When the banks collapsed last year, the big question on everybody’s mind was, “where did the money go?” The shocking answer is that it never existed. The Federal Reserve can print paper money in limitless supply, but that doesn’t mean there’s anything of value to back it up. The Fed needs more gold! All of that virtual money made gold a great commodity.
When sub prime lending got out of control, banks started selling and trading the shaky loans they had made. There was some kind of financial game of hot potato playing out, and everyone knew that someone would get stuck holding a worthless loan. The home owner didn’t have the money, the bank didn’t have the money, but somebody created a banking hedge market that was really hoping that money would show up some way, some how. It didn’t. Now you can open any newspaper or watch any daytime television programming and see multiple ads from people wanting to buy your gold. The price of gold is strong. Actually, the price of silver is good, too. These precious metals back the green stuff we call money. Nobody really trusts the green stuff, but those shiny, heavy commodities that we like to wear as jewelery are a solid bet.
In order to stabilize a financial system, there has to be tangible goods to back it. Whether it’s food commodities, metal commodities or energy commodities, there has to be something people want to trade for. Since there is more paper money floating out there than gold to back it, it makes sense that metal commodities would be so good. The only commodity that might be as good is natural gas. Right now it’s on the rise, but recent large discoveries of the substance may mean it loses its value on the stock market pretty darn fast. For the time being, buy gold.