Lydian gold coin

Gold and silver have been the main currencies since the creation of the first market. These metals and gold especially are respected in all parts of the world and are valued throughout history. First-ever coins that contained gold or silver were introduced by Lydian King Croesus (561 B.C.) and throughout the centuries people continue to value and store gold and silver for many reasons. When economies fail and fiat becomes worthless, we always return to the gold standard. This pattern started centuries ago and repeated in the most recent history. It proves that gold and silver have value and the purpose of this post is to state the twelve undeniable reasons to buy gold & silver.

1. Fiat money is destined to fail

Fiat currency

All the world’s currencies are fiat and fiat currencies always fail. Most people around the world are unaware that the paper we call money is fiat. If you’re not sure what fiat money is, let’s clarify it. Fiat money is a government-issued currency that is not backed out by physical commodities such as gold or silver. In other words faith-based currency. You may say “so what is the problem with that”, and here is the problem. There have been hundreds upon hundreds of fiat currencies throughout history and they all failed, 100 percent and not a single exception. However, it gets even worse here; since 1971, for the first time in history, all the world’s currencies are fiat currencies. This reason alone is enough to start investing in gold and silver, but we have eleven more. 

2. The global economy

To understand what’s wrong with the global economy we need to take a look at history once again. Throughout history, all economies were going back and forth from “quality currency” to “quantity currency” and again to “quality currency”. The quality currencies were coins containing gold and later diluted by cheaper metals such as copper that made it a quantity currency. Then it took a deceptive form of national currencies that were initially backed by money. These were called claim checks on gold. Claim Check = Gold. Past some time the government changed the law giving them the right to print more claim checks on gold that didn’t exist. Lots of Claim Checks = No Gold. The next step was to cut the connection between money and currency completely. That is what we know about the current state of the global economy. When we used real money, gold would balance all economies. Here is how the economy balance worked. When one country’s economy boomed they would import cheaper goods and services from the depressed country and lower the wage rate. The outflow of gold would cause deflation and cool the economy. A country with the gold inflow would boom causing wages and labor rates to increase. That made prices of the goods and services to rise, making the first country switch back to producing its own goods by exploiting local services. The trade imbalance was always rebalanced this way. Gold-backed money also made it harder for the government to spend more than they produce. To spend more they had to borrow gold from the private sector. If they borrowed too much gold it caused interest rates to increase which slowed down the economy which caused tax revenue to fall. However, the debt-based monetary system is allowing deficit spending and imbalance trading to persist making a huge fraud bubble. The economic bubble is threatened to burst, only this time it can happen on a global scale compared to one economy in the past. The great depression of 1929 and the recession of 2008 would seem like good times when the global economic bubble bursts. To survive in that ugly time you need to own physical gold and silver.

Global debt
Global debt by country

3. New monetary system

You’ve probably heard many times that there is nothing new under the sun and history repeats itself and it goes in 30-40 years cycles. Many scholars and economy analytics are sure that this time there will be no exceptions too. In the past 100 years, we can see that the world had four monetary systems: Gold Standard – Gold Exchange Standard – Bretton Woods System – USD Standard. The system we are in today is US Dollar Standard and it has been around for a long, but like all systems in the past, it’s cracking and failing. The difference from previous transitions is that it was going from complete gold backing to less and less where USD is not backed by anything except air. The same scholars state that by the end of this decade history will repeat. And like in 1922, 1944 and 1971 economists and government representatives will have an emergency meeting to decide on a new world monetary system. It could be that cryptocurrency is something that they’ve been preparing, but that’s a different topic. All the monetary systems in the past had one thing that never failed and it was Gold. In the current monetary system, the key component is the US Dollar and it represents over 60 percent of the value of the world’s currencies. Loss of trust in the USD will trigger a dollar crisis which will create a domino effect of disbelief in all currencies and they all will collapse. And just like it happened before, central banks will go back to a commodity that never failed- Gold. People that stored physical gold will benefit from the crisis and that is a big reason to buy gold and silver.

4. Money printing doesn’t work

Increase of cash supply by 120% since 2008

When the crisis of 2008 hit the global economy US government printed an insane amount of currency and is continuing to print to this day. From 2008 to 2016 money supply have increased by a staggering 120 percent which caused Real Estate and Stock Market inflation. We can see that by looking at record high prices of real estate and stocks. The government still thinks that they can save the situation by printing more trillions of dollars. Just imagine, the printing press runs but nothing is backed up. At the end of the day, the market dictates the value of printed dollars. When credit debt bonds, fiat currency, and derivatives will implode that will trigger central banks to print even more to stabilize the situation but it will only cause hyperinflation. When that happens people will lose faith in the currency and rush to gold and/or silver causing the precious metals to increase in price. If you already buy gold and silver you will benefit even in that situation.

5. Gold & Silver investment is a safe haven

In the previous reason to buy gold and silver, we mentioned that from the crisis of 2008 real estate and stock markets increased exponentially. Real estate, stock market, bonds are all at the peak high. Stocks have been in the bubble for over a decade now. Bonds are in a thirty-year bull market. And real estate is still deflating from the biggest bubble history knows. All these assets were great to invest in, but bull markets can’t run forever. That leads us to a thought that the longer we are in a bull market the closer bears are. Real estate is a great investment asset and always will be, but the entry price is super high today. When the real estate bubble bursts, that’s one of the best assets to run to. The only bubble that hasn’t started to grow yet is gold and silver. When all the above dots are connected I wouldn’t want to sit on anything rather than precious metals.

6. Greed and Fear Psychology

If you have been investing or trading you probably know that the market is driven by greed and fear. When you look at the history of market behavior you will see that it can take years for an asset to grow and only days to collapse completely. There is even a saying for that: “The bull climbs the stairs, but the bear jumps out the window.” This event can be explained because fear is by far stronger emotion than greed. However, gold and silver can be an exception to that rule as it can rise super fast as it happened in the 70s. It took almost a decade to go from $35 to $400, but once people started to panic out of dollars it took a little over a month for the price to rise to $850. That run was made possible by a small percentage of the population. Imagine where it can take the gold and silver price if a lot more people would panic into a safe haven? That is why I think gold and silver are great investment assets.

7. Goldrush then and now

During the most recent gold rush of the 1970s, only two markets could participate in the gold exchange: the United States and the Great Britain. That means only 10 percent of the world’s population could participate in that great gold rush. This time the entire planet can take part in the gold rush. In the 1970s there were zero investors from USSR and China. Now there are about 285 billionaires in China and 102 billionaires in Russia. There are over 1500 billionaire investors on the planet and they are all potential gold and silver buyers. Plus, everyone had a saving mindset in the 70s, compared to now where speculation and investing are encouraged. That creates 1000 times more potential runners into gold and silver. A huge portion of the world’s population didn’t have access to the gold market. Plus the savers’ mentality, but now everything is different plus gold & silver supply has decreased significantly since the 70s. That is a good reason to buy gold and silver as one of your investment assets.

The 1970s goldrush

8. Buying power of gold and silver

The truth about commodity price is its buying power. For example, in ancient times an ounce of gold could get you a set of good clothes like a draped toga (that’s what they wore back then). Today, you can buy a good suit for an ounce of gold. As we can see, history shows that an ounce of gold could only dress people at all times. However, there is a huge difference in the production of an ancient robe and modern suit. Back then it would take months to make a robe. Cotton had to be planted, takes time to grow, then it had to be harvested and put into threads. Then it had to be handwoven and stitched into a toga. Remember, it was all hand made piece by piece. Whereas today, production efficiency amazing. Everything is made with the help of production machines and it takes several hours to make thousands of suits. On the other hand, to get gold from the ground it takes a lot of men’s power almost the same as it was in ancient times. But still, an ounce of gold buys only one suit. So what’s wrong with the purchasing power of gold? The answer is, as people become more efficient in production, it created hundreds of ways to store value and invest. Back then, you could only store gold as a wealth security asset, today, it can be stocks, bonds, real estate, collectibles, currencies and much more. As we discussed in previous reasons to buy gold and silver, all these assets are in the longest bull run and a huge bubble. All it takes is a loss of belief in fiat currency and prices for all these assets are going to collapse. And as we mentioned earlier, people will run into something that never failed, gold and silver.

9. Inevitable global crisis

Diluted gold purchasing power by the overpriced and bubbled investment assets. Government debt, budget deficits, trading deficits, and trading wars are on the unseen levels. The stock market, real estate market and bonds are in a huge bubble. Credit debt and derivatives are threatening to crush the global economy. It took years upon years to create these bubbles, but as we learned earlier, it can only take weeks to bring everything down. Thousand times more investment-driven people with a lot more currency to invest can rush into gold and silver if the collapse happens. First time in the world’s history all currencies are fiat and unstable. Multiply that by finite and decreasing gold and silver supply. All the listed above problems are happening right now and to me, that’s a dangerous mixture inevitable to blow up eventually. The effects of the global crisis can either make you prosperous or give you a really hard time. To be in the first category, I suggest that you buy gold and silver for every spare currency you can find.

10. Finite supplies of gold and silver

Another way to define gold and silver is as precious metals. Why are they called precious? First of all, they are precious because they are always worth something and especially during a crisis. There is not that much supply compared to other metals such as copper, nickel or zinc which makes it a rare metal as well. These metals are widely used not only to make beautiful and expensive jewelry but in everyday technology. Not a single computer, smartphone, car or any other device that you use daily is made without these two metals. If gold or silver jewelry can be melted and refined into precious metals bullion, then gold and silver from technological devices are irreplaceable. It would cost more to get them back, than its current trading price. When the spot price of gold drops below $1000 and below $14 for silver, it becomes economically not profitable to mine these metals, as labor cost would be above what can be taken from the ground. When prices are low, on one hand, it’s a great opportunity to increase your storing volume, on the other hand, be sure that there is not much gold and silver mined. To summarise, demand is growing un proportionally faster than the gold and silver inventory.

Global Silver Supply

11. Precious metals are a tangible investment

When you purchase gold and silver bullion in most cases you can get immediate possession of your investment. Worst case you get it in a few weeks if you’re buying during the shortage. You can hold, feel and be sure that you have your investment but you can’t do that with digital investments like stocks or bonds. Another advantage of owning physical gold and silver is that it can’t be hacked, manipulated or deleted. In today’s world when everything is digital and online, it’s a good idea to have something “under the pillow” in case there is internet or power outage. If you have it on hand it’s “liquid” and can be used at any time.

Gold and Silver tangible investment

12. A private investment 

When it comes to money and investments you don’t want too many people knowing about your savings. You can’t say that about stocks and other assets requiring to work through an online brokerage. Even your savings account is not confidential as all the data is stored online and can be accessed by a third party or hackers no matter how secure it is.

What should I do with all this info?

Every single reason by itself is sufficient to start buying gold and silver. However, if you combine them it becomes not only logical to store some for the rainy day but have it as one of the major investment assets in your portfolio. If you’re not really into investments, you know that saving is very important. Save some gold and silver just as you would save cash, except in this case be sure that it’s always gonna be worth something and that is something we can’t say about fiat currency. It is very easy to purchase gold and silver right now. There are at least a couple of bullion shops in each decent-populated city. There are gold and silver bullion for all budgets. If you only have spare $100 a month start buying silver rounds or coins. One thing I recommend for precious metals buyers is to stay away from gold or silver certificates. What these mean is you pay for the bullion and instead of physical metal, they give you a promise certificate stating that you own that many ounces at their storing vault. The reason to stay away from these certificates is in case something goes south you want to have immediate access to your bullion. Another great thing about thinking of gold and silver as savings is that it takes more effort to spend it. Cash can be spent so fast that you won’t know where it went, but it’s different with precious metals. You would have to take it to a dealer, and that takes some time and planning.

Let me know what you think about investing in gold and silver. Also, did I miss any reasons to buy gold and silver? It would be great to hear your thoughts.