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Precious Metals Can Help Balance Your Portfolio

by

Adam Starchild


Precious metals are poised to take off. Alert investors could profit handsomely. Those who fail to participate could miss out on the most exciting profit opportunity of the '90s.

The signs are unmistakable:

  • The Toronto Stock Exchange Gold and Silver Index has reached an all-time high. The Philadelphia Gold and Silver Index has more than doubled.

  • Eleven of the top 13 mutual funds for 1993 were gold and precious metals funds.

Meanwhile... the federal budget is out of control. The national debt is $4.5 trillion. and unless Congress curtails spending, you're in for higher and higher taxes as well as the worst inflation ever. Add it all up, and it means a move by investors to precious metals.

When rising inflation makes it more costly to hold dollars the demand for gold replaces the demand for dollars during uncertain times -- and the price of gold goes up. Silver and platinum generally do also. This isn't new; it has been the case all along. There are no financial instruments, new or old, that can provide the inflation protection that gold can. And during times of rising inflation, nothing is as good as gold in responding well to bad news.

Many financial advisors suggest keeping 15% to 20% of your investments in gold and other precious metals. Most people only think about stocks, bonds, and annuities, and overlook the value of diversifying some of their money into precious metals.

A quiet transition has been occurring in the gold market in recent years, and last year, China became the world's largest gold consumer. It's not just China either -- it's a trend that's firmly in place throughout the Far East. While most developed Western societies are coping with the legacy of decades of living beyond their means, China and much of the rest of the Far East are entering the 21st century with a bang.

Whether it's inspired by the inflation that accompanies these overheated economies, or simply the inevitability that some portion of newly created wealth will find its way into gold, the gold market has strong underpinnings that will support much higher prices over the next few years.

Gold serves as an investment as well as a form of storing your money -- that will never become worthless. First and foremost, gold is a physical asset. This distinguishes it from paper financial instruments like stocks and bonds. When gold performs well as an investment, it often means that most of your other investments are performing poorly. Just a look at the current rates you can get on a bank deposit will tell you how true this is.

Gold should be the foundation of your investment holdings because for thousands of years it has been the primary means by which people, as well as civilizations, have preserved their wealth.

Gold is also a traditional means of protection from inflation. Some investors have been disappointed with the performance of gold in the past decade, but they are forgetting the primary purpose of gold as a hedge against inflation. But because there has been very little inflation in the American economy in the past decade does not mean that gold has been a bad investment. The proper comparison is not to other forms of investment performance, but much like buying fire insurance and not having the house burn down. In this case the gold did exactly what it was supposed to do -- provide a store of value with inflation protection.

Gold is the most effective protection of your purchasing power. This is illustrated by comparing its value today with its value in Biblical times. From the Old Testament we learn that during the reign of King Nebuchadnezzar, an ounce of gold bought 350 loaves of bread. An ounce of gold today will still buy about 350 loaves of bread.

We have two suggestions as to the best ways to own gold -- special ways that are not widely known:

  1. Gold coins may be purchased from precious metals dealers, precious metals exchange companies, major banks and many brokerage firms.

    But an even better source for gold coins and bullion is a broker/dealer founded in 1982 by two of the former senior officers of Deak-Perera, at the time the nation's oldest and largest precious metals and foreign exchange firm. Asset Strategies International Inc., Suite 400A, 1700 Rockville Pike, Rockville MD 20852 are not "coin dealers," meaning that they don't take positions in the precious metals, therefore creating a bias to sell certain items held in inventory. Instead, through their domestic and international network of wholesalers they buy and sell at competitive prices.

    They are well known in the financial newsletter industry and at one time or another have been recognized as a "recommended vendor" by many of the writers in the newsletter industry. The principals, Michael Checkan and Glen Kirsch have been in the precious metals/foreign exchange business for a combined total of 50 years.

    They also worked with the Perth Mint (owned by the Government of Western Australia) to create the Perth Mint Certificate Program, an excellent way of buying and storing precious metals offshore.


    About the Author
    For twenty years Adam Starchild has been writing books about these subjects, and they are published by a variety of publishers. They are available in many bookstores or public libraries. He is the author of Portable Wealth: The Complete Guide to Precious Metals Investing.

    For more information on asset protection, see Asset Protection & Becoming Judgment Proof.

    Copyright © 1995-2004 by Adam Starchild
    The Investor's Library has reprinted this copyrighted article with the permission of the author.


Special Recommendations:
The Gold Supply and Prosperity
Gold, Freedom, and Free Markets: Economic Philosophy for Prudent Investors
Portable Wealth: The Complete Guide to Precious Metals Investment


 
 
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