9/6/11

If the last five years have taught investors anything, it is the importance of securing their wealth in assets that cannot disappear overnight. Stocks and fiat currencies have demonstrated a remarkable ability to depreciate in value, while other investments like CDOs collapsed under a sagging housing market.

The stark reality is this: paper currencies and other assets controlled by the government can be expropriated at any time by the government. Just as the government controls paper money, it also controls any person who relies solely on paper currencies as money.

If you value financial autonomy, you should look to gold as one of your primary sources of money or wealth preservation.

You might be wondering why gold qualifies, in our mind, as the most secure form of money. To a greater degree than any other asset, gold meets all the requirements of money. It was rare and prized long by civilizations long before any paper currency was developed. It has many unique properties and applications, which ensure that it will also retain some measure of its value. But the most important reason gold has utility as a store of wealth is its three thousand year history as a medium of exchange. Since the Chinese first issued gold coins as legal tender in 1091 BC, gold has been a worldwide medium of exchange.

Gold's reign as the primary medium of exchange lasted more than three thousand years, from 1091 BC to 1930 AD. From that date until the present, paper and base metal currencies (like copper) have replaced gold as the primary means of currency. Not surprisingly, the last eighty years have been marked by one economic collapse after another.

Once the United States abandoned the gold standard in 1971, the entire global economy shifted to a system where governments could issue more paper money than they could guarantee. With each influx of paper money came a rapid devaluation of that currency, wreaking havoc on investor's portfolios.

Without doubt, gold in recent years has regained its utility as an investment that is safe from floundering economies and the boorish reach of governments. More and more investors are growing weary of watching government expropriation of their wealth.

Their solution? Abandon paper currencies and invest in gold.