How a Gold Position Could Make You Wealthy During a Crisis

Let’s say you have a $100,000 portfolio with 95% of it in blue-chip stocks and income-paying bonds.

You place the remaining 5% of your portfolio into gold. This gives you $95,000 in stocks and bonds, and $5,000 in gold.

If the predicted financial disaster doesn’t strike, your stocks and bonds will increase in value.

Your gold will probably hold steady in price or decline a little. Since the bulk of your portfolio is in stocks and bonds, you’ll do just fine.

But what if the financial disaster strikes? I’ve heard some top analysts say gold could climb to $7,000 an ounce in a financial disaster scenario.

Let’s say a financial disaster sends the value of your stocks and bonds down 50%. That would be a massive decline. Throughout history, only the worst, most severe bear markets sent stocks down this much.

This epic financial disaster would cut your $95,000 position in stocks and bonds by 50%, leaving you with $47,500. But let’s say this disaster also causes gold to rise to $7,000 an ounce. Right now, gold is $1,150 per ounce. A rise to $7,000 would produce a more-than-sixfold increase in the value of your gold. It would cause the value of your $5,000 gold stake to rise to about $30,435.



Post-financial disaster, you’d be left with $77,935 ($47,500 from stocks and bonds + $30,435 from gold).

The disaster still would hit you, but not nearly as hard. Your insurance would play a big role in limiting the damage.

But what if you think the chances of financial disaster are higher than “unlikely”?

What if you’re more worried than the average Joe?

If you are, simply increase the "insurance" portion of your portfolio. Instead of a 5% position in gold, you could increase it to 20%.

If the previously mentioned financial disaster were to strike your $100,000 portfolio weighted 80% in stocks/bonds and 20% in gold, the math work out like this:

The 50% decline in your $80,000 stocks/bonds position would leave you with $40,000. Gold’s increase to $7,000 an ounce would increase your $20,000 gold position to $121,739

Your large gold-insurance position actually would produce a net gain in this scenario. You’d be left with $161,739…an increase of over 60%.

As you can see, the larger your gold-insurance policy, the better you would do in a financial-disaster scenario.

But if the financial disaster doesn’t strike, you won’t benefit as much, because you hold less money in stocks and bonds, which do well if the economy carries on.

And keep in mind…it would take a serious financial disaster to send stocks down by 50% and gold up to $7,000.

Depending on what you think the chances of a financial disaster are, you can adjust your gold-insurance policy. It all depends on your goals and beliefs.

Think the chances of disaster are slim? Consider a gold-insurance policy equivalent to 1%-5% of your portfolio. Think the chances of disaster are high? Consider a gold-insurance policy equivalent to 20% of your portfolio.

Is financial disaster around the corner? I don’t know the answer.

Nobody does.

But if you buy some "wealth insurance" in the form of gold, you don’t need to know the answer. It’s simple. It’s easy. It’s low-cost.

You buy gold and hope you never have to use it. You’ll do fine if things carry on. You’ll do fine if the crap hits the fan.

And the peace of mind you get from owning gold "insurance" is worth even more than the money it could save you.