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Why should people buy gold and silver as an investment?

Two 0.5 oz American Eagle gold coins purchased by investorWe’ve been seeing an upswing in folks wanting to buy gold or silver as an investment lately, and we thought it’d be a great idea to write a bit about why now’s a great time to make this investment, so here’s a bit of background.

The federal reserve has been buying $85 billion per month in mortgage bonds and treasury bonds. Last year the DOW was up 30% thanks to QE3 (a stimulus program designed to lower mortgage rates).

All of that money went straight to Wall Street. But now, the federal reserve is realizing that hyper inflation is around the corner and began tapering in 2013, reducing their bond-buying to $75 billion per month. In January, they reduced it another $10 billion.

So why are they doing this? The federal reserve wants to build inflation because it would allow them to pay off their debts with cheaper dollars. When they started tapering, the stock market rebelled. It’s gone down 7% since January, which takes it from a bull market to being a bear market.

Which brings us back to that question of why people should buy gold and silver as an investment:

  • Institutional investors (hedge funds, 401K money managers, IRA managers, etc.) are taking their money out of the stock market in a controlled fashion. That money is going into other investment avenues, such as gold. Because of this, gold has increased in value by about $100 per ounce since the first of the year. Gold was at $1,192 an ounce on December 23, and now it’s been rising steadily—corresponding exactly with the stock market changes—to about $1,300 an ounce. Why would you not want to catch a rising investment right now?
  • The three trillion dollars that the federal reserve has created out of nowhere (with stimulus plans designed to lower mortgage rates, such as QE1, QE2, QE3, and Operation Twist) was created, as officially stated, to create inflation. It’s doing that, but because so much money was created, the value has dropped and very large inflation is around the corner. Inflation will cause the cost of gold, silver, and platinum to rise in response, to safeguard the value of the dollar. So if you buy now, while the prices are low, you’ll have a great opportunity to sell that gold and silver back when inflation brings the prices back up again.

So what do you think? Do you think gold and silver are wise investments right now?

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