Why Gold?

April 26, 2012

Yesterday, I covered a brief history of gold and silver and why they are money. I also spoke why I encourage people to start with silver. Today, I will explain my position on gold.

Gold right now is valued at $1,645 per ounce. Through out the history of America we were on “the gold standard.” An ounce of gold was worth $20.67. A dollar was sequentially worth 1.5 grams of gold. (31.1 gram in a troy ounce)  You could easily go to the bank with $20.67 and get an ounce of gold out, or you could go to a bank and give them a $1.00 and get 1.5 grams of gold in return. This was important to us during the wars, because our pilots and those who traveled often would get a bracelet with gold grams around it, so, when they traveled all they had to do was take a link off and the gram of gold would be worth a good amount of money in whatever country they were in, it was also very discreet.

With the gold standard explained, I personally believe we could return to a gold standard. The dollar is broken, which I will explain in a future blog, but the writing is on the walls that the US Dollar will soon collapse or have a serious restructuring. If the restructuring puts us back on “the gold standard” the government will take gold inventory(reported 261.5 million ounces, in reality it could be far less) and US dollar inventory(15 trillion US dollars) and then assign a SET price to gold. If this happens gold will be around $60,000 an ounce. Which yes, sounds crazy, but it could easily happen and swiftly happen. Let that sink in. A $1,600 investment in 5 years could be worth $60,000.

I own gold, because gold sets the pace for silver. Silver is manipulated (will cover later), but gold can not be as easily manipulated at a price of $1,650. Gold may just be the small step that allows one to buy more silver in the future as gold if it does not return to the gold standard may eventually hit a ceiling if the fed does not send us into hyperinflation, then silver will catch gold, but gold will make a run first, and if you ride the gold run, then sell as silver hits its run, you’ll be able to accumulate a great amount of wealth in a relatively short amount of time.

I can not stress this rabbit trail enough, and I will probably soon write a blog dedicated to it – TIMING. If you bought a house in 1993, a nice 3/2 for $80,000 and then held it for 15 years and your house was worth an insane, bubbled, amount of $208,000, then you didn’t sell it, and now in 2012 it’s worth around $88,000 you have successfully LOST wealth. Your house was over valued and you had the opportunity to make money, but you held onto it, and now your house is valued at an accumulate 10% increase over the last 19 years. Remember 18 years ago when gas price were 1/4 of what they are today, and movie tickets were 1/3, and break was 1/2, and gold was $400 an ounce. That $80,000 could have bought you 200 ounces of gold in 1993, you take the 200 ounces of gold and it’s worth $330,000.

History favors gold and will favor gold until this bull market ends in the next 3-5 years. This is the investment of a lifetime, don’t let it pass you up, like the housing market and stock market did. Do your research, buy now, sell at the right time. Let the wealth transfer to you.

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