Why I Buy Gold and Silver

Many people ask me why I have been buying gold and silver for years. I get it, gold is heavy. Unwieldy. But it's something that has retained its value unlike many other assets. And that's what this blog post is about.

In my personal opinion (DYOR), investing in gold and silver is a smart strategy for diversifying your portfolio.

Why? Because precious metals represent a different asset class that most investors have low exposure to, and typically, they exhibit low correlation with the stock market. Let's dig in and get some gold.

You can buy gold in Melbourne. Gold and silver always has maintained value.

1. Different Asset Class:

Gold and Silver as Commodities: Gold and silver are classified as commodities. They are tangible assets that have intrinsic value. Unlike stocks, which represent ownership in a company, or bonds, which represent debt, gold and silver are physical assets that can be valuable to hold.

Store of Value: Historically, gold and silver have been considered stores of value, since before Biblical times. They have been used as currency and as a hedge against economic instability for centuries. This makes them fundamentally different from financial assets like stocks and bonds.

Fiat money has NEVER been stable over the long-term.

Check out this short YouTube documentary on the untold history of money.

2. Non-Correlated with the Stock Market:

Low Correlation: The price movements of gold and silver are generally not closely tied to the performance of the stock market. This low correlation means that when the stock market is experiencing volatility or downturns, gold and silver prices can provide a buffer against losses in a predominantly stock-based portfolio. (Sometimes precious metals decline, but they provide. a good counter-balance.)

Hedge Against Inflation: Gold and silver are often seen as hedges against inflation. When the value of currency declines due to inflation, the value of precious metals tends to rise. This makes them a good counterbalance to the inflationary pressures that can erode the purchasing power of cash and fixed-income investments. In times of high inflation like now, this is a major benefit.

Safe-Haven Assets: During times of economic uncertainty, geopolitical tensions, or market crashes, investors often flock to safe-haven assets like gold and silver. This flight to safety can drive up their prices, providing a potential upside even when other asset classes are declining.

3. Diversification Benefits:

Reduced Portfolio Risk: By including gold and silver in your investment portfolio, you can reduce overall portfolio risk. The low correlation between precious metals and stocks means can help smooth out the volatility of your overall portfolio.

Potential for Upside: While gold and silver are not guaranteed to outperform other asset classes, they have the potential to provide strong returns, especially during periods of economic turmoil or high inflation. This potential for upside gains can improve the overall performance of a diversified portfolio.

4. Historical Performance:

Long-Term Stability: Historically, gold and silver have maintained their value over long periods, even during economic downturns. While their prices can be volatile in the short term, they have a track record of stability and growth over the long haul. And investors should have an eye towards the long-term value of their portfolio.

So how has gold been performing recently? Quite well actually. just look at this chart!

This is a 42% increase from a year ago. Now I consider that an abnormally high return, but it does show the appeal, particularly during geo-political tensions.

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Summing Up:

Investing in gold and silver is a good idea because they represent a different asset class from stocks and bonds, offering diversification benefits. Their low correlation with the stock market makes them a valuable addition to a well-rounded portfolio, providing a hedge against market volatility, inflation, and economic uncertainty. Keep in mind, however, that no investment is without risk.

But for me, the historical stability and potential for upside make gold and silver mandatory for those looking to diversify and (more importantly) protect their wealth.