1. Gold is still cheap, while stocks are expensive. In January of 1980, both the Dow Industrials and the price of gold were at the same level: 800. Now, nearly 30 years later, the Dow is above 12,000, and gold is around $900.2. Governments can print money to pay off their debts… But they can't create gold. For example, the U.S. government is printing tons of new money right now to get the banks to lend. In other words, the supply of paper money can be infinite. But the supply of gold is extremely limited. They say the entire gold production in the history of the world could fit on the basketball court at Madison Square Garden. And it's not so easy to get it out of the ground.
3. Precious metals do well in major international conflicts. The price of gold was fixed during World War I and World War II. But silver, for example, rose by more than 100% in both world wars. Gold has risen for the duration of the War on Terrorism. It all comes back to No. 2, above... Governments ultimately print money to pay for wars.
4. Gold will rise during inflation... and during deflation. Gold rises as the value of the dollar falls. But what many people don't understand is that gold will do even better during deflation, as the government lowers interest rates and wildly prints money (creating inflation) to offset that deflation. This leads to substantially higher gold prices… which is exactly what's happening right now.
5. Gold lowers risk in your investment portfolio. In the past, gold has tended to do the opposite of stocks: It skyrocketed in the 1970s, when stocks did horribly. Then in the 1980s and 1990s, when stocks soared, gold lost more than half its value.
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