As the Eurozone debt storm strengthens and economies continue to struggle under enormous amounts of debt, investors worldwide are faced with the question: Should I Buy Gold?
Let’s look at the facts:
- Debt crises in Portugal, Spain, Ireland, Greece, and now Spain. To borrow a quote from TIME regarding the crisis in Greece, “Greece has big debts relative to the size of its $357 billion economy (about 120% of GDP). It no longer has the option of eating into those debts by inflating its currency. In fact, it has no power to use monetary policy to ease its pain, as the Federal Reserve has been doing in a big way in the U.S.
- If and when Greece decides to exit the Eurozone to return to the drachma, the world will be awash in liquidity. Why? Because central banks around the world, including the Federal Reserve, will engage in massive quantitative easing to try to stimulate economic activity in their respective regions.
- 16 of Spain’s banks were downgraded earlier this month by Moody’s Investors Service, which cited a recession
- The U.S. already has over $14 TRILLION dollars of debt. As mentioned in the article, that’s roughly $46,000 per every American citizen!
- The IMF announced in its latest report that it has plans to increase its precautionary gold reserves on account of rising global risks. Central banks around the world are also preparing for currency devaluations by purchasing gold.
All of these factors make it clear that investing in gold is not only a good idea, but a smart idea as well.
No one can predict the future of the U.S. or European economy but by looking at the facts and seeing where things have been, a good indication of where things are heading is obvious.
The keyword here is Diversification. Protect the paper assets in your portfolio with gold and silver, that way when stocks and the dollar fall, you are protected with the portfolio insurance of precious metals.
