In order to answer this question, I’m going to quickly summarise the history of money;
In order to further enrich our lives, people began to trade. If somebody had , say, 2 goats and another person had 2 chickens, it would make sense for them to trade a goat for a chicken. One of the problems that sprung up from this ‘free trade’ agreement between two parties, was that somebody may want a chicken, but the owner of the chickens doesn’t want a goat. To this end, an intermediary (or medium) was needed. It was (and still is) called money. It was observed that some products were used mainly to facilitate transactions but had no other real use than that. Historically this has been gold for large transactions and silver for smaller ones.
Over time, certain services were provided to store a person’s gold and silver in a safe environment, namely a secure vault at a bank. When people deposited there money at a bank, they would receive a deposit slip which would allow them to retrieve there money whenever they so desired. Over time, these deposit slips began to circulate as a substitute for money called a currency. People would accept these deposit slips in place of gold and silver with the understanding that these slips could be redeemed for gold and silver at the bank that issued these slips. Very quickly, banks learnt that only a small percentage of people actually came to the bank to take possession of gold and silver. To this end, the bank would create more deposit slips than they had reserves of gold and silver in their vault. They did this because they could make money from interest on the loans they extended to people. This scheme worked until banks began to circulate too many deposit slips and had to default payment in silver and gold as they didn’t have enough reserves. This is what a bank run is.
Due to the dishonesty of the banks, the Federal Reserve was chartered in 1913 and tasked with (primarily) preventing bank runs. For all those who don’t know, the Federal Reserve is neither federal nor has any reserves but that’s a topic for a different day. Since it’s inception, the Fed has reduced the American dollar to a fiat currency which basically means it has no commodity backing it to give it any value. It’s derives it value from legal tender laws which means the government passed a law that states that it is money. Hence the term fiat which is a word derived from latin which means “let it be done”.
Now the brief history of money is out of the way, let me try to answer the original question; why should you own gold and/or silver?
Since 1913, the American dollar has lost 95% of it’s purchasing power.
Conversely, gold has gone from $20/oz in 1913 to $1300/oz today and silver has gone from $1.29/oz in 1913 to $23 today.
I am no economist, merely an enthusiastic amateur in the realm of monetary history, but it is clear to see that as the purchasing power of the dollar goes down, the price of gold and silver goes up.
Any simpleton can take two graphs (one showing a positive trend, and the other negative) and claim that one is the cause of the other. It’s precisely because of this I had to include the brief history of money at the beginning of this article which demonstrated that USD are linked to gold and silver, albeit USD are not backed by gold and silver. Because of this relationship, it can be deduced, using Newton’s third law of motion, that one is the ‘reaction’ to the ’cause’. Seeing as the devaluation of the dollar occurred before the rapid increase in gold and silver prices, logically, the devaluation of the dollar is the cause of higher gold and silver prices!
To this end, with the almost 100% certainty that the Federal Reserve is going to embark on another round of quantitative easing (printing money backed by nothing), it is set to destroy the purchasing power of the dollar even further. This means gold and silver will go higher.
As more and more people wake up to the reality of one of the largest cons perpetrated on human civilization (fiat currencies), they may eventually come a point where the price of gold and silver goes to obscene levels which will mean we are entering the bubble phase of this boom. It could be argued that we are there already, but given the inflationary policies of the fed, the price of gold and silver is merely reacting to these policies.
Eventually, given a long enough time span, and like every other fiat currency in the known history of man, the USD will end up going down to it’s intrinsic value; zero. When this happens, you don’t want to be left holding a fist full of dollars.