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.S. 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.S. 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.S. 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.S.
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”. According to Clearwater,
Fla.-based talk show host and gold analyst, Tom O’Brien, when metals gain 20%,
gold equities jump by fifty or sixty per cent. That’s great when it happens but
the reverse can occur as well.
Buy gold bars or coins, and put them in a
safety deposit box. If you chose to purchase coins from a coin shop, make
certain you pay the lowest price possible and that they have a buy back policy.
If you elect to go with a broker, fees will be inevitable because you are
purchasing a tangible commodity.
There are brokers, and then there are brokers.
The best of the breed will answer all questions, and make the process of
first-time gold buying less nerve-wracking. Great brokers are also accessible
when needed, and quick to call with any new information that affects the value
of the investment.
Work with established companies, five years in
business is good, ten even better. Don’t bother with firms that badger you with
telemarketing offers or apply high-pressure sales tactics. Avoid paying high
commissions too. Some brokers have layers of fees, through which they earn more
money then they do investing on behalf of customers. There are also companies
out there that will not buy metal back. Stay away from them as well.
“Check references and Better Business Bureau
ratings”, Lubaszka adds. “Deal with a company that takes an active interest in
doing business with you. World Financial, for example, offers a five-star
customer satisfaction guarantee. If questions are not answered or we fail to
respond to a prospect’s call or email within 24 hours, that person receives a
one ounce silver American Eagle coin free of charge. A financial advisor’s job
is to ease the investment process, and to insure that customers get the most
for their money. Good advisers are merely good, but the best are worth their
weight in gold.”
To contact World Financial directly call
818.264.4085. World Financial is the
premiere provider of precious metals to investors nationwide. Aside from offering numerous incentive
programs, World Financial offers clients the right type of precious metal
strategy for every investor’s needs.
They are located at 12198 Ventura Blvd Ste 200, Studio City CA, 91604.
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