Gold News

No Reason to Buy Gold

Really? It's not hard to make the case for Gold Investment today...

to invest in gold," said the finance editor of a major newspaper interviewing me recently, writes Jeff Clark, editor of Casey's Gold & Resource Report.

"If gold goes up because of inflation, then so does everything else, so why buy it? It's not really a good investment."

She was serious. Yes, she is a finance writer. And yes, it's a newspaper you've heard of.

I was so dumbfounded that I must have sounded like an infant struggling to form its first words when I attempted to counter this inane line of thinking. Tell me you're a deflationist, tell me the Fed will rescue us, tell me foreigners will keep buying our debt – but don't tell me that gold serves no purpose!

I tried to point out the exploding monetary base, the soaring debt, the failing economy – but it was readily apparent her mind was made up. The interview was over and she hung up.

It may sound vengeful, but I'm tempted to keep a list of people whom I could remind someday of their negative comments about gold. I'd put "Betsy" at the top. I probably would chicken out in the end, but right now it's a wonderful reminder of why we're not in a bull market mania – not yet.

Besides, I think the odds are stacked in my favor that she'll someday be buying insanely inflated Gold Mining stocks from me. I'll have to thank her then.

But I can address Betsy's misunderstanding now, because part of what she said is correct: gold is not an investment. Gold's primary purpose is to preserve your purchasing power. Whether it be roaring inflation, or Dollar debasement, or economic upheaval, or out-of-control government spending, it has been the absolute best form of protection throughout the history of mankind. And I can prove it.

Let's trace what an ounce of gold or silver – true money – has been able to purchase at various periods in history, and how it compares to today.

1979: Gold's average price that year was $306.68. This bought an average-priced full size bed. 30 years later, $950 would still buy you a full size bed.

1963: A gallon of gasoline in America sold for 31 cents. This meant that 3 silver dimes could buy a gallon of gasoline. The total weight of silver in 3 silver dimes is 0.217 of an ounce. Today, 3 silver dimes would buy a gallon of gasoline anywhere in the US.

600 AD: In the Middle East, a chicken at the time of Mohammad would cost a family one silver Dirham (3 grams). Today, 1,400 years later, a chicken in the Middle East would still cost a family one silver Dirham.

Time of Christ: Under the Roman Empire, an ounce of gold purchased a Roman citizen his toga (suit), a leather belt, and a pair of sandals. Today, one ounce of gold will still buy a man a suit, a leather belt, and a pair of shoes.

400 BC: Some scholars report that during the reign of King Nebuchadnezzar, an ounce of gold bought 350 loaves of bread. Today, an ounce of gold still buys about 350 loaves ($950 divided by 350 = $2.73/loaf).

1000 BC: King Solomon was known to have purchased many horses for his army. Historical records show he bought them in Egypt for 150 shekels of silver each. 150 shekels was about 55 troy ounces of silver. Today, you can still buy a riding horse for 55 troy ounces of silver ($800).

Gold and silver, in short, have characteristics no other matter on earth can offer.

Gold cannot be..

  • Printed (ask a miner how long it takes to find it and dig it up)
  • Counterfeited (you can try, but a scale will catch it every time)
  • Deflated or inflated (it can't be reproduced)

Gold cannot be destroyed by...

  • Fire (it takes 1945.4° F to melt it)
  • Water (won't rust or tarnish)
  • Time (a Gold Coin remains recognizable after a thousand years)

Gold doesn't need...

  • Feeding (like cattle)
  • Fertilizer (like corn)
  • Maintenance (like printing presses)

Gold has no...

  • Time limit (most gold mined is still in existence)
  • Counterparty risk (remember Bear Stearns?)
  • Shelf life (it never expires)

Gold as metal is...

  • Malleable (spreads instead of crushes)
  • Ductile (stretches without breaking)
  • Beautiful (just ask an Indian bride)

Gold as money is...

  • Liquid (easily convertible to cash)
  • Portable (you can hold $50,000 in one hand)
  • Private (no mandatory reporting here)

Gold is internationally accepted, lasts for thousands of years, and best of all, they aren't making any more of it.

Now, Betsy, are you sure there's no reason to Buy Gold?

Doug Casey is a world-renowned investor and author, whose book Crisis Investing was #1 on the New York Times bestseller list for 29 consecutive weeks, a record at the time.

He has been a featured guest on hundreds of radio and TV shows, including David Letterman, Merv Griffin, Charlie Rose, Phil Donahue, Regis Philbin, NBC News, and CNN; and has been the topic of numerous features in periodicals such as Time, Forbes, People and the Washington Post.

His firm, Casey Research, LLC., publishes a variety of newsletters and web sites with a combined weekly audience in excess of 200,000, largely high net worth investors with an interest in resource development and international real estate.

See full archive of Doug Casey articles

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

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