4 Reasons to Consider Investing in Gold and Silver

With all the buzz of gold and silver, especially those who were investing in silver the last few weeks, are you wondering yourself - why buy gold and silver?

There are many reasons why you should consider owning precious metals as part of your portfolio. Regardless if you are looking at buying gold or silver, you need to understand "Why" first. We will explore 4 such reasons.

Remember, there isn't any rush and you need to only allocate a percentage of your overall assets to any 1 asset class. Typically a rule of thumb is 10-15% gold and silver bullion for portfolio insurance (all of the time). Also, an investor could add to their allocation percentage to the degree they believe an economic meltdown/crisis is probable. Hence, during a financial crisis, the argument can me made for increasing one's gold and silver allocation accordingly.

Another point is that gold and silver should be seen as an store of value instead of a method to getting wealthy. There are plenty of analysts predicting gold likely to go way beyond historical levels (inflation adjusted) and I believe a number of those arguments are sound on their logic. But, bear in mind, the flip side means the outlook for unemployment and the economy is much worse. So, be careful what you wish for. Now, here are 4 reasons to own gold and silver.

1. Geopolitical Uncertainty and Global Unrest
Gold retains its value not only in times of financial uncertainty, however in times during geopolitical uncertainty. Also known as the crisis hedge, because investors move to gold for its relative safety when world tensions rise. During such times precious metals outperforms other investments. As an example, gold prices have been in a 10 year bull market an have posted some of their most impressive gains during the recent financial crisis.

2. A record of Holding Its Value During Monetary Expansion, Inflation
Unlike paper currency of many countries, gold has maintained its value through time. Investors view gold as a means to preserve their wealth from one generation to the next. As suggested earlier, try not to get trapped chasing the price as much as considering the preservation qualities of gold and silver. It is very likely gold and silver are going to be around for an additional century.

3. Deflation
So you thought gold only went up during times of inflation?  Deflation is often a period where debt and prices contract, business activity slows and also the economy is burdened by that excessive debt in the system. This causes what can be termed a credit contraction. The relative purchasing power of gold, compared to other assets, typically does well during deflation. . Often times, the economy will move from deflationary conditions to inflationary ones, depending on the central bank's behavior.

4. Increasing Investment Demand
Prosperity within the emerging market economies like Asia (China) means more investors to allocate a portion to precious metals. They simply have more capital to allocate. In many countries, buying gold and silver is a way of life. Take India for example. India is among the largest gold-consuming countries. The Indian wedding season in October is traditionally the time of the season that sees the highest global interest in gold. India has a history that goes beyond the U.S. That history includes gold as money. With gold at historical levels you could consider silver a more affordable alternative. Just remember that silver is more volatile.

Keep in mind that when you are considering why buy gold and silver, that the precious metals market is first and foremost a way to insure your portfolio. Beyond that, take the time to conduct thorough due diligence before allocating money to the precious metals market.