Last week a neighbor of mine who started buying gold and silver coins a year and a half ago stormed into my house.

May 11, 2011 – Last week a neighbor of mine who started buying gold and silver coins a year and a half ago stormed into my house. “I should never have listened to you!” he said. “I lost a huge hunk of cash this week!”

After I calmed Harry down a bit I asked him if he sold off his silver coins. Fortunately he had not. If he had, he still would have made a handsome return, but barring some global cataclysm the price had certainly bottomed out and would get right back on track. But I learned something from Harry’s reaction.

There is a common problem people have – their perception of what gold and silver investment is all about. To begin with, did Harry lose anything at all? Of course not, because he didn’t sell. His coins didn’t get any smaller and he still had just as many. Only one thing matters in gold and silver investments: how much purchasing power does Harry’s investment have today compared to when he bought the coins.

Pundits like to say that gold and silver investments do nothing, but it is odd that by doing nothing they consistently beat out all competition in real terms. That is because fiat currencies are the poorest measure of wealth and every asset based on them will always lose purchasing power over time.

The value of gold and silver coins, however, is constant over generations. There will always be short-term variations – volatility – created by speculation, but in the long run prices will reflect the true value of currencies. The more the dollar declines, the higher the price of gold and silver will be.

People like Harry don’t need to get rich on the market. That’s a gambler’s game and the deck is stacked in the house’s favor. Instead they work hard accumulating wealth throughout their lives. In times such as these, however, the possibility of severe wealth erosion with traditional investments is very real.

On the other hand, investing in gold and silver coins will protect your hard earned wealth against inflation and dollar devaluation – in my book that is doing one heckuva lot.

Shannon King

Senior Staff Writer –

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