The thing about buying gold is that it takes money out of circulation, particularly when you are buying physical gold which you then store in a safe or vault.
1. Money spent on gold can’t be spent on goods and services
Western economies depend on continuous consumption. In fact, to be healthy, our economies need to grow, year after year. The wealth of the country depends on millions of people opening their pocket books each day and buying stuff. Lots of stuff.
So if you spend $10,000 on buying physical gold, that’s $10,000 that won’t be spent on groceries, home improvements, gas, or new electronic gadgets. The money you spend on gold is taken out of the economy.
2. Money spent on gold can’t be spent on stocks
Money invested in stocks fuels the growth of public companies. The more of their shares you buy, the more money they can spend on new factories and offices. In turn, they try to reward you by growing the value of their companies, so the price of your investment goes up.
Again, when you buy gold, and those gold bars and coins are sitting in a secure place, their value in cash can’t be spent on investing in stocks, or in groups of stocks in the form of mutual funds.
3. Money spent on gold can’t be spent on bonds
If you have an investment portfolio, it is doubtless a mix of stocks and bonds. The stocks are chosen to give you growth, so the value of your portfolio can rise. The bonds are chose for safety. Traditionally, the safest bonds have been those issued by various levels of government. Treasury bonds have always been viewed as the safest of all.
But what if you decided that bonds no longer represented a safe haven? (Not an unreasonable decision right now, in current circumstances.) You might look around for safer places for that “safe” part of your portfolio. The obvious alternative to bonds, when it comes to seeking a safe haven, is gold.
But if we all buy gold, who is going to buy those government bonds? And if we don’t the bonds, where is the government going to find the money to fund the deficit, among other expenses?
The bottom line…
Neither the government nor Wall Street likes to talk up the benefits of buying gold, simply because buying gold takes money out of circulation. And for the reasons stated above, that is perceived as being a very bad thing.
But for you and me, it’s a different story. Our primary concern is with protecting ourselves and our families. And to do that, it makes a whole heap of sense to increase the proportion of our savings that we invest in gold.
Why? Because when you are looking for a safe haven for a proportion of your investments, to counter-balance the inherence risks involves in buying stocks, buying gold is looking better and better as each month passes by.
If you want to buy more gold right now, see if you can find a reputable local dealer who deals in gold bullion.