What is the purpose of investing in physical gold or gold ETFs?

If the US was taken off the gold standard and no one was to own gold at that time, what is the purpose of buying physical or gold ETFs today?

Investing, ETFs
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June 2017

Any time the government gets involved they lessen or devalue things due to lack of inadequate management.  So they control the currency & printing press through the Federal Reserve.  Since the Federal Reserve was set in motion in 1917, gold was $20/ounce.  That is why they called it a $20 gold piece.  But that $20 gold peice could buy a 3 piece, handmade Italian suit and so could the $20.  Today, that same $20 will barely buy you the silk hanky but the ounce of gold will still buy you the Italian suit.

This example illustrates the slow, gradually erosion of our purchasing power.  Why?  Simple supply & demand.  The more dollars they print, the less each dollar is worth.  Inflation, by definition, is sole a Monetary Policy problem cause by excess printing of money.  It is not a short term shortage, drought, etc.. which can cause prices to spike and feel like inflation to you, but is really a supply demand imbalance.

BTW, did you know that the Federal Reserve is not actually owned by or a government organization.  It is really owned by the member banks (the largest banks in the country).  They purposely names it "Federal" so citizens would think it was a government enitity.  The Federal Reserve was actually created for exactly 2008.  To bail out the member banks if they ever got into trouble.  This is well documented & wrong.

All that aside, that is why you should buy gold.  As a hedge to the devaluation of our currency.  As to whether you should buy physical or paper gold, that is another topic & too long to go into here.  I will say that you should own some amounts, say 5%, in physical as a hedge to paper assets.  Then you should hope it languishes because if it goes through the roof like some Black Helicopter theorist predict, we have bigger problems.  

But it is a good asset class for everyone's porfolio & is non-correlated at the times when you need it.

Hope this helps and best of luck, Dan Stewart CFA®

June 2017
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