You can’t build an empire on snow in the sun. Likewise, you shouldn’t build up capital based solely on intangible assets which could melt away – like snow under the heat of the sun – overnight.
And yet, that is precisely what we do when we prioritize investments in shares and currencies. The first can quickly lose their value after a stock market crash, as seems to be happening more and more frequently, while the second nowadays are based on debt in a world which is already living well beyond its means. Between bankruptcies and business failures, the prospects for our economic future seem bleak.
Gold, an unmatched value
Nonetheless, all human society has experienced major economic upheaval, but each time, those who managed to stay afloat were the ones who had thought to protect their capital through safe investments. In other words, by investing in immutable, constant and unquestionable assets which retain their intrinsic value in any circumstances. Gold is precisely that type of asset and, in the face of an uncertain future, it remains the best insurance policy for your capital today. This precious metal is indeed the only “reservoir of wealth” to have never failed in its primary function, despite the fact that it generates no income.
It is important to note that we are not talking about returns or speculation, but rather about preservation. And that is really the most important thing, because the first rule of investing is to preserve one’s capital. All the other means employed in an attempt to protect wealth – be they bank accounts, securities or even government bonds – have seen their interest rates dwindling to almost nothing in recent years, due to spine-chilling monetary stimulus packages. We have even witnessed some of the safest securities in the world, like short-term Swiss government bonds, being “paid” at a negative rate! To put it plainly, this means that investors had to PAY to lend money to Switzerland.
An asset sought-after by banks themselves
In this type of context, a non-income-generating asset like gold is still more advantageous in a portfolio than an investment with a negative yield, a fact that has helped to sustain the market for the yellow metal since 2009. And this, despite the best efforts made by central banks to contain the price of gold… so they could buy it as cheaply as possible for themselves!
The reality is that central banks have never bolstered their gold reserves as much as they have in the last decade. This is undoubtedly the most conclusive sign of the importance of gold in uncertain times.