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Monetary Tool for Financial Survival
In his latest thought provoking article, Gary Tanashian explains why gold and cash are absolutely vital in one’s portfolio.
During the 2008, 09 and 2010 run, where inflation was being promoted by every newsletter and media head around, it was easy to get caught up in the rush and many investors dumped cash. Gold was the talk of the world investment community. It was believed to be the only true safe haven asset when the inflationary time-bomb exploded. To put it lightly, things have changed since 2010. The euro is in an inflationary danger zone while the dollar is in a deflationary time warp. Needless to say, gold has been stuck in a rut for nearly 18 months (although it looks to be coming to the end of a consolidation period).
In his article Tanashian explains why he believes the inflationary threat will come back into play (although the timing of it is uncertain), but that a deflationary environment is slightly more realistic. In short, he essentially believes that we will see both types of environments, but which one comes first is the question. Tanashian explains that a heavy bout of deflation often leads to significant inflation down the road (and vice-versa). And although he doesn’t completely disregard the possibility of $3500 gold, Tanashain encourages us to be prepared for deflation.
As he states, “But it is that very same deflation case that must be respected at all times because the natural forces of the market will likely one day overwhelm the will and egos of mere mortal policy makers, QE3 or no QE3.”
An investor with cash on hand during a deflationary environment obviously has many advantages. That investor can buy properties, stocks, commodities and other hard assets on the cheap. This explains Tanashian’s cash allocation belief. The possibility for deflation to hit our economies is far too great for us not to be prepared. At the same time, if you get stuck holding gold during a deflationary environment, consider this:
“Gold is gold; a tool for monetary survival.”
Gold is one commodity that, over time, has maintaned its purchasing power relatively well (even in a deflationary environment).
Click here to read Gary Tanashian’s recent article.