Precious Metal Fundamentals

Physical Hard Assets as a Store of Value

The Four Fundamentals

There are four key factors affecting the price of precious metals long term.

1 . Currency Devaluation

2 . Inflation

3 . Geo-Political Unrest

4 . Supply & Demand

These are the underlying reasons that gold and silver protect and grow wealth. Precious metal owners can ingnore the noise of day to day market and concentrate on the long term.


“At some point, the dollar has to give. You can’t just keep printing money, and monetizing debt, and buying bonds, without the dollar imploding.”

– Peter Schiff  – Author, investment broker, and financial commentator

1 . Currency Devaluation

Governments and central banks create currency. The more a currency is created the less value the currency has. Its value becomes eroded and the result is a loss in purchasing power. As the new issuance of currency makes its way through the system, prices for goods and services rise. This is known as inflation; too much money chasing the same amount of goods. Too much debasement of currency leads to a currency crises as people loose confidence and seek out assets that maintain value.

Gold and silver are rare commodities that have maintained purchasing power over the long-term. Between 2002 and 2016, while central banks around the world have created trillions of dollars, gold values have increased over 300% (USD).

2 . Inflation

Governments and central banks create currency. The more a currency is created the less value the currency has. Its value becomes eroded and the result is a loss in purchasing power. As the new issuance of currency makes its way through the system, prices for goods and services rise. This is known as inflation; too much money chasing the same amount of goods. Too much debasement of currency leads to a currency crises as people loose confidence and seek out assets that maintain value.

Gold and silver are rare commodities that have maintained purchasing power over the long-term. Between 2002 and 2016, while central banks around the world have created trillions of dollars, gold values have increased over 300% (USD).


“Deficit spending is simply a scheme for the ‘hidden’ confiscation of wealth. Gold stands in the way of this insidious process.”

– Alan Greenspan – Former Chariman of the Federal Reserve


“Globalization has created this interlocking fragility. At no time in the history of the universe has the cancellation of a Christmas order in New York meant layoffs in China.”

– Nassim Nicholas Taleb – Scholar – Former Trader & Risk Analyst

3 . Geo-Political Unrest

The world we live in is vastly different from the world we think we live in. Geo-politics is the influence of factors like geography, economics, and demography on political and foreign policies. Relationships between large trading partners, between governments and their citizens, and even people to their environment all have an affect on geo-politics.

In 2008 finance professor and former Wall Street trader Nassim Nicholas Taleb popularized the term “Black Swan”. It is unpredictable events that can quickly render investment plans useless. Events like natural disasters, prolonged conflicts, government default or even financial collapses are examples of geo-political events that can have a major impact on investments.

Some examples of major events include the attack on the World Trade Center, US Invasion of Iraq, Lehman Brothers bankruptcy, Fukushima disaster, the Syrian Civil War, the Greece default, the Syrian refugee crisis in Europe, and Brexit.

 Hard assets like precious metals are a means of holding unencumbered assets outside the banking system and they act as physical insurance against against geo-political risks. Gold and silver are a physical store of value, globally accepted and incredibly liquid.

4 . Supply & Demand

The law of supply and demand is a basic economic concept. It is the interaction between the supply of resource and the demand of the resource.

There are approximately five billion ounces of gold above ground, and appromimately one billion ounces of silver. By comparison there are trillions of dollars worth of paper/digital currencies, debts, and derriviatives. According to a 2016 IMF report current global debt of the nonfinancial sector was $152 trillion. Within the financial sector Michael Snyder (via The Economic Collapse blog) estimates that the top 25 U.S. banks are holding $222 trillion of exposure to derivatives. The supply of precious metals is paltry compared to the supply of debt and currency.

As debt currency creation has exploded global demand for physical gold as a store of wealth has been steadily rising since 2008. Central banks around the globe have begun to acquire the metal as a hedge against declining fiat currencies. Demand for silver as an investment has also been on the rise over the last decade. Since silver is less expensive than gold, many investors find silver more affordable. This means that investors can purchase a lot more silver for the same amount of money. So the demand on silver as investment is much stronger than gold.

Silver is not just in demand as a currency hedge, but also demanded for its industrial use. The use of silver in industry is immense, from solar power, battery power, water purification, and any electrical or digital item, silver is used. What makes this fact even more interesting is that in most industrial usage of silver the amounts used is very small which makes the silver price inelastic. This means that the price of silver could rise multiple times and it would still be used in computers, cars, and cell phones.


“The great merit of gold is precisely that it is scarce; that its quantity is limited by nature; that it is costly to discover, to mine, and to process; and that it cannot be created by political fiat or caprice.”

– Henry Hazlitt – Economist, Journalist and Author

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