On Monday, May 22, Arizona became the eleventh state in the Union to recognize gold as currency. The Grand Canyon state officially joins Wyoming, Utah, Kansas, Oklahoma, Missouri, Texas, Louisiana, Indiana, Tennessee, and South Carolina – states that all now treat gold like real money.
As The Mise Wire points out, due to inflation, the US dollar continues to buy “less of everything.” Your greenback is then saddled with a double whammy – inflation plus taxes.
For years, gold bugs have bemoaned the fact that paper money is not “real money.” Instead it is a promissory note, a spurious guarantee of a particular amount of value – depending, of course, on the current level of inflation.
Any gains are deceptive – which is why bills calling for the elimination of taxes on precious metals have been introduced in Arizona and Idaho. Idaho State Representative Stefan Gleason calls taxes on precious metals “taxes on top of taxes” when consumers exchange their precious metals for dollars.
According to this same line of reasoning, since consumers are not charged state sales taxes on purchases of precious metals, they shouldn’t be charged sales taxes when they go to cash in their metals for dollars.
Metal coins have been circulating for the last 3,000 years. And the United States continued the authorization of the gold-backed dollar until 1971 when President Nixon terminated the link, and let the price of gold float free. Since that time, we frequently read in the financial news about the dollar-versus-gold, as opposed to the dollar-and-gold.
Most investors in this country take the dollar for granted as bona fide currency until either inflation or geopolitical uncertainty becomes a threat. They then gravitate toward gold as a safe haven of value and portfolio insurance.
But as an article in Investopedia mentions, you’re best off investing in gold proactively, since it protects your finances before an economic threat materializes. And while there are notable exceptions, you should also be aware that gold tends to move inversely to the dollar. The yellow metal is therefore a very effective hedge against inflation.
A time-honored investment maxim applies to the purchase of gold as well as to the purchase of stocks and other paper investments: “buy low, sell high.” To take advantage of what has become the natural conflict between gold and the dollar, you shouldn’t wait till the price of stocks, principally dollar-based investments, collapses.
Right now, the stock market is roaring near a top and at today’s closing price, $1,267.00 per ounce on the spot market, gold is poised for takeoff. While nobody can predict the future, I’d bet my dollars on that possibiliy.
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