This is part one of three in a series exploring three key reasons why gold could be the best hedge in the event of a major market correction.
There are many stories in the news lately exploring the various ways to protect yourself from a major market correction. They talk about hedge funds shorting US municipal debt, junk bonds, and foreign bonds in Asia and the eurozone. However, hardly anyone in the media mentions the use of physical gold bullion to protect your savings from a stock market crash. We believe gold will outperform any of these conventional “safe havens” for three key reasons.
The first promising factor for gold is that it is heavily out of favor. That is to say, the financial media loathes the yellow metal. Bullish sentiment on gold is currently at its lowest level since 2004. Due to the 30% decline of gold in 2013, those who have long hated it have been doing a victory lap. This is despite the fact that gold rose nearly 600% from 2001 to 2012.
Gold’s detractors somehow see fit to celebrate being correct once in 13 years. However, being on the ball less than 8% of the time since 2001 is nothing to brag about. With that kind of batting average, they couldn’t make the cut on a little league baseball team, let alone presume to give advice on how people can protect their hard-earned wealth.
As our Chairman Peter Schiff has pointed out again and again, the fundamentals of gold remain unchanged. The natures of central banks and the bubbles they create have also remained the same. In light of this reality, the arguments of the so-called experts against gold completely miss the point. Fortunately for us, when the “experts” (none of whom saw the crisis coming in 2008) are down on gold, it presents an excellent buying opportunity. If they were all recommending gold, its price would likely be much higher than it is today.
Remember – one of the main benefits of owning gold and other physical precious metals is that there is no government official, no commissar, no Fed chairman standing between you and your money. You get to physically hold the metal that is storing your wealth. That means no one can devalue it with a snap of their fingers, the way the Federal Reserve does with dollars. We posted just last week about how the dollar has lost more than 80% of its value since Nixon took the US off the gold standard in 1971.
This fundamental truth about gold will be invaluable in the midst of the next financial calamity. When the next crash comes, central banks like the Fed will undoubtedly use the only tool they have – inflation. As mainstream investors see this, where will they seek refuge? Even Treasury Inflation-Protected Securities (TIPS) are linked to inflation measures notoriously suppressed by the government. Gold, meanwhile, is worth what it is worth on the market – regardless of what any government may claim.
Investors who took heed of Peter’s early warnings are already enjoying golden profits. The experts were doubtful back then, and they haven’t changed their tune. Fortunately, consensus does not determine where the market will move. That is left to the laws of economics.
Check back tomorrow to learn the second reason physical gold bullion is a better hedge than the mainstream alternatives.
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