price of gold shows the long-term confidence of investors vs. their faith in the dollar:

As you can see, gold is more than four times more valuable today than it was in 2001.

The reason is simple: There is a finite pool of gold. The amount added to the total every year is minimal. On the other hand, the number of new dollars in circulation is unlimited. The stated goal of most governments today is to create inflation. They do that by flooding the world with currency.

Think of the volume of gold in the world as a big pie. There are only so many pieces of that pie. The more money we add, the smaller the slice of the pie you can afford becomes. On the other hand, if you already have a slice, it becomes worth more and more money.

That’s why owning some amount of gold is critical for every investor. It’s insurance against inflation. It doesn’t have to be bars or coins either. Jewelry makes a great investment … and it looks nice too.

Good investing,

Matt Badiali

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Comments 10

  1. Chuck Burton January 5, 2018

    Interesting that, now that the Fed is taking action that should make the Dollar more valuable, you expect the price of gold to rise. Doesn’t seem to make sense.

    Reply

  2. Peter January 5, 2018

    Matt had you not mentioned the jewelry part at the end, it would have been a compelling essay. Jewelry is a rip off and is almost never 99 percent gold and therefore is sold if need be as scrap. A lousy end to an almost good essay.

    Reply

  3. Mr Roy Myers January 5, 2018

    The stated goal of governments is not to create inflation. In fact, their goal is to restrain inflation by using central bank interest rates to do so. Many OECD countries target inflation to around 2%.
    R Myers

    Reply

  4. John Klages January 5, 2018

    I agree with most of this except for your final statement. Jewelry does NOT make a good investment. Typically people buy jewelry at retail and then when you want to sell it, you get wholesale or maybe only the gold weight value… The only good investments in “jewelry” would be something like investment grade diamonds or maybe some special pieces of jewelry which could be desirable in an auction due to the provenance of the piece.

    Reply

  5. Will January 5, 2018

    Enjoyed this write up, but why do you insert a Gold Price Chart, dated 11 July 2017 into an article dated 5 January 2018?

    Reply

  6. Mark H January 6, 2018

    Gold and Silver are dead money. The metals are constantly manipulated, corrupted by the federal reserve and bullion bank minions who utilize massive naked short positions to crush any rally in metals. The SEC, FOREX and COMEX are complicit by dereliction of duty, failing to prosecute these corrupt, arrogant thieves. Until they all go to jail and are fined out of business it will be unabated criminality and fraud in the metals markets.

    Reply

  7. AURUM January 6, 2018

    Wait until mid-FEB’18 to buy. I’m looking for 1250 gold and a final bottom
    before a huge rally. Patience grasshopper.

    Reply

  8. AURUM January 6, 2018

    I should mention I’m shorting gold and mining shares; look
    for gold to go to about 1250 a final bottom.
    (I forgot)
    Oil should plunge to low 50s ; so I’m short oil and oil companies.
    This info is not only from Edelson’s boys but from my other gurus.
    They confirm this. Mid FEB18 there abouts; it’s not an exact science.
    And a brief dollar rally? I still can’t believe it. but it is in the cards.
    Right now, gold and oil are overbought and the poor dollar is oversold.
    Swing trade baby!

    Reply

  9. Joan January 6, 2018

    Thank You. I enjoy your reports. Please discuss cobalt, it’s critical future and where we can purchase it outside of Africa and Katanga. What about the big CO 27 company in Canada and its supply of CO for Germany and elsewhere. I see it is sold on the Frankfurt Exchange as well as the Canadian exchange. Is it available to us in the United States through our US markets. Do you have some recommendations in this area. Also are there electric storage battery makers besides Daimler-Benz and Tesla in the early stage that have a future. Change is coming soooooo fast. Your updates are very helpful. I am also a member of super cycle and read Seans reports. Thank you. Joan Please, request that my last name is never used in any written materials which I think is your policy.

    Reply

  10. John Draughon January 6, 2018

    Price is the balance of supply and demand. Following the upcoming nuclear war with North Korea, the people who might buy gold will no longer exist so the price should collapse.

    Reply