Don't Fear The Credit Crunch
Despite what your financial advisor tells you, luck and attrition are not the only ways to build or maintain your portfolio in a credit crunch. There are many tried, tested and true paths to profit in troubled times.
Precious metals are safe. Gold in particular has been used by monarchs and capitalists for two millennium to protect wealth. Gold is a market indicator. With gold prices starting to recover while oil prices slump, confidence is slipping in the global economy and uncertainty is the order of the day. Gold prices have fallen only because traders sold to cover their losses. People who invested with borrowed money sold their gold, even though most believed they would indeed make money if they held on, but they couldn’t. Some investors sold on the way down, and then bought again on the rallies. Despite the volatility, gold's overall decline has been small, especially compared with other commodities. Some believe gold is simply a counter to the US dollar, or something that will rise in the face of inflation. But this also protects you during deflation.
Gold Is Not an IOU and is saleable anywhere in the world, for cash. And like cash itself, gold gains value as everything else drops. Just look at the volatile Dow versus the steadiness of gold in the face of forced selling.
Why Gold Rises During A Deflation? Gold is a protection against uncertainty. When the basis for determining the value of paper assets, including money, becomes unclear, discredited or confusing, gold is a solid, nationality-free asset, a shelter-from-the-storm investment. When the old, relied-upon approach ceases to work properly, demand for gold will skyrocket, and so will the price. And right now, as forced selling dwindles and uncertainty rises thanks to deflation attacked by insane spending by governments, we will see gold's value rise.
