Analysts, financial planners and so called “experts” tout a variety of anti-inflation investments but none have the intrinsic value of gold, silver or any other precious metals.
By Aurum Advisors (goldcoinsgain.com)
Intrinsic Means Forever
Intrinsic value does not mean that the product may have value for some time, or even for a long time. Instead, intrinsic value denotes value forever, i.e. a value that remains relatively unchanged and equal to the same amount today as it was thousands of years ago.
Gold and silver are some of the few products with intrinsic value (excluding food and shelter) because they’ve been demanded for thousands of years. In addition, they still purchase the same goods today as they would in ancient times. The best example is that of the custom suit, which can be purchased today for $1200 (the price of an ounce of gold) or so, just as it could during the 1940s and ancient times for an ounce of gold.
Anti-Inflation Investments Must Have Intrinsic Value
In order to be a truly anti-inflation instrument, the investment itself must have intrinsic value. Gold and silver have each produced returns that compare to inflation, making them suitable as safeguards…while other commodities like oil, coal, coffee, and pork bellies may rise and fall with inflation, they have no intrinsic value – which means they have no place as a long term hedge against inflation.
Paper Inflation-Protected Products
Frequently, some of the most “practical” anti-inflation investments are also the [greatest] shams in the investing world. True, inflation-protected securities require no storage space and can be bought and sold on a dime, but how does this translate into intrinsic value?
Treasury Inflation-Protected Securities (TIPS) [or Real Return Bonds (RRBs) as they are referred to in Canada] are one of the more popular products for inflation protection. TIPS [&RRBs] are unlike other government debt; they are indexed to inflation to always provide a return that is greater than inflation. However, the proof is in the pudding. TIPS [&RRBs] are indexed to the change in inflation based on the Consumer Price Index, which almost always lags true inflation of the money supply. In addition, TIPS [&RRBs] rely on counterparty risk and are only as good as the agency backing them, which is the U.S. government. TIPS [&RRBs] lack any intrinsic value, as more of them can be created just by printing!
The ‘Real’ Value
When it comes to safety and security, no other instrument compares to real physical gold or silver. History suggests that gold and silver have always accurately reflected the change in inflation and protected investor’s wealth against poor economic conditions. In addition, unlike empty promises and inflation-protected notes, gold and silver coins are tangible and can be held in your hand.
In today’s economic world, [what] you need [is] an investment with intrinsic value, i.e., gold or silver.