Why do I need to buy and hold gold? There are many reasons. To understand why you need gold, you need to understand our current money system. In the United States, when the Federal Reserve prints a dollar, the government owes the Federal Reserve a dollar, adding more debt to the already mounting debt from other expenditures. Other countries buy the debt, in the form of treasury bonds. Lately, the US has bought back a lot of its bonds. To pay just the interest on the US debt, what do we do? Print more dollars. Thus owing more money to the Federal Reserve.
In 1933, each dollar was backed by gold. One ounce of gold was equal to about $20.00. This could buy a formal suit, a car, or a vacation. Later that year, President Roosevelt took the dollar off the gold standard. He intended this to be temporary during the war, but it was difficult to adjust back to after the war. In 1935, he adjusted the value of an ounce of gold to $35.00, to enable a return to the gold standard. This held, with more adjustment, until the 1970’s, when the gold standard was abandoned. Now, one ounce of gold will still buy what it did in 1933, but the same 20 or even 35.00 won’t even buy a week’s groceries.
So what form of gold should I buy? It is almost universally agreed that it is best to buy physical gold, that you can hold in your hand. Lately the paper gold certificates have been popular, but when people start trying to redeem them for physical gold, there is a good chance that gold supplies will run out before all certificates are redeemed. There are still a variety of physical gold options. The best option is pre-1933 gold coins. This is because of the law enforced by President Roosevelt during the war, forbidding citizens to hold large amounts of gold. The exception was collectible coins. This law, although not enforced anymore, is still on the books, and could, theoretically, be reinforced. They also have the advantage of numismatic, or collectible value. Other options are modern-day gold coins and bullion. There are various grades of modern coins, but many gold dealers will still just pay spot price for them.
At $1169.70 per ounce at the time of this writing, buying a full ounce of gold is cost prohibitive for many people. There are some companies that sell smaller amounts, even down to 1 gram. This is my personal preference, because it is more affordable, and, in case of economic crises, could be more easily traded for goods/services. There are different grades of gold bullion also. When buying gold bullion, look for gold that is LBMA certified. This is gold from a refiner approved by the London Bullion Market Association. This gives you assurance that the gold you are buying is high quality, pure gold. You also want to make sure you are buying 24 karat gold. This is the same as.999, 99.99% pure, or “currency grade”. You can take a bar of LBMA certified, 24 karat, or currency grade, gold, to a bank and pay a loan with it.