Gold Is the Safeguard of Last Resort

For some folks, gold isn’t an investment… It’s a religion.

I don’t agree with that approach. In my letters, we approach gold like any investment… We set emotion aside and look at the facts. And we get a lot of questions on gold… especially in times of market volatility and fears of catastrophe.

So in today’s Q&A, I explain why you should own gold, as well as the best way I know to “boost” your returns from gold investments. I also detail how to keep yourself safe from Internet hackers and the best ways to get the benefits of probiotics.

Have a burning question? Send it to us at [email protected].

Q: About six months ago, I bought what I thought was $50,000 of physical gold. I briefly learned about the “Spot Price” versus the “Bid Price” and the “Asking Price.” Subsequent to my purchase, I now realize that the “Spot Price” needs to increase 33% before I break even.

Can you please explain why if you buy $50,000 worth of gold, it’s only worth $36,000? Why is it not exchanged like cash, if in fact it is to be treated like cash? – B.G.

A: Great question, B.G. In this case, I can’t say why the bid and ask prices are so far away… And I can’t give individual investment advice due to SEC regulations.

But there is no reason why $50,000 worth of physical gold bullion should be worth $36,000 six months later… when the price of gold has climbed from $1,050 per ounce then to more than $1,200 per ounce today.

The fundamental reason people buy gold is that it’s a great form of savings… that gold is the ultimate “store of value.” That belief flows from all the reasons gold was used as money… There’s a finite amount, it doesn’t deteriorate, etc.

Here’s what’s wrong with that thinking…

If you own one ounce of gold, no one can tell you whether it will retain its value over time. It depends on the price of gold relative to other things. You see, gold’s fundamental problem is that it is an “unproductive asset.” It creates nothing, generates nothing, and does nothing that increases the value of your investment in it.

This about it this way… Land can be farmed and buildings can be rented. An equity stake in a company (stock) can grow more valuable as the company sells more goods. And it can generate cash in the form of a dividend. As a result, you can build financial models assessing things like its present value and future cash flow… giving you the tools to make reasonable estimates of that asset’s future value.

Gold does none of that. So you have no way to know its value other than the price you pay. If someone isn’t willing to pay $50,000 for $50,000 worth of physical gold, you don’t have $50,000 worth of physical gold.

But gold is the quintessential “chaos hedge.” Gold outperforms many other asset classes during times of great economic and political stress. That’s why I think every investor should own some gold.

Gold is the safeguard of last resort.

And if you’re interested in “boosting” your exposure to gold and gold-mining companies, Porter Stansberry just reopened membership to his Stansberry Gold Investor service… His 15 recommendations – made just a few months ago – are already up by an average of 16%. And there’s more upside likely. To learn more about this opportunity, click here.

Q: I thought most people used Kitco [to check the live price of silver]. – J.H.

A: We had a couple of other readers ask this question… And you’re right. Kitco.com is a great source for looking up live precious metal and currency prices. It’s one we use a lot around the office.

Q: Last year, I received a notice from Scottrade stating the federal government was aware of their servers being hacked and account information being stolen months prior to notifying Scottrade. We were given a free year’s membership with Clear ID.

At my request, all of my account numbers were changed by Scottrade. I also changed all of my log-in information. Next I placed a fraud alert on my credit report. I added a firewall system to my personal computer, malware program and AVG Pro.

Could you please address safety issues concerning hackers and how to keep our financial information safe? – Anonymous

A: Unfortunately, Scottrade is just one site in a long line of hacks. The most recent major hack (as we’re writing this) involves the data breach of more than 117 million users on the popular job-networking site, LinkedIn.

Other than avoiding the Internet completely, there’s not much you can do to entirely prevent hacks. But there are steps you can take to protect yourself in the event of a hacking…

First, make your passwords “strong and long.” A strong password has a combination of numbers, letters, and symbols (the characters above the numbers on your keyboard) that are nearly random. And don’t use your password for more than one website. If your password from one website is hacked, and you’ve used that same password on other sites, it’s easier for thieves to steal your information from multiple places.

Second, when you can, use “two-factor authentication.” Two-factor authentication requires your password plus another piece of information – like a code sent to your e-mail or mobile device associated with your account – to log in to a website. I love using this feature.

Many companies – including Google, Apple, Microsoft, and the password-manager service LastPass – give you the option of using two-factor authentication, as do many banks, brokerages, and credit-card companies. And Amazon has recently started using it as well.

Tech blog Gizmodo has a guide on how to set up two-factor authentication on some websites. You can read it here.

Q: Can you recommend a good [probiotics] pill to take? I always appreciate your advice and rather than going online and buying a random pill I would prefer to take a supplement that you are familiar with. I realize that every person is different and the pill you recommend may not work well for me but I would appreciate your thoughts on a solid company that makes a good product.

I have learned a lot from you in both the investment world and now the healthcare world too. I just read your report on immunotherapy and loved it! Thanks again for everything! – H.R.

A: Thanks for writing in, H.R. I’m glad you’re using our research to take control of your health and wellness.

My longtime readers know that my basic approach to most things is to go for natural sources before pills.

When it comes to probiotics, I recommend trying to get the best benefits from food first – adding yogurt, sauerkraut, or kimchi to your diet will help you get not only the bugs, but also all the added benefits of those whole foods.

If you do want to go the pill route, I take one occasionally when I travel. I like to find probiotic pills that contain several different strains of bugs – the last one I took had L. acidophilus, L. salivarius, B. bifidum, and S. thermophilus. I also check my brands against the latest tests from Labdoor, which you can access here.

You can read more about probiotics and other ways to boost your health in Retirement Millionaire. My monthly financial newsletter covers financial recommendations, market research, and valuable cost-cutters and health news. If you’re not a subscriber already, you can try it out with a risk-free, 30-day trial period right here.

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