There are so many different factors and scenarios to consider when trying to figure out where the value of gold and silver are going. I believe in PMs because of their monetary value over the history of human civilization. The fact that central banks and investors around the world continue to turn to PMs in these times of uncertainty reinforce the idea that gold at least is not the "barbarous relics" critics claim it to be.
Those of us who believe that debt is an increasing problem for both the U.S. and much of the western democratic world believe that our current fiat currency system is vulnerable to debasement. Debt levels are an enormous problem going forward. Countries have the horrible choice right now of trying to cut debt using austerity methods, which will produce a lot of insolvency and deflation. Or they can try to continue to stimulate and reflate the economy and risk an inflationary outcome. Right now the world, especially Europe, is choosing austerity. The debate remains unresolved in the U.S.
Personally I come into the current situation believing there is no easy way out. I don't buy the argument of the perennial optimists that we can grow our way out of our debt mess. Looking back in history, I see one of three scenarios, a 1930s style deflationary depression, a Weimar, Zimbabwe style hyperinflation, or a Japan style multi decade malaise. The current U.S. situation differs from the precedents of all three of these situations and we don't know how policy makers are going to respond, so it is very difficult see accurately predict the endgame although we all have our biases and guesses. Mine is austerity, creating a double dip and deflationary scare, followed by dramatic policy actions demanded by the public which in the end produce inflation.
With all of that said, I choose PMs as an investment of choice because I do think that it has held value throughout world history in times of economic distress. In both economic depressions and severe inflations, gold has performed well. Some, like Jim Rogers, expand investment advice to all commodity classes. Many see oil as the ultimate store of value bacause of its obvious utilitarian uses. I don't share the view that all commodities are useful because in a severe economic contraction, many commodities can collapse due to poor demand. Gold, and to a lesser extent silver, on the other hand, will continue to have its monetary value. Thus I see PMs as the better choice to protect oneself from what I am convinced will be hard times to come.
AI
