Why should gold be the product that has this unique property? Most likely this is due to their history as the first form of money, and later as the basis of the gold standard, which determines the value of all money. Therefore, gold gives recognition. 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 price of gold does not rise when other asset classes do so. It doesn’t even have feedback, as stocks and bonds are mutually exclusive.
REASONS TO OWN GOLD
1. History of preserving its value
Unlike paper money, coins or other assets, gold has retained its value over the centuries. People see gold as a means of passing on and maintaining their wealth from one generation to the next.
Historically, gold has been an excellent protection against inflation, as its price tends to increase as the cost of living increases. Over the past 50 years, investors have seen rising gold prices and a sharp decline in the stock market during years of high inflation.
Deflation is the period during which prices fall, economic activity slows and the economy is overwhelmed by debt surplus and is not observed worldwide. During the Great Depression of the 1930s, the relative purchasing power of gold increased, while other prices fell sharply.
4. Geopolitical fears / factors
Gold retains its value not only in times of financial uncertainty, but also in times of geopolitical uncertainty. It is also often called a “crisis commodity” because people are fleeing in relative safety as global tensions rise. During these times, gold surpassed any other investment.
THE HISTORY OF GOLD AND CURRENCIES
All world currencies are backed by precious metals. One of them, with gold playing a major role, is to maintain the value of all currencies in the world. The bottom line is that gold is money, and currencies are just securities that can wake up worthless because governments have the power to decide the value of each country’s currency.
The future of currencies We are at a tipping point
WHY DO SMART INVESTORS INVEST IN GOLD?
1. Markets are now much more volatile after the Brexit and Trump elections. Rejecting all chances, the United States has elected Donald Trump as its new president, and no one can predict what the next four years will be. As commander-in-chief, Trump now has the power to declare nuclear war, and no one can stop him legally. Britain has left the EU and other European countries want to do the same. Wherever you are in the Western world, insecurity is in the air like never before.
2. The United States Government shall monitor the provision of retirement benefits. In 2010, Portugal confiscated assets from the retirement account to cover public deficits and debts. Ireland and France acted in the same way in 2011 as Poland in 2013. The US government. He watched. Since 2011, the Ministry of Finance has taken four times the money from the pension funds of civil servants to compensate for budget deficits. Legend of multimillionaire investor Jim Rodgers believes that private accounts will continue as government attacks.
3. The top 5 banks in the US are now larger than before the crisis. They have heard of the five largest banks in the United States and their systemic importance as the current financial crisis threatens to shatter them. Lawmakers and regulators have vowed to resolve the issue as soon as the crisis is resolved. More than five years after the end of the crisis, the five largest banks are even more important and critical of the system than before the crisis. The government has exacerbated the problem by forcing some of these so-called “non-major banks to go bankrupt” to cover up the violations. Any of these sponsors would fail now, it would be absolutely catastrophic.
4. The danger of derivatives now threatens banks more than in 2007/2008. The derivatives that bank collapsed in 2008 have not disappeared, as promised by regulators. Today, the exposure to derivatives of the five largest US banks is 45% higher than before the economic collapse in 2008. The estimated bubble exceeded $ 273 billion, compared to $ 187 billion in 2008.
5. US interest rates are already at an unusual level, leaving the Fed with little room to cut interest rates. Even after an annual increase in the interest rate, the key interest rate remains between ¼ and ½ percent. Note that before the crisis that erupted 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 reduce interest rates to stimulate 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 based in the United States. UU The first position of a bank order in the USA is only # 39.
7. The Fed’s total balance sheet deficit is still growing compared to the 2008 financial crisis: the US Federal Reserve still has about $ 1.8 trillion in mortgage-backed securities during the 2008 financial crisis, which is more than twice as much as $ 1 trillion. I had before the crisis. When mortgaged securities become bad again, the Federal Reserve has much less leeway to absorb bad assets than before.
8. The FDIC acknowledges that it has no reserves to cover another banking crisis. The latest FDIC annual report shows that they will not have enough reserves to adequately secure the country’s bank deposits for at least another five years. This amazing revelation recognizes that they can cover only 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. The unemployment rate was 4.4% in early 2007 before the last crisis. Finally, while the unemployment rate reached the 4.7% observed when the financial crisis began to devastate the US economy, long-term unemployment remained high and labor market participation fell sharply five years after its end. the previous crisis. Unemployment could be much higher as a result of the impending crisis.
10. American companies are failing at record rates. In early 2016, Jim Clifton, Gallup’s chief executive, announced that the United States’ trade failures were bigger than startups for the first time in more than three decades. The shortage of medium and small companies has a major impact on the economy, which has long been driven by the private sector. Larger companies are also not immune to the problems. Even heavy players in the US economy such as Microsoft (which cut 18,000 jobs) and McDonald’s (which closed 700 stores during the year) are suffering from this terrible trend.
Why do smart investors add physical gold to their retirement accounts?
Ensuring inflation and deflation.
Limited supply Demand is growing
A safe haven in times of geopolitical, economic and financial turbulence.
Diversification and portfolio protection.
Cover against the decline of the policy of printing dollars and money.