The precious metal is a time-tested hedge against inflation, economic uncertainty, and more.
In 1946, when the Foundation for Economic Education was founded, an ounce of gold traded for around $38.25. This week, it was trading above $2,000!
I can only imagine how much money could have been made with earlier investments in gold. I sure wish I had invested extra Christmas or birthday money in the precious metal in 2000 when gold was about $280 an ounce.
While there’s no guarantee on any investment, it’s clear we’re entering a period of great economic uncertainty. In recent economic news, several banks and major financial institutions have filed for bankruptcy leading 2023 into what is likely a recession period. The US dollar is losing significant value caused in part by monetary inflation, overspending, and fading market confidence. Some economists speculate that the US will consider a centrally controlled, government-issued, cryptocurrency as a means to promote Modern Monetary Theory.
Throughout history, as fiat currencies have come and gone, gold has stood the test of time again and again, and there’s a reason why.
“Commodities such as gold and silver have a world market that transcends national borders, politics, religions, and race,” writes Robert T. Kiyosaki, author of Rich Dad, Poor Dad. “A person may not like someone else’s religion, but he’ll accept his gold.”
Buying gold or even holding it was not always an option for Americans. As FEE President Emeritus Lawrence W. Reed has pointed out, “...on April 5, 1933, FDR told Americans—in the form of Executive Order 6102—that they had less than a month to hand over their gold coins, bullion, and gold certificates or face up to ten years in prison or a fine of $10,000, or both.”
This essentially made private ownership of gold illegal from 1933 until December 31, 1974, when the executive order was rescinded. These laws negatively impacted the US economy, markets, and the US dollar, and in many ways continue to plague the US and world today. As economist F.A. Hayek suggested, the US government was monopolizing the currency, while debasing it, expanding social programs, and funding them through fiat monetary inflation schemes.
While there’s no way to undo the past, we can capitalize on the future, and gold can be a great way to do that. Here are five reasons to consider giving gold a look if you’re starting a portfolio or looking to diversify.
1. Gold Maintains Value Over Time
Although there are short-term volatility concerns with gold compared to the US dollar, long-term investment in physical gold has maintained its value throughout history. If we look at 1946, the value of an ounce of gold was around $38.25. Today, in 2023, the value of an ounce of gold is steadily pushing past $1900 into the $2000 range. Even 10 years ago, an ounce of gold was around $1400.
Considering gold for long-term investment is a great way to hedge against inflation and crumbling fiat dollars as opposed to storing your hard-earned money in a savings account where it earns virtually no interest even as inflation erodes its purchasing power.
2. Gold Is Easy to Trade
Gold’s value is nearly universal—it is appreciated throughout the world and has held value throughout time. This international and cross-cultural appeal for gold makes it relatively easy to buy and sell throughout the world, a contrast to many other investments.
When there are government policies in place that control bank accounts, monitor stock trading, restrict sending or receiving digital funds, limit lines of credit, shut down credit cards, debase currencies, and regulate crypto transactions, having physical gold is still usually a viable option for trade. This is seen quite often in periods of inflation, deflation, and war.
If you are interested in buying gold but do not have an extra $2,000 to drop on an ounce of gold, there are a few other ways to invest without buying a full physical ounce.
Here are a few ways to get started:
3. Gold Has Low Maintenance
Unlike many other investments, gold has a historic and logical propensity to increase in value over time all on its own. Stocks might offer a higher rate of return on average, but with gold, you don’t have to hover over a computer day-in and day-out to decide when to buy and sell. You don’t have to research company financials or listen in on earnings reports as intensely.
Sure, it is typically best to buy low and sell higher than what you originally paid. However, it is also likely that whatever price you pay for gold today, in 10, 15, or 20 years from now it will be worth far more, making it a low-maintenance investment.
Another great practical aspect of gold is its natural low maintenance characteristics of durability, and imperishability, while also having wide-ranging industrial uses.
4. Gold Is a Path to Generational Wealth
When you own physical pieces of gold—whether in the form of coins or bars or some other physical form—these can be transferred between people without necessarily having government involvement. When the gold is bought or sold, there may be times when a tax is enforced.
However, when gold is given as a physical gift as an inheritance, or heirloom, simply to hold onto as opposed to selling for profits, you will likely be able to keep it without taxation up to a certain amount. Having gold can help transfer wealth between generations. Some cultures melt and mold the gold into basic styles of wearable jewelry, coins, ornaments, or cutlery, to further aid in this transferring process.
5. Gold Inspires Competition
Economist Henry Hazlitt agreed with F.A. Hayek that having competition currencies helps fight inflation while giving free people more options to choose from. Competition and choices are not given to people who are not free from state currency monopolization.
If more people invest in gold, it is likely to inspire progressively greater competition for the US dollar and other world currencies. Currency competition presses governments to reliably hold their value compared to monetary inflation and price inflation rates.
Haziltt explained, “Let us not reject the gold standard because governments once embraced it. After all, it was the end-product of centuries of experience. It was the survival of the fittest against the early competition of oxen, sheep, hides, wampum, tobacco, iron, copper, bronze, and finally of silver. It was the outcome of competition in the marketplace, as I am confident it would be again. It was only after its victory in private use that governments took it over, exploited it for their purposes, diluted it, perverted it, and finally destroyed it.”
About the Author:
Joshua D. Glawson is a writer on such topics as politics, economics, philosophy, finance, and personal development. He has a Bachelor's in Political Science from the University of California Irvine. He is the Content Manager of Money Metals Exchange.