Gold Asset Allocation – Building Your Financial Foundation

At The Phoenician League, we advocate the principle of asset allocation. This is about spreading your money – your capital – across several different asset classes according to a personalized model. The purpose here is true asset diversification.

A robust asset portfolio will consist of some combination of the following:

We dedicate a separate page to provide a high-level overview of each of these asset classes. In this entry we’ll cover gold asset allocation.

Gold Asset Allocation – the True Monetary Metal

The investment case for gold asset allocation is simple. Gold is the world’s one true monetary metal. It has been used has a store of value for millennia.

As much as the Keynesian economists tried to disparage it throughout the 20th and early 21st centuries, gold represents generational wealth. It is recognized all over the world. And there’s a functioning gold market in every major country on Earth.

What’s more, nearly every major central bank in the world still holds gold. And the numbers show that many central banks have been buying gold hand-over-first in recent years.

Once upon a time the central banks used gold to back their paper currencies. They don’t do that any longer… so why do they still have the gold? Why didn’t they sell it?

Clearly the central banks believe that their gold investment will come in handy one day. And I think that day is fast approaching… because we are seeing a significant shift in global gold inventories right now.

As you probably know, the dollar was linked to gold prior to 1971. And prior to 1933 we had a true gold standard where the dollar was actually backed by gold.

Back then, the foundation of personal finance was savings. And households could keep their savings in dollars because the dollar was tied to gold. Only those households that had plenty of savings would then go out and look for investments to make – either in the stock market, in real estate, or in hard money loans.

President Nixon cut the dollar’s final link to gold in 1971, and then Retirement Incorporated spun up later in the 1970s and early 1980s. That gave birth to the retirement planning model that the mainstream still touts today.

Of course, that model says we should funnel our savings into various funds held within tax-deferred 401ks and retirement accounts. But here’s the thing – those are not savings vehicles. They are investments. Their value goes up and down with the market.

So we have two generations of people now who have largely foregone savings and put all their money into investments. Meaning, anyone who follows Retirement Inc.’s model never builds the financial foundation that their forefathers understood was so important.

Granted, the Age of Paper Wealth and trillions of dollars created from nothing has pushed the stock market consistently higher since the 1980s... so I don’t think we can call the conventional model a failure. It’s worked out okay for plenty of people.

But some of that has been a mirage.

If we measure the S&P 500’s value in terms of gold rather than dollars, it’s down considerably from its all-time high. So the dollar value those stocks represent doesn’t hold as much purchasing power as it used to.

That’s why we see it as prudent to build our financial foundation on savings. Gold asset allocation represents the oldest form of savings.

Personally, I don’t see gold as an investment. I don’t buy gold with dollars hoping that I can one day sell it and get even more dollars than I had before.

Instead, I buy gold because I want it to protect my purchasing power and help create generational wealth for my family.  Thus, I see gold as the cornerstone of a bulletproof foundation.

For those who are still working with an active income, if you move a little bit of money into gold every time you get paid, you’re going to create true financial security for yourself very quickly.

And for those who are around retirement age with a nest egg already, simply allocating a portion of what you’ve built into gold will protect your money forever. You won’t have to worry about inflation or market crashes much anymore.