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Number One Reason to Own Gold
gold barsBy Patrick A. Heller, Market Update
March 10, 2009
gold bars

What do the following industry-leading companies have in common?

Alcoa, AIG, AMBAC, American Express, AMR (American Airlines), Bank of America, Bear Stearns, CBS, Citigroup, Countrywide Credit, Delphi, Dow Chemical, Eastman Kodak, Fannie Mae, Ford, Freddie Mac, Gannett, General Electric, General Motors, Goodyear Tire, Harley-Davidson, The Hartford, International Paper, JDS Uniphase, Lear, Lehman Brothers, Liz Claiborne, Macy's, MBIA, Merrill Lynch, MetLife, MGIC, MGM, Motorola, JC Penney, Prudential, Saks, Sears, SprintNextel, Tenet Healthcare, UAL (United Airlines), United States Steel, Wachovia Bank, Washington Mutual, Whirlpool, and Xerox.

The answer: Since the middle of 2007, all of these companies have seen their stock values decline by more than 80 percent.

At the close of markets on June 29, 2007, gold was at $648. Its price now is more than 40 percent higher than it was then. Gold has outperformed the stocks in these companies by at least seven-fold in the past 20 months.

This example is a perfect demonstration of the number one reason to own gold. The best purpose for owning gold is for insurance against calamities that may affect the values of paper assets. The concept of owning insurance is not to make a profit by collecting on it (no one wants to be in a car accident, have their house burn down, lose valuable possessions to burglars, and so forth), but to have some protection just in case bad things come to pass. Gold serves to preserve and protect wealth.

Gold provides a stable form of money to facilitate commerce. An ounce of gold may temporarily hold a particular exchange rate versus dollars, pounds, euros, pesos, yen, francs, etc., but the value of these fiat currencies can and do change, usually downward. So far in history, there has never been a paper currency that has not eventually failed. In contrast, an ounce of gold from six thousand years ago is still worth an ounce of gold today.

Physical gold in your immediate possession is an asset that is not anyone else's liability, so it has no counterparty risk. While the value of gold can fluctuate as measured in paper currencies, it has never suffered as much as these stocks of the companies listed above.

These massive losses sustained in the value of paper assets over the past 20 months have prompted many more people to acquire precious metals, which magnifies the contrast in results. All the financial catastrophes for stocks and bonds are a major incentive for the U.S. government to act to suppress the price of gold, to try to stem the flight from paper assets.

Although the gold price manipulation activities have become blatant and extreme, you wouldn't know it from a review of the mainstream U.S. media. The Gold Anti-Trust Action Committee ( has accumulated substantial documentation of this manipulation but has been given almost no coverage by the general U.S. media. GATA even paid for a full-page ad in the Wall Street Journal on Jan. 30, 2008, in which it detailed some of its evidence. The ad forecast huge financial problems if the gold price suppression efforts continued. The manipulation continued and financial problems are approaching all-time record levels, but the connection between the two just doesn't get covered in America.

The media in other parts of the world are not afraid to discuss the idea that the U.S. government is behind the efforts to suppress the price of gold. Last Thursday, Adrian Douglas, a precious metals analyst and strong supporter of GATA, taped a 90-minute interview for Russia Today TV to specifically discuss the evidence of gold price manipulation. This program is broadcast in more than 100 countries, including in New York. It is slated to be aired this week, though I don't have specific information as I write this.

Also last week, Asian correspondents for Bloomberg interviewed Jim Rogers, a highly respected American investor who moved his family and his business to Singapore. Rogers reiterated his previous advice to avoid the U.S. dollar "at all costs." The reporters specifically asked Rogers if he concurred with the evidence uncovered by GATA and others about the manipulation of the price of gold. Rogers declined to answer the question (probably the diplomatic option given his wide range of information sources) and instead acknowledged that he owns gold and silver. Had these correspondents been based in the U.S., it is doubtful that they would ever have mentioned GATA.

Just as prudent people own insurance for their cars, homes, lives and health, they should own precious metals as "wealth insurance."

Consumer alert: The outstanding performance of gold compared to almost any other asset has not escaped the attention of criminals. Crooks who peddled investment scams in other areas in the past are now using the allure of gold to separate gullible and novice buyers from their hard-earned wealth. There are many reasons why I advocate prompt action to acquire physical gold bullion-priced products, but no amount of urgency is an excuse not to practice due diligence. There are any number of warning signs to watch out for, with the most important being that if something sounds too good to be true, it probably is.

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On March 11, 2009 Mark said
"Physical gold in your immediate possession is an asset that is not anyone else's liability, so it has no counterparty risk."

Yes, but...

The more you've got the greater the liability that's on your shoulders to protect.  Are you truly up to the task?  Things could be getting ugly.  Tumbleweeds in the streets. Gangs, military.  You might get thrown out of that nice detatched 3 bedroom why risk your gold or your life?  

Gold, beyond a reasonable emergency supply, should be stored offshore to keep the government from seizing it.  And stored in a professional bullion vault by an accredited custodian.  

The least expensive way to own gold and the safest is through

On March 11, 2009 thowze said
Too many times investors have been purchased gold through an agent and had the bullion stored for them in a valut, only to find out later that the vault was empty. Now bullionvault has a good reputation, but investors should hold onto physical bullion themselves. At least they know where it is at all times.

At least it makes me feel good at night!
On March 11, 2009 Beach said
Buy your stuff from MONEX and take possesion.  Nice plug for the above "vault" ... but do really think this is the wild west?  The technology that this era is armed with can cripple a social unrest WAY faster and more effective than ever before .... and have been training to do just that for many, many years. Confiscation? ... look, you wizards should read more ... like Mineset.
On March 11, 2009 fat tony said
Say what? No contrarians, gold bears, stock bulls, nay sayers, disbelievers? Where's the good ole American 'I wasn't born yesterday' spirit? GATA? What about the Anti-Gold Disestablishmentarinism Committee?  Oh, they were working hard yesterday - maybe just got up late today. Oh, well, THEY'LL BE BACK!
On March 11, 2009 Mad Max said
Yes, why wire your money to an offshore website?  Where is the security in that?
On March 11, 2009 Chrysotheras said
Buy physical* for insurance...
Buy gold stocks for leverage...
Leave the rest to the inevitable action of economic laws...

* keep physical in a safe within  walking distance reach from where you live
On March 11, 2009 skibunny said
 I suggest privately minted (in Switz.)gold from Anglo Far East, through the company I buy from.
 It's a little know fact that when you have government issued bullion you are only ever the bearer and never the owner of that gold.  That's how the govt. was able to confiscate gold in 1933.
 May I suggest for reasonably priced small denomination physical gold?

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