Should I buy Gold? Or is Silver a better investment? With all the volatility in the markets, Greece on the verge of default and Ben Bernanke contemplating pumping more money into the market it has many people wondering if buying precious metals is a good idea. If you’re like me, you see all these ads on TV for…“We buy gold. Sell your old gold jewelry. We pay top dollar! Guaranteed!” There seems to be so many of these ads – it almost drives you bonkers. Through it all, it’s hard to sift through the data and opinions.
Who I follow for advice
Robert Kiyosaki – In 2006, I started reading a number of Robert Kiyosaki Yahoo! Finance Blog posts (Most of the comments basically said he had no clue on how the markets worked). In them he was touting how everyone should be investing in silver – stating that silver was relatively cheap. At the time it was between $11-$14/ounce. For myself, I had no clue on whether this was a good price or not. I had read a little bit of his book Rich Dad Poor Dad, and could tell he knew what he was talking about. So I started buying a few Morgan dollars (90% silver) and 1 oz bullions. From 2006, silver has since rose to $47/oz, and is currently at $32.48. On top of that, Mr. Kiyosaki continues to predict that 2010 – 2020 will see great gains from gold and silver. He states that the world economy will crash in 2016, and the US will be at the center of the problem. See the following video:
As you can see he lays out a lot of compelling reasons to invest in precious metals, but here are a few more.
Uses of Silver
Silver has a number of uses – which can’t be said of gold. Silver is used in jewelry, silverware, cell phones, computers, cameras, was used as currency (prior to fiat currency), mirrors, RF connectors, dentistry and medical devices. Silver has a great differentiator in that is has so many uses, but gold is mainly hoarded. Where do you see gold in use as widely as silver?
Federal Reserve Keeps Printing Money to Buy US Debt
Since 2009 the Federal Reserve has been monetizing our national debt. What does monetize mean? Wikipedia defines it as, “Monetizing debt is thus a two-step process where the government issues debt to finance its spending and the central bank purchases the debt, leaving the system with an increased supply of base money.” Some of you might of heard of this as QE1 or QE2 – Quantitative Easing. To you and I this leaves the American people with devalued currency, and thus that is why gold and silver have more than doubled in the past 2 years. On top of that, China (the largest holder of US debt) has to be frustrated with the Fed’s action. The US currency they’re holding bonds against is being devalued right underneath them. I can’t think that China will allow this to happen much longer. I would be definitely keep an eye on gold and silver, if a QE3 comes about.
Robert Kiyosaki talks about the affects of the Fed printing money:
1971 – US Moves to a Fiat Currency
So how can the US print so much money? That is what I thought two years ago when we started going through QE1. Then I read from Robert Kiyosaki that the US moved off the gold standard in 1971.Thanks to Nixon, we switched from the gold standard to what is called a “fiat currency” (Nixon gold standard shock). What does that mean?
The term fiat money has been defined variously as (Wikipedia):
- any money declared by a government to be legal tender
- state-issued money which is neither convertible by law to any other thing, nor fixed in value in terms of any objective standard.
- money without intrinsic value
In researching for this post, I found another interesting tid-bit: Any country that has switched to the fiat currency is seeing their currency value go to ZERO! It has essentially ended up having no value at the end. What Nixon did in 1971 in order to fund the Vietnam war and combat rampant inflation was make our money worthless. More than likely that is why gold & silver prices spiked in 1981.