10 Reasons why Gold may be an Insurance Policy

Most investors are drawn to gold because it has gone up over 400% in the past ten years. Not a bad track record, especially in light of the stock market suffering through the “lost decade”. However, wealth creation is not the primary reason to buy gold. Gold may serve like an insurance policy to insure against the many negative events that can occur in today’s global economy. Events such as:

1. The fragile economic recovery we are experiencing in the US.
   
2. The high level of debt we see in our cities, states and our Federal government.
   
3. The economic uncertainty we currently see in the European Union, Russia, Japan and many other parts of the world.
   
4. The sovereign debt crisis in Greece, Portugal and Ireland.
   
5. The geopolitical tensions that we see in the Middle East; India and Pakistan; North & South Korea and elsewhere
   
6. The volatile currency markets. Even Central Banks are becoming less reliant on paper money and trading it for gold.
   
7. The devaluation of the US dollar.
   
8. Investors trying to deal in financial markets that move at the speed of light and where “flash crashes” occur and one year later can still not be explained.
   
9. Inflation in the US and many other parts of the world as governments has chosen to just print money to cover their debts.
   
10. Black Swan Events. The earthquake that causes a tsunami that hits a nuclear reactor in Japan. The unexpected events with severe negative consequences that cannot be predicted. We know they are coming but we cannot say when and we cannot say what they will be.

Gold holds value in times of uncertainty where your other investments may not. There is an old saying, “put 10% of your money in Gold and 90% into stocks, bonds or cash. Then every night go to bed and hope Gold prices go down because that means there is a good chance your other investments went up.”  You purchase insurance on your home not because you want a tornado to hit, but in case a tornado hits.  Gold may be able to provide the same protection for your investment portfolio.