“Gold, a Hedge Against the Perils of Interesting Times”
While paper-based investments and real estate are vulnerable to effects of changing times, gold soars. A precious metals investment may save a portfolio when all else fails. The old Chinese curse, “may you live in interesting times”, has particular relevance to the current epoch of U. history. There’s a lot going on right now, much of it scary.
Major investors around the world are responding to the events of our perilous age by sinking their dollars, deutschmarks and yen into gold, silver and palladium; Bill Gates, Warren Buffet, and billionaire speculator George Soros to name but a few. Big financial institutions like the Central Banks of Russia and China are also leaping onto the metals bandwagon driving the price of these precious commodities ever higher. This is spurring a gold rush not witnessed since the Misery Index years of the 1970s. Many financial experts now view gold in particular as an island of stability in a paper-based investment market growing stormier all the time, a development that bodes well for everyday folks who want to shore up their retirement accounts with a precious metals hedge. “People the world over are losing faith in politicians, and currencies,” says Marc Lubaszka, President/CEO, World Financial, a highly successful investment firm specializing in precious metals based in Studio City, Calif.
“This has resulted in a flight to gold and other precious metals, a storehouse of value for more than five thousand years. Investors are taking their money out of paper assets, and putting it where it is likely to earn a better return in uncertain times.” Old Reliables Unreliable Investments once considered as stable as granite are rapidly losing ground, Lubaszka explains. Real estate is but one example. Long praised as a slam-dunk by money gurus, home-buying is no longer viewed as a hurdle-free path to profit. Stratospheric pricing and higher interest rates are putting intolerable pressure on the current housing bubble, factors bound to bust the suds sooner or later and drive the overheated real estate market into deepfreeze. “The housing bubble will burst rather than gradually deflate, following the rapid and violent pattern of decline of nearly every financial bubble throughout history,” Lubaszka says. “Higher interest rates negatively impact not only the health of the housing market but other economic segments as well. The stock market takes a hit because higher rates make it more costly for companies to pay for debt. Higher rates hurt corporate profit margins and reduce stock value, bad news given the deep debt situation so many companies are in today.
” Paper is Passé According to Lubaszka, the U. dollar has lost more than 80% of its original value since the early 70’s when we went to a floating currency, a situation not helped very much by the debut of the Euro in the late 1990s. Unlike American dollars, a portion of the Euro is gold-backed, a stability feature that has helped it outperform the dollar over the long haul. It is for this reason that many foreign investors have been taking money out of U. dollars and putting it into gold and oil instead, one explanation for why the price of both has continued to rise in recent months. “Gold prices are climbing right now because the Federal Reserve is printing dollars in flood proportions to keep the real estate market afloat,” adds Richard Russell, editor Dow Theory Letters, a stock market trends and securities report published since 1946. “This is creating inflation, which erodes purchasing power. All the world’s central banks are inflating right now, reducing confidence in paper globally and encouraging gold-buying.
India and China are spurring gold prices as well. India is the world’s largest gold-consumer, and the Chinese government is actively encouraging its citizens to buy gold.” All are extremely encouraging signs for gold investors. Over the course of the past 35 years, gold has climbed in value from a modest $35 an ounce to nearly $600. Contrast that with the battered U. dollar, a currency currently worth only 20% of its value in 1970. “When gold peaked-out in the 1970s, interest rates were at an all-time high,” Lubaszka says. “Right now we’re waiting to feel the effects of the last 9 interest rate increases which generally take 6-9 months to begin impacting the economy. Now’s the time to buy gold because when rates go up, downward pressure is exerted on real estate, stocks and bonds and commodities like gold tend to increase.
The opposite occurs when rates travel from a high to a low. That’s the time to reduce gold assets and increase the paper part of a portfolio.” Buy Without Getting Burned Michelle Henderson, a talent agency owner in Los Angeles, Calif. understands the stakes when it comes to investing. “As an agent I work in a commission-based world, and have to invest in both people and ideas all the time,” she says. “Though I’d had bad experiences with stock investments in the past, I knew I would eventually find something that would work for me. I invested in a diversified metals portfolio made up of palladium, silver and gold, and earned a profit of 38% with the palladium alone. Staying focused on making money, and following World Financials advice, I was able to earn an above-average return and greatly increase the overall value of my assets safely.” Lubaszka explain, “It’s probably best for the first time investor to begin conservatively by purchasing physical metals instead of gold stocks, which can be very volatile”.
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