15 Reasons Why You Should Own Gold Today
1. THE FOREIGN TRADE DEFICIT - The U.S. currently and historically imports significantly more than it exports each year. As a result, trillions of U.S. dollars now reside outside of the U.S. They are only legal tender, however, within the U.S. and foreign holders will only continue doing so if they have confidence that the dollar has value. The instability of the dollar has increasingly made apparent that paper money has no real value, and stands as an IOU from the U.S. government which is itself in trillions of dollars of debt.
2. U.S. GOVERNMENT DEFICITS - The U.S. government has nearly $11 trillion dollars of national debt already in place and will print money to come up with the additional funds needed for TARP's $700 billion payout, the Federal Reserve's $800 billion Consumer Loan and Bond Plan, and the House of Representative's $825 billion Economic Stimulus Plan. This will lead to further erosion of the buying power of each U.S. dollar.
3. DOLLAR WEAKNESS - In 2006 the Federal Reserve System stopped publishing the M3 monetary aggregate, which revealed to the public how much currency was in circulation. As a result, most Americans have no idea how much money is being printed by the government. Without this knowledge it is more difficult to weigh the strength of the U.S. dollar and to thus have confidence in its status not only within the U.S., but around the world. In this economic downturn people have become aware that we no longer are printing money in the billions, but the trillions and are therefore even less confident in our currency.
4. DEMAND OUTWEIGHS SUPPLY - Most of the gold that has been mined is available to consumers in the form of coins, bars and jewelry. Despite this availability, there is not enough gold being mined to meet the amount that is consumed. This deficit is made up by forward sales and loans from The Central Bank, but these will have to be covered and a gold shortage may be the result. With this shortage possibly on the horizon, U.S. investor demand for gold is expanding and as the domestic consumer demand for gold increases, prices move higher.
5. SUPPLY IN DECLINE - In addition to the current insufficient supply, there is an annual decline in global gold production. The estimated global gold demand worldwide is over 4,000 metric tons each year. The gold mined around the world annualy is only about 2,500 metric tons and is growing smaller. Any problems that result from the current deficiency will only worsen with this trend.
6. FOREIGN INCREASE IN RESERVES - Asian and Russian central banks are continuing to buy gold to increase their reserves, a trend that will continue in the decades to come. To buy the gold, they are spending their surplus of unstable U.S. dollars. Not only does this signify a lack of confidence in the U.S. dollar, but an increased confidence in the greater value of gold and an awareness of its shortage. This move signifies a worldwide cognizance about the discrepancy between the value of paper money and physical gold. "The instability in currency markets has encouraged some central banks to increase their gold reserves. Russia added 57.7 tonnes worth $1.7 billion last year, taking its total to 495.9 tonnes" (
"Stock markets may slide, banks may fold, but gold keeps its shine for wary investors" - 2/2/2009 - London Times).
8. GOLD SHARE OWNERSHIP - The purchase of shares of gold in Exchange Traded Funds is on the rise. ETFs provide a way for people to buy gold without buying a gold mining share. One share equates to 1/10 ounce of gold, which the ETF buys, therefore relieving the buyer from having to physically store the gold. Billions are being bought, to the extent that the ETFs are physically buying gold to support their funds. This heightened demand is increasing the demand for gold, thereby threatening its future availability.
9. GOLD REMAINS UNDERVALUED - In 1970, the price of gold continued to be suppressed at $35 an ounce. When gold ownership was legalized in 1975, the fair market price of gold went up to nearly $200 an ounce. Thirty four-years later, at its current price gold remains undervalued. This can be measured by pricing housing, automobiles, education, medical treatment, entertainment, etc. What one U.S. dollar bought in 1975 requires eight U.S. dollars to buy now. Based on this scale, gold continues to be undervalued.
10. VALUABLE CURRENCY - The worth of the dollar is dictated entirely by outside forces. Without government accountability, it becomes nothing more than a piece of paper. Gold, however has intrinsic value and has been viewed as a store of wealth for thousands of years. It holds value not only in the country where it is purchased, but all around the world, where it universally offers ease of liquidity.
11. DEBT-FREE INSTRUMENT OF VALUE - Gold is the only financial asset that is not a liability to an outside source. In other investments, like bonds, treasuries and CDs you are loaning money, which is subject to the ability of the government or borrower to pay off their obligations. With gold there is no debt obligation and therefore cannot be defaulted upon. It is pure asset value giving a portfolio protection from these other investments.
12. SKEWED U.S. INFLATION STATISTICS - The method by which government formulates statistics continues to change. The consumer price index used to incorporate energy, food and housing into its statistics outlining the level of inflation and currency devaluation. Currently, the government excludes these items from these statistics when they still remain pivotal portions of citizens' spending. For the last twenty years, prior to the current economic downturn, we have experienced erosion of purchasing value of the dollar in these three areas that the government does not recognize. Therefore, inflation as it stands is not recognized in its entire severity.
13. SHIFTING VIEWS OF CURRENCY - There has been and continues to be a paradigm shift among the citizens of the world toward gold as a financial alternative to currencies and debt instruments. People now seeing gold not as a commodity, but as a permanent wealth asset.
14. THE GOLD/OIL RELATIONSHIP - The relationship between the price of gold and the price of oil has been characterized by the Gold/Oil Ratio, a factor measuring the value of the number of barrels of oil that equate to the value of one ounce of gold. From 1965 to 2005, the Gold/Oil ratio stood at an average of 15.3:1 (the price 15.3 barrels of crude oil equaling the value of 1 oz of gold). Ups and downs suggest an inevitable realignment to a "fair mean," as represented by 15.3:1. Today the ratio stands at about 22.5:1, signifying that oil is undervalued and will most likely ascend to far greater heights when the economy begins to turn around, consequentially carrying the price of gold significantly beyond its current status. More about The Gold/Oil Relationship>
15. MIDDLE EASTERN INSTABILITY - Instability in the middle east not only impacts the availability and value of oil, but also independently affects the price of gold. The area's permanent instability will drive up the price of gold as people turn to the metal as a flight to safety, just as they do in any time of political unrest.
For more than half a century, H.S. Perlin Co., Inc. has provided tangible gold holdings for our clients. We are a firm focused on gaining your trust and satisfaction by personalizing investment plans to best meet your current and future financial circumstances. Our principal mission is to create wealth protection strategies through the placement of a small percentage of your wealth in gold.
Phone: 858.459.7803 / Fax: 858.459.7804
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