Tuesday, February 26, 2013

Gold Vs Paper Currency: Why The Precious Metal Is Your Best Bet

Precious metals have been a popular investment since the economy went haywire back in 2008. While the value of the dollar has consistently eroded, the value of precious metals such as gold and silver has been rising inexorably. For thousands of years people have recognized that precious metals hold their value like no country's currency can. Precious metals also provide a great hedge against economic uncertainty. As financial uncertainty spreads worldwide people have found investing in precious metal provides them with a measure of financial stability and even allows them to turn a profit. 

Gold and Silver Have Intrinsic Value

There are a number of good reasons to invest in precious metals. Precious metals are physical commodities. They have value in and of themselves. They can be used as collateral or to purchase goods and services almost anywhere in the world. Things like currency, stocks and bonds are only pieces of paper and virtual goods. They may represent something of value, but they have no real value themselves. If the companies or governments that issued them fail they become worthless. Precious metals, on the other hand, retain their value regardless of what happens in the political/economic landscapes. The value of gold and silver can simply never go to zero. 

A Limited Commodity

Another reason precious metals are better than cash is because they are a limited commodity. There is a finite amount of gold and silver on the planet. This is part of the reason they are so valuable. True, companies mine for them every day, still they represent only a tiny fraction of the resources on the planet. Reams of paper money are printed in countries all over the world each day. When governments (or counterfeiters) want more money they simply print it. But there have been numerous instances where it took baskets of money to buy a loaf of bread. That has never been the case with precious metals.

Durable And Versatile

Gold, silver and other precious metals are versatile. They can be transformed into jewelry, used in industry, made into coins or bars and still keep their value. They are also able to hold their value when deluged by water, burned by fire or broken into pieces. The same cannot be said of paper currency. For paper money to have any value it must be in pristine or near pristine condition. Damaged bills are usually not accepted as legal tender. Paper money can also easily be rendered useless by flood, fire or a mischievous child playing with scissors. This makes it a more risky proposition to have your wealth in paper currency than precious metals.

Enduring Value

For thousands of years precious metals have been used as a means to pay for goods and services. During that time many forms of paper currency have become worthless. Many forms of paper currency today are theoretically backed by precious metals. It makes more sense to own the precious metal than the paper currency. Banking today is handled electronically. With a few strokes or miss strokes on a computer the life savings of millions of people can be gone in an instant. If people are looking for a medium of exchange that has stood the test of time precious metals is their best bet.

How to Invest

If you are now convinced that gold is something you'd like to invest in, the 1st step is to find a reputable gold dealer that can help you through the whole process of investing in gold. Do your research and look at different gold dealer reviews on the web. It is recommended to work with a dealer that is in your area and that has some positive testimonials from other clients like you. Also, look for accreditations to make sure that the gold or silver you're purchasing meet the minimum purity requirements.

Investing through your IRA

One of the most popular ways of buying gold in 2013 is investing through your IRA or 401k retirement accounts. Many Americans don't know that this is possible, yet it is one of the best ways of investing in gold. Check out a site like goldiraguide.org to learn more. One of the main advantages of buying gold through your IRA is the tax-saving aspect. In fact, certain plans allow you to buy gold bullion coin or bars tax-free, as long as your gold is being held by an accredited custodian. 


Johnny Stein is a financial analyst who occasionally blogs about precious metals, stocks, real estate and other investment options. He has over 30 years of experience in commodities and stock market investing in the United States.