Is Precious Metals Investing A Bubble

March 10, 2012 by staff 

Is Precious Metals Investing A Bubble, Is the economy recovering? Are stocks about to soar? What is today’s best investment? These are the debates we find ourselves in the midst of on a daily basis. For every question raised there are a million opinions voiced and for every expert who speaks of recovery there is one that speaks of imminent financial Armageddon. And while opinions vary from one extreme to the other, there is definitely common ground upon which we all stand. We are all uncertain about the future of the economy, the state of our national debt and our own ability to survive financially when it’s time to get our gold watch.

It is this uncertainty that is causing investors to shift their savings and retirement strategies. Bonds are a good example. When people are willing to invest for a 2% return in a 2.8% inflation environment, they are saying they are happy to lose just a little bit of what they have invested as long as the small loss is guaranteed. Sounds funny doesn’t it? “Please guarantee me I will lose just a little bit every day you hold my money.”

Safety has definitely become a predominant theme for investors. Too many have lived through the dotcom era, the speculative housing boom and stock market bubbles to have much appetite left for risk. With the last 20 years of investing being wrought with risk, investors today are diligently searching for alternatives. More research is being done and less is taken for granted. Even the Rule of 72 has become antiquated as real negative rates of returns produce illogical investment growth forecasts. How do you plan to lose money and retire?

As more investors do more research, one investment is standing out as a consistent winner. Over the last 11 years it’s averaged 18% annual returns. It’s up 100% since September 15, 2008, the day Lehman collapsed and the credit crisis began. Yes, gold may be today’s most sought after means of storing wealth and protecting one’s savings and retirement.

Last year, gold demand, fueled largely by central bank’s renewed appetite, reached 4067 tonnes. With mining supply at just 2809 tonnes, that left 1258 tonnes to be fought over in the market place. As is the case with any commodity, when demand exceeds supply by nearly 50%, the price has to go up. But it’s not just central banks buying more gold. Gold demand is rising at all levels of savings and investment.

Evidencing this trend, is the growing popularity of Precious Metals IRAs. Yes, you can own gold, silver and variety of other precious metals in a self-directed IRA. Because the metals are physically held in a depository in your name, precious metals IRAs are becoming a viable alternative to ETFs. The metals in an IRA are accessible, safely stored and ready to be delivered into your hands, should you so choose and when the time is right.

There are a variety of coins and bars that meet standards set for which metals and types of coins or bars are allowed to be held in your account. American Gold Eagles and Silver Eagles may be among the most popular as each are guaranteed by the Federal government for weight and purity. Indeed, these coins are the most sought after Gold and Silver coins in the world.

Perhaps the greatest attraction to precious metals IRAs, is Gold’s longer term potential for gain. Volatile markets have made it increasingly difficult for short term investors to make a safe profit. One crisis has already struck with little warning and up to the minute before it struck, traders were buying and selling as though no danger lie ahead. Because of the havoc then wreaked on investments, many savers and investors are adopting a longer term strategy. They do more research, consider alternatives and are amazed at what they learn.

For example, we recently ran a hypothetical scenario where we placed $10,000 into the Dow back in 1970. Today, that $10,000 would be worth $140,000. Then we placed $10,000 into gold. The results are jaw-dropping. Today that $10,000 would be worth $450,000. This is not to suggest no one should ever invest in stocks. The timing of boom and bust cycles leave savers and investors extremely vulnerable when you have all your eggs in one basket. This makes diversification a must.

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