Bullion can preserve capital in inflation or deflation, argues John Ficenec
"In the face of an uncertain future, gold remains the best insurance policy," says John Ficenec at London's Telegraphnewspaper in a staunch defense of bullion published Dec. 8. Ficenec argues that for preservation of capital, nothing beats gold over the long haul, and the metal can help investors weather inflation as well as deflation:The metal is the only store of wealth that has a proven track record over thousands of years, and as such it should be an essential part of every portfolio.
The market price of gold may have fallen during the year, but hoarding of the precious metal by central banks and private individuals is approaching record levels. ...
The first rule of investment is preservation of capital. The second is to go searching for gains or income that fits with your appetite for risk. Gold has been the insurance of choice for thousands of years to satisfy the first rule, despite the fact it generates no income and actually incurs costs for storage. ...
It seems odd that the price of gold has fallen so sharply. But there are several reasons for this. Like all markets, over-exuberance had pushed the price higher than the fundamentals could support. At the same time, gold's big rival as a store of value, the U.S. dollar, has recovered as strong economic growth supports the world's reserve currency. ...
Gold is simply the best insurance against inflation, or deflation. "I would rather own gold than government bonds, high-yield bonds and equities. If this scenario [deflation] were to pass it would lead to even more money printing around the world," according to Marc Faber, the contrarian Swiss investor.
The first rule of investing is capital preservation. ... A balanced portfolio should hold an allocation of about 5% in assets such as gold. The future is uncertain and gold is the most effective insurance against that.
More information can be found online at http://www.goldbullionadvisors.com
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