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Why Gold, Silver and Platinum?

Krugerrand Gold Bullion Coin 

Why invest in gold, silver or platinum?  Many investment gurus and books on investing today recommend diversifying portfolios across a wide range of investments.  This is merely the application of the age-old adage, “Don’t put all your eggs in one basket.”  Many experts suggest that you put at least 5% of your investment portfolio in precious metals such as gold, silver or platinum just in case the stock markets and bond markets ever crash.

Many investors have purchased more than 5% in precious metals for various reasons.  They are purchasing precious metals as a hedge against the governments' seemingly never ending expansion and inflation of the Dollar and the Euro.  The United States and the other Western European nations believe they can print and create money to pay for unlimited governmental spending.

Many economic experts point to the many times in history where this strategy has failed and resulted in hyperinflation, the collapse of economic systems and the collapse of governments.  Somehow the United States and Western European nations have become convinced that they can continue increasing the money supply and that the rules of economics will not apply this time and everything will be O.K.  So investors in precious metals have turned to gold, silver and platinum as a hedge against inflation.  Others look at it as insurance against the failed economic policies of their governments.

If the public ever views the dollar as "not  worth the paper its printed on" or worse just as electronic blips created on computers by banks and governments, there could be a total collapse of the Dollar, the Pound, the Euro, etc.  If this happens, what will people use for currency and trade.  Precious metals investors say, gold, silver and platinum.

Unlike paper dollars, they are not making any more gold, silver or platinum.  There is only so much gold, silver and platinum on the planet.  Most of the easy gold, silver and platinum, (i.e. the deposits close to the surface), has already been mined.  Gold, silver and platinum have become very hard and expensive to find and get out of the ground.  Some of these precious metals, most notably silver and platinum, are also being “used up” in thousands of industrial and chemical applications.  Millions of ounces of silver and platinum are being used every year as catalysts and as chemical compounds.

One famous example is the catalytic converter being installed on millions of new motor vehicles every year.  In a catalytic converter, platinum is used to remove sulfur from the exhaust of internal combustion engines.  Millions of ounces of silver are used every year in electrical contacts, in chemicals and photography.  One can credibly argue that precious metals such as silver and platinum are becoming more precious every year.

The growth of economies in the Far East, especially in India and China, has resulted in the ever-increasing consumption of silver and gold by investors in those countries.  They can finally see that investing in United States and European paper and currencies is a bad bet.

You can invest in gold, silver and platinum in many different ways and its simple to do.  Gold, silver and platinum are all sold in bullion coin form.  One famous example of this type is the one ounce gold South African Krugerand .  The United States and many other governments mint gold, silver and platinum bullion coins.  These can be purchased at any coin store. 

Another very common investment is called junk silver.  Junk silver is pre-1965 United States dimes, quarters and half dollars.  Junk silver coinage was minted by the United States government until 1964 and was circulated as United States currency.  Junk silver is 90% silver by weight.  Junk silver has no numismatic value and derives its value from its silver content alone.  To give you an idea how much the inflated paper U.S. dollar has slipped since 1964, one-dollar face value (ten junk silver dimes or 4 junk silver quarters or 2 junk silver half dollars) is worth about $11.50 today.  Let me say that again, in 1964, 4 silver quarters were worth one dollar, today those same four 1964 silver quarters are worth about $11.50.

Did your stock and bond investments grow 11 ½ times over the same period?  Did you lose half the value of your stock market, 401K, IRA, and mutual fund investments in 2008 alone?

Whether you follow the current advise and invest only 5% of your investments in gold, silver or platinum is up to you.  Many others are investing far more in precious metals for the reasons stated in this article.  It’s up to you. 

Beware of stockbrokers and stock market investment gurus who tell you to stay away from gold, silver and platinum.  How many times have you heard these guys say, “gold is a crummy investment.”  Remember, brokers only make money from commissions when you buy into the stock and bond markets.  They don’t want you put part of your investment dollars in gold, silver and platinum because they don’t make a fee when you do.

More than one precious metal investor has pointed out that you can think of investing in gold, silver and platinum as an insurance policy against a market crash where you get to keep the premium!  Such a deal!