Going For Gold

September 19, 2019

If you've been keeping track of precious metals (gold, silver, platinum, etc.) lately, and the prices have been fluctuating wildly. Though all precious metals are affected by these fluctuation, at the moment I will concentrate on gold. I don't claim to be a precious metals expert (in fact I'm far from it) but I do have common sense and recognize trends. From the looks of it, the world's fiat currencies and the amount of global debt have created turmoil in all the financial markets like stocks, bonds, derivatives, foreign exchanges, etc. When you examine all the data, it appears that the primary asset best suited for preserving financial wealth is gold and silver as well. 

 

Unfortunately, or fortunately, the outlook for paper money doesn't look favorable. Do your research and you will discover that reports paint an alarming picture. The antidote is gold, gold, and more gold." The article titled The World Acquires More Gold While China Is Dumping Treasuries from the site ZeroHedge, offers a preview of where the world of finances is headed.

 

The article states that: "If 2018 saw national / central banks acquiring more than they have since 1968 and this they are outpacing last year by 73% will this be the biggest year for gold national / central bank acquisitions in history? If not history it would have to be much earlier than 1968 since that record has already been breached.With the global economic changes that are occurring we have been calling for some type of gold trade settlement for a number of years. We believe that Russia and China are on the cusp on making this change. We have no proof this going to happen this year or next, but all the signs are pointing in that direction. We believe, especially if China continues acquiring more “official” gold on the open market, there will be a gold trade settlement note announced before 2025. Possibly much sooner." 

 

Even Switzerland has jumped on the gold bandwagon. The article Switzerland Chooses Gold Bullion Over Paper Wealth Backed By US Dollar states "Another country is betting on physical gold. Switzerland's pension fund has boosted its investments in bullion, switching from the paper-backed securities in US dollars. “Physical gold is the best way to hedge as well as to accumulate wealth over decades. If you would have purchased for $100,000 gold in mid 70ties the holding without doing anything would be worth more than $2 million,” the analyst said. Another factor why the pension fund demanded physical gold was that they understand that paper gold just represents a claim on gold in a highly paper-leveraged gold market, Grass explained. 

The global debt burden continues to grow, while more than 65 percent of all monetary reserves on this planet are in US dollars, Grass notes. “Holding physical gold is definitely the best hedge against all sorts of fiat money risks, but from a central bank perspective it is definitely the best hedge against a weakening dollar that is on its way to reaching its intrinsic value which is zero,” he said."

 

 

8 Reasons To Hold Gold from Investopedia:

 

1. A History of Holding Its Value 
Unlike paper currency, coins or other assets, gold has maintained its value throughout the ages. People see gold as a way to pass on and preserve their wealth from one generation to the next.
 
2. Weakness of the U.S. Dollar
Although the U.S. dollar is one of the world's most important reserve currencies, when the value of the dollar falls against other currencies as it did between 1998 and 2008, this often prompts people to flock to the security of gold, which raises gold prices.
 
3. Inflation Hedge
Gold has historically been an excellent hedge against inflation, because its price tends to rise when the cost of living increases.
 
4. Deflation Protection
Deflation is defined as a period in which prices decrease, when business activity slows and the economy is burdened by excessive debt, which has not been seen globally since the Great Depression of the 1930s (although a small degree of deflation occurred following the 2008 financial crisis in some parts of the world).. During the Depression, the relative purchasing power of gold soared while other prices dropped sharply. This is because people chose to hoard cash, and the safest place to hold cash was in gold and gold coin at the time.
 
5. Geopolitical Uncertainty
Gold retains its value not only in times of financial uncertainty, but in times of geopolitical uncertainty. It is often called the "crisis commodity," because people flee to its relative safety when world tensions rise; during such times, it often outperforms other investments.
 
6. Supply Constraints
Much of the supply of gold in the market since the 1990s has come from sales of gold bullion from the vaults of global central banks. This selling by global central banks slowed greatly in 2008. At the same time, production of new gold from mines had been declining since 2000.
 
7. Increasing Demand
In previous years, increased wealth of emerging market economies boosted demand for gold. In many of these countries (like China and India), gold is intertwined into the culture.
 
8. The Bottom Line
Gold should be an important part of a diversified investment portfolio because its price increases in response to events that cause the value of paper investments, such as stocks and bonds, to decline. 
 
Final Thoughts
 
Central banks, companies, and wealthy individuals are on to something. They're all hoarding gold, as if preparing for some financial catastrophe on the horizon. In my view, grab the gold while it's cheap, because after the SHTF...it will be too late!

 

 

 

 

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