The Jared Dillian Letter

Gold Isn’t Great for Buying Pizza… But You Still Want to Own Some

All forms of money have a few things in common.

One, you can use them to buy things, like a pizza for instance. Two, they’re divisible. So a restaurant can charge you $14.99 for that pizza.

And three, they are a store of value. If you keep $20,000 in cash in your house for 10 years, theoretically it will retain its value. Except you have to account for inflation, where prices go up and the value of money erodes over time—sometimes quickly, sometimes less so.

The year I was born, a new car cost around $4,000. Now it costs around $36,000. So, it’s easy to see that, over the past 46 years, the dollar has not been a great store of value.

If you've ever met a goldbug—somebody who's really into gold—this is what they talk about all the time. Because it’s one of the big problems that gold solves.

Gold is not great for buying pizza, but it does a fantastic job of holding its value over time.

Over the last 70 years, for example, gold's inflation-adjusted annual return was 2.1%. In other words, gold held its purchasing power, which is what it’s supposed to do.

Really, gold has held its value for thousands of years. So you want to own some gold to protect against inflation, among other reasons that I discuss in greater detail in The Awesome Portfolio.

Fear Alone Will Do It

Now, the US hasn’t experienced high inflation since the early 1980s. But the fear of inflation can be enough to drive the price of gold higher.

Think back to 2009. The Fed had recently started its first round of quantitative easing—basically money printing. And many people thought it would cause a lot of inflation. So they stocked up on gold... pushing the price from roughly $800 an ounce in 2009 to $1,900 in 2011.

The high inflation never materialized, but that didn’t matter for gold. The fear alone was enough to push it higher.

We’re in a similar boat today. But now the Fed is doing an unlimited amount of quantitative easing. And again, people have well-founded fears that this, along with other reckless government policies, will lead to high inflation.

This is an environment where the price of gold could soar even higher than where it sits today, at around $1,770 an ounce. Because the Fed can keep “printing” dollars, but it can’t print gold.

In other words, this is an environment where you want to own gold.

Higher Deficits, Higher Gold Price

Gold also races higher when the federal deficit balloons, like it’s doing now. This was another reason gold more than doubled between 2009 and 2011: The government’s annual budget deficit soared to roughly $1.4 trillion.

Still, that’s peanuts compared to what we’re looking at now.

This year, the deficit is projected to reach $3.8 trillion. This would make it the biggest federal deficit in US history... another good reason to own gold.

The #1 Reason to Own Gold

We just covered several reasons why gold could climb higher: inflation fears, money printing, and a monster budget deficit.

But there’s another reason to own gold: It greatly reduces the volatility in your portfolio. Add some gold, and you’ll more or less get the same overall returns. But you’ll chop your volatility in half.

This is critical—because volatility is the enemy of rational decision-making. The more volatile your portfolio, the worse your investment decisions will get. It’s not you... it’s human nature.

So you want to keep volatility to a minimum. And gold will help you do that.

Now, there are a few ways to go about this. First, you could buy physical gold and tuck it away in a home safe. But it’s challenging to buy gold bars or coins right now. And the possibility of government seizure is not zero.

So, your best option is to invest in gold through a gold ETF, like the one I recommend in The Awesome Portfolio. You’ll find the ticker symbol inside this new special report, along with four other specific investment recommendations... and step-by-step guidance on putting them together into a low-volatility, low-risk portfolio that still provides the solid long-term gains you’re after. Click here to get started.

Jared Dillian
Jared Dillian

P.S. If you’re new to investing or only working with a modest amount, don’t get discouraged. The Awesome Portfolio is still for you. But you’ll want to act fast—since the 51% discount ends tomorrow. Grab your discounted copy of The Awesome Portfolio by clicking here.