Is It a Good Idea to Invest in Precious Metals?

As we continue to plod along in this uncertain economy, one begins to wonder what investments will be safe in the event of an economic disaster. Some might think that cash is all-powerful, but if your country can’t pay the bills, then their pieces of paper will be absolutely worthless! With this in mind, perhaps it would be wise to hedge against this potential event and invest in precious metals!

What Are The Advantages of Precious Metals

We have all heard of entire countries going bankrupt and paper currencies inflating so much that they are valued at only a small fraction of what they used to be. For example, let’s say that our government owes more money than they can possibly pay back (which actually appears to be the case lately). Suddenly, their “investors” (meaning, other countries) decide that they want their money back. Since we don’t have mounds of cash reserves, it’s just not possible for us to do it. So what’s our solution? Let’s print more money! Well, since we have an increase in our paper money, but a stagnant value of gold to back it up, each dollar is suddenly worth a little less. As this happens again and again in shorter time-spans, our country could very shortly be heading for a financial meltdown.

Instead of holding onto cash that may be worth nothing in the future, it’s a good idea to hedge against a typical investment with precious metals. For centuries, gold has been the most popular precious metal. Even in ancient cultures, gold was used to establish worth among citizens. Today, it still holds great prestige.

Gold is currently valued at about $1,500 per ounce. When the economy is unstable, the value of gold typically rises (since it is a hedge), so if you think that our economy will soon fold, it may be wise for you to purchase a few ounces of gold. After all, even if our cash becomes worthless, gold will still have great value.

It seems that fewer economies value the currency of the U.S. as they used to, which sometimes makes it difficult to buy and trade goods. But, gold holds great power and most likely always will. If you pull out some gold from your safe, chances are that people will notice.

Use It as a Hedge, Not an Investment

As I stated earlier, gold (among other precious metals) is a great hedge against an economic downturn, but what if the economy begins to thrive again? Rather than the value of gold rising, it will most likely plummet again, leaving you with much less value than when you initially bought it. Therefore, precious metals really shouldn’t be purchased as an investment, but merely as a safety net in the event that the economy does take a dive.

If your net worth is around $1 million, I would suggest that 5% of your worth should be in precious metals. That way, if our economy comes crashing down (which it really could, you never know), you’ll at least have $50,000 of investments that will grow in value. In these cases, your gold will makes your golden years tolerable rather than miserable.

Have you ever thought about investing in precious metals? If the economy takes another downward plunge, will you be buying up some gold?

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