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WHY GOLD?

Thursday, 14th November 2019
What is Gold?

 

  • Gold is money; it is a store of value and a unit of account
  • Gold is the only universally acceptable form of final settlement and it has been so for thousands of years. It is no one else's liability and therefore it backs itself. Its value does not depend upon the performance, faith and good credit of any other person or thing
  • Gold's current value reflects the interaction of buyers and sellers who establish its exchange value for goods and services or currencies. It is issued and priced by the market; it has no central bank and no other price setting mechanism
  • Gold supply is relatively fixed over time; above ground supply is growing at about 1.5% per year and cannot be increased any time soon

The Role of Gold

  • Gold's unique qualities make it the ideal hedge against risk of all kinds...inflation or deflation, government overreach, political turmoil, currency debasement, default, bank failures and market crashes
  • The total world's above ground gold supply today is about 180,000 metric tonnes worth about $8.4 trillion, less than half of which is in good deliverable form today
  • This $8.4 trillion is the ultimate backing for about $250 trillion in debt, $78 trillion in tradable equities and a world economy with a GDP of about $80 trillion
  • Risks to paper wealth are rising so the value of gold is rising
  • At the current price, the total value of the world's gold is insufficient to offer safe harbour for the owners of risky paper wealth

Why Gold is Relevant Now

  • The world is in the midst of an unprecedented central bank experiment in monetary policy. Central bank intervention has created huge, unsustainable increases in paper wealth compared to the supply of real goods and services
  • The global economy is slowing down. A recession would likely lead to waves of default and huge deficits. Hyper-aggressive policies will be implemented to avoid collapse and sustain the economic expansion. One such policy is negative interest rates which provide a powerful incentive to own gold
  • Ongoing currency debasement is highly probable due to monetary and fiscal stimulus as well as efforts to increase trade competitiveness
  • Gold protects wealth against all these risks