Counter Market Downturns With Gold

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1. Figure out what you own.

How much do you have in stocks, bonds, annuities, CDs, etc? Add it all up.

2. Divide

Take the total amount of your portfolio and divide it by 10. The resulting number is how much you have in hard assets, meaning gold and silver.  In other words, 10%.

3. Why 10%?

First, it’s a good round number and it’s easy to arrive at. Second it also seems about right for what we want to achieve, which is to preserve our wealth.

4. Why Gold?

We use it as a hedge because it tends to move in the opposite direction to paper assets. This isn’t always true but it is generally. When markets drop gold tends to go up. Generally the more precarious the world economic system the more investors like gold. Gold is perceived as a safe haven.

Think of your gold position as insurance. You almost want your gold to go down in value because that means that your stocks are probably increasing in relative value.

Also, and most vital, if paper currencies are devalued gold will increase relative to the depreciation of the currency. If the world enters a period of severe inflation brought on by the massive spending coming out of Washington, gold and silver will likely be the only paces to go. The smart money always has some gold.

Another reason the average investor should like gold is that at one time you could go to jail for owning gold. You could get 10 years in prison just for having gold in you possession. FDR confiscated gold from American citizens at the point of a gun in 1933. US citizens were allowed to own gold again in the 70s.

Gold is power, even more so than paper money, and governments know this. So get some, while you can.


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