Why the Financial Gurus Are WRONG About Gold / Commodities / Gold and Silver 2021

Longtime gold bashers are gloating over the precious metal’srecent price slump. Gold prices havedeclined more than 10% in the first quarter of 2021.

But the perma-bears shouldn’t feel vindicated. After all, anyonewho heeded their advice missed out on gold’s record run in 2020 – and on manyyears of outperformance since 2001.

While gold bugs are often accused of having an unhealthyobsession with the metal, the “anti-gold” bugs reveal a deep-seated bias thatcan only be explained as irrational or dishonest.

Financial AdvisersDon’t Get Fees Recommending Physical Gold

It’s no mystery why many who work in the financial industry hategold. They are in the business of pushing paper assets, and physical preciousmetals held outside of bank and brokerage accounts generate no fees for them.

Financial professionals concoct various rationalizations for whygold is a bad investment.

They can certainly point to periods when stocks and bonds haveoutperformed.

Of course, no one particular asset class can be counted on to generatestrong returns every single year.

The whole point of diversification into alternative assetclasses including precious metals is to mitigate the risks inherent in anall-paper portfolio. These include inflation risk, interest rate risk, creditrisk, counterparty risk, and even political risk.

It’s not just the opinion of bullion dealers that preciousmetals play a valuable role in investment asset allocation.

It’s the opinion of the respected firm Ibbotson Associates (nowpart of investment analytic giant Morningstar). Ibbotson found that investorswho put 7.1% to 15.7% of their portfolios in precious metals enjoy superiorrisk-adjusted returns.

Gold shows virtually no correlation to stocks and bonds, meaningit can rise when paper assets fall. Yet the average investor has nowhere neareven the bare minimum suggested by Ibbotson Associates to hedge against risksin financial assets.

Meanwhile, investors are bombarded with misinformation aboutgold from Big Finance and popular personal finance gurus.

Millions of people have turned to Dave Ramsey for financialguidance.

He recently stirred legal controversy byfiring several employees for having premarital sex.

Clearly, he sets high standards for others. What about for hisown advice?

Unfortunately, while some of his tips about managing householdfinances responsibly may be sound, he doesn’t seem to have a clue about soundmoney itself.

In a conversation posted to YouTube last yearwith a caller who inquired about gold, Ramsey said, “It is a golden coloredrock. It has no intrinsic value except for the fact that two people arefighting over it. And that’s the only thing that gives it value – the sameexact thing that gives a green piece of paper with a president’s face on itvalue.”

While he’s essentially correct when it comes to unbacked FederalReserve Notes, Ramsey would have you believe that gold’s value is just asfleeting.

In fact, gold is unlike any fiat currency in that it does haveintrinsic value.

Regardless of whether an ounce of gold is minted intoa coin and has an arbitrary face value stamped on it, that ounce ofgold possesses – and will always possess – valuable properties as a scarce,highly dense, highly conductive, highly ductile, aesthetically pleasing metal.

Gold historically has retained its purchasing power better thanany paper currency ever invented. Yet Ramsey claims, “It has a crummy trackrecord as an investment.”

He has a crummy grasp of recent history.

From 2000-2010, gold gained a cumulative 280%. But for the stockmarket, it was a lost decade. The S&P 500 actually fell 24% over that sameperiod.

Incredibly, Dave Ramsey asserts on his web site, “Since thedollar isn’t backed by gold anymore, investing in this precious metal won’thelp you if inflation hits.”

That statement is so nonsensical, it seems Ramsey experiencedsome sort of mental glitch when writing it.

The whole point of gold as investment thesis is that it servesas a hedge against an unbacked dollar! And yes, precious metals will help youover periods of rising inflation pressures.

During the decade of the 1970s, as paper assets got clobbered byinflation, gold delivered average annual returns of 30.7%. The S&P 500barely eked out nominal gains of 1.6% per year – which were far too puny tokeep pace with an inflation rate that surged into the double digits by the endof the decade.

Looking longer term, gold has risen almost 10,000% – from $20 tonearly $2,000 per ounce – since 1930, priced in America’s depreciating fiatmoney.

Gold Haters: Those“Living in the Past” Play with “Shiny Poo”

Despite gold’s proven track record of boosting investmentreturns during trying times for paper assets, the naysayers can’t seem to letgo of their anti-gold animus.

Gold is tantamount to “shiny poo,” accordingto Big Finance.

Meanwhile, some of the “digital” bugs who are promoting Bitcoin andother cryptocurrencies also feel compelled to bash gold.

Grayscale Investments, which operates an exchange-traded Bitcoinproduct, went so far as to launch a “drop gold” campaign.It produced an anti-gold TV commercial than has aired frequently on CNBC. Thead portrays gold buyers as “living in the past” and out of step with the“digital world.”

Cryptocurrency enthusiast James Altucher claimed in aninterview, “Gold is just a rock. Bitcoin has real value.”

There is no denying that Bitcoin has gained tremendous marketvalue in recent years. It recently surpassed $1 trillion in totalcapitalization.

But barely ten years old, cryptocurrencies are much morevolatile than gold and have nowhere near its historical track record ofmaintaining value. Bitcoin could conceivably be worthless in a few years’ timeif new technologies supplant it.

Gold, on the other hand, is a basic element that can’t bedigitally replicated or replaced. And it still functions without a computer orwhen the power goes out.

Gold has been valued and used as money for thousands of years.And central banks today are steadily accumulating gold.

Unlike a fiat currency, gold’s value can never be hyperinflatedaway. Unlike a bond, it can never default. And unlike a publicly tradedcompany, it can never go bankrupt.

That’s why gold has real value.

Stefan Gleason isPresident of Money Metals Exchange, the national precious metals company named 2015"Dealer of the Year" in the United States by an independent globalratings group. A graduate of the University of Florida, Gleason is a seasonedbusiness leader, investor, political strategist, and grassroots activist.Gleason has frequently appeared on national television networks such as CNN, FoxNews,and CNBC, and his writings have appeared in hundreds of publications such asthe Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2021 Stefan Gleason - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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