Gold & Silver are NOT…
Today, gold and silver are widely misunderstood, even by those who buy and sell them, thinking they might be good investments. Let us dispel the misconceptions surrounding the precious metals and understand their true nature.
Gold and silver have a long and rich history of being used by societies as money. Following the removal of the gold standard in the twentieth century, many have forgotten about the qualities of precious metals which make them a sound form of money and today people speak of gold as an investment. This is incorrect. Gold was, and in a slightly clandestine manner, still is, money. In fact, unbeknownst to many, the Bank for International Settlements, or BIS, today classifies only two items as Tier One monetary assets on the balance sheets of central banks around the world, namely cash, and gold. It is just that people no longer transact with gold for goods and services in the economy, instead using the fiat currencies such as the Pound, Dollar and Euro, as dictated by the various governments of the world.
When people exchange their currencies for gold, or silver or platinum for that matter, what they are actually doing is saving, not investing! Let us look at the difference between these two terms. Saving is the action of preserving the value of one’s wealth over time, something which gold happens to be very good at. Saving with a stable asset like gold does not grow one’s wealth over time but rather protects it. Investing, on the other hand, involves allocating money to a venture that will generate more money and thus grow the value of one’s wealth over time. Understanding this is the first step to getting a grip on your personal finances.
Let us look at how gold has remained stable in its value over thousands of years of history. not increased in value over time. In Rome, 2000 years ago, a tailored tunic cost around 1 oz of gold. Based on the price of gold today, we see that 1oz of gold can also buy you a tailored suit today. What about housing? House prices go through their own bubbles and crashes based on supply and demand. Over time, however, a similar quantity of gold tends to be required in order to purchase a house. Back in 1953 the average house cost 150 to 200 ounces of gold in Britain. Over 70 years later, 150 to 200 ounces of gold can still buy you a house in Britain. The fact that gold has gone up in price does not mean that you can now buy a bigger or better house as house prices have also gone up by a similar amount due to the same inflation that caused gold prices to go up. Buying gold, therefore, as illustrated, is not an investment as it does not grow in purchasing power over time,
Does this mean that one should not own gold and silver? No. On the contrary, our opinion is that in a world where the value of fiat currencies can be, and is being, inflated away by the unbounded expansion of the money supply through continual debt issuance, anybody who wishes to save over the medium-to-long term, should do so using assets that preserve value, such as precious metals. Doing so is the first step to financial sovereignty and protecting yourself from the weaponisation of the modern monetary system against you via the hidden tax of inflation. Whilst gold is not an investment, it is one of the most reliable and time-tested means by which one’s wealth can be protected and preserved over time. Therefore, start to think of precious metals, gold and silver, as real money to save with, and not as an investment. Investing is another topic, a complex endeavour that requires time, study, practice and experience to become good at. This is something which we aim to help people with through our online courses and portfolio insights services.
