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Assuming that the European Union finds a way to stamp down debt fears across the pond, investors should start seeing the dollar for what it is: a poor store of value. Throw your capital into a money market account, and you’ll be lucky to earn 1% in interest. Even then, you’ll be losing purchasing power as the official inflation rate stands at 3.39% (ShadowStats.org calculates the inflation rate at an eye-popping 7% at the time of this writing).
Gold and silver mining stocks give investors an opportunity not only to protect their purchasing power, but to hopefully profit in the process. As the price of gold and silver rise, the value of a junior mining company grows at a compound rate. Why’s that?
Here’s an example: Let’s say a gold mining company has claims on 1 million ounces of gold in the ground. If the price of gold goes up 10 percent from $1,000 to $1,100, that gold mining company is instantly worth $100,000,000 more ($100 x 1,000,000 ounces)! On top of that, a company’s cash costs to extract gold typically go DOWN over time (with much of the cost of mining required up front).
We're told that inflation is hovering around 3 percent. The fact of the matter is, it's actually above 10 percent when we calculate the rate according to same criteria our government used in 1980. The blue line below shows inflation (as it would have been calculated in 1980). The red line shows inflation as it's "calculated" by the government today:
A look at gold and silver's returns over the past 12 years is incredible – particularly when we compare it to the rather dismal return on the Dow, the S&P, or (worse yet), money market accounts.
It’s a bold prediction, but I believe 2012 could be the year that Americans and investors abroad begin to lose faith in paper currencies. The United States government’s debt obligations leave the country few options outside of printing money. And printing money ultimately leads to inflation. Sooner or later, we’ll see that inflation and we’ll be forced to seek out alternative ways to protect our capital. That’s where gold and silver mining stocks come into play.
It's tough to argue that there isn't something going on in the gold and silver sectors in 2012. A company that I recommend in the book (and own shares in), Wildcat Silver, is already up more than 70 percent since the start of the year. Get started today, before the rest of the public, and you stand to profit the most.