Gold IRA Companies and Reviews of 2018
- Why Invest In Gold?
- Gold vs Stocks - A Comparison
- How to Get Gold into your IRA or 401(k)?
- Best Gold IRA Companies  (Click here to go straight to the best gold IRA Companies)
Why Invest in Gold?
Gold has always been a ‘safe haven’ asset in times of financial collapse. Even though the worst of the Global Financial Crisis seems to be behind us, it could still be the smartest investment you could make this year.
Back at the end of the First World War, 358 mg of gold was worth exactly one German Mark. By the end of 1923, the same weight of gold was worth one trillion Marks.
Gold had not appreciated in price by a trillion times over (one thousand billion). Quite the opposite. Its value had stayed fairly stable. In 1918, 358 mg was the weight of gold in a one Goldmark coin. But the pressures of war led to Germany abandoning the link between its currency and gold. Germany funded the war entirely by borrowing, and printed more and more money to help meet its obligations. The result was hyperinflation and the collapse of the German economy.
Those who invested their money in gold before hyperinflation set in were able to preserve their wealth. Those who did not were ruined. The German currency was worthless, but gold had maintained its value.
The appeal of gold
This is the picture throughout history. Wherever there is financial ruin – whether due to war, inflation, stock market crash, social upheaval or a combination of any or all of these – gold proves to be the ‘safe haven’ investment to which investors flock to preserve their wealth.
Gold maintains its value for a number of reasons. One is its scarcity. There is only a limited quantity of gold in the earth, and much of it has already been mined. Unlike paper money, or electronic money – which can simply be created out of nothing – it is not a trivial matter to add to the supply of gold in existence.
The second reason is that mining gold is a difficult and time-consuming task. Not only are there limited quantities of gold, but what there is in the earth is hard to find, dig out and refine. However, unlike most other elements, gold does not corrode in any way, so once it has been refined and turned into coins and bars, it does not degrade over time.
Lastly, gold has great aesthetic appeal. For millennia it has been used for jewellery and as a medium of exchange – and this shows no sign of changing any time soon.
Why you need a safe haven
Gold and other precious metal like silver and platinum have always been good investments, especially in times of economic turmoil.
We have just emerged from the worst recession in living memory. The causes of the financial crisis have been well documented. The banks made trillions of dollars worth of bad loans – mortgages to people who would not be able to afford them when interest rates rose, as they inevitably did. Because these loans had been packaged into securities and sold on, no one really knew who held the bad debts. Because they didn’t know what was truly on their balance sheets, the banks refused to lend their money out: the Credit Crunch of 2008 and 2009. This choking off of credit almost immediately led to a prolonged recession. Governments were forced to bail out banks and other affected industries that would otherwise have gone bankrupt, causing an even worse crisis. They borrowed huge amounts of money to do this, and created hundreds of billions of dollars more through Quantitative Easing – the strategy used to ensure the banks had money to lend to prop up the economy.
Although we seem to be out of the worst of the Financial Crisis, there is still enormous uncertainty. Few economists believe we are back to ‘business as usual’.
The US and other countries now have immense debts, and no credible plan to repay them. Vast amounts of money have been created through quantitative easing. In the same way that the creation of excess money in Germany in the 1920s caused hyperinflation, there is real concern that quantitative easing will have a similar effect now.
Another cause for concern is the money that flooded into the emerging economies when America and Europe were less stable. Now that the picture appears to be improved, this money is flowing out again, bringing the risk of recession elsewhere in the world – and the social and economic implications that raises for everyone. Then there is China, which owns a large proportion of the substantial US debt. The first tremors of financial instability have already been noted, and there is no telling what the result would be for the US if China ran into problems.
The Global Financial Crisis has progressed in stages, with the emphasis shifting each time. A crisis of liquidity (the Credit Crunch) evolved into a recession and a Sovereign debt crisis. This, in turn, had international implications – the Eurozone Crisis, China and the emerging economies. Unpayable debts, high inflation and further financial collapse at home and abroad are all not only possible – they are likely. There is no way of knowing how bad the result will be, or when it will occur. But few critics genuinely think that we have found our way out of the crisis yet.
There are a handful of things you can do to insulate yourself from the continuing effects of the financial crisis. One is to pay off any debts as fast as you can, so that if your circumstances change then you are less likely to go bankrupt. Another is to invest in a broad range of assets, so that you are protected against certain sectors of the economy struggling.
Lastly, make sure you have a hedge against inflation and the devaluation of the currency that will inevitably happen if the world loses confidence in the ability of the US to pay its debts. Gold and other precious metals have always proved a safe haven investment in circumstances such as these. There are many ways to invest: in physical metals (coins and bars) you hold personally; in gold kept in insured vaults on your behalf; ETFs (exchange-traded funds) that allow you to trade gold easily; in mining company stocks; as part of a gold-backed IRA, and more. At least one of these is likely to suit your needs and allow you to preserve the wealth you have worked for.