The shiny stuff has a long history being used as Money. Modern currency is FIAT currency meaning it is mandated by fiat or declaration as money backed by guns. Use this paper or die. Well, it may be a bit dramatic but that oft unread statement on our greenbacks says" this note shall be legal tender and good to pay all debts public and private" or such a similar statement from time to time. Fiat money does not have any intrinsic value. What value it has depends on public confidence in the currency's issuer. Legal tender is any currency declared legal by a government. Many governments issue a fiat currency and then make it legal tender by setting it as the standard for repaying debt. So, in brief, our currency is forced upon us by FIAT.
In contrast, the vast majority of the world outside of the USA recognizes the intrinsic value of Gold and in doing so needs no government telling them it is money. You will still find markets that want Gold as payment and even the important institution known as the IMF declared Gold a Tier One Asset. Under the old rules, there was little incentive to hold physical gold, as it was only valued at 50% for reserve purposes. Basel III rules move physical gold from being considered a Tier-3 asset to being considered Tier-1, which allows physical gold in bullion form to be counted at 100% value for reserve purposes. Since that change Central Banks have been accumulating Gold at a steadily brisk pace. Countries like China, Russia, Turkey, India and others have been nearly hoarding the physical metal ever since. Why not the US? Well, maybe they are but on the down low to keep the public and world from losing faith in the full faith and credit of the United States. In God We Trust should rightfully be placed in what many call God's money, Gold.
So is Gold an investment. Though there is some potential for the price of Gold to rise over time it is not really Gold rising which is mostly referred to by weight, but rather it is the value of the currency that is GOING DOWN. This is a crucial distinction in understanding Gold. It is a hedge against devaluation of currency. Little know by the general public except when in the grocery store, the USD has been greatly devalued in recent years. That is called inflation and is brought about by printing more and more FIAT currency which dilutes the value of the Money Supply and thereby takes more of it to get the same old amount of goods and services. It becomes insidious when a Government overspends massively and creates more currency out of thin air and eventually the debt and debt service become so burdensome that they need new credit cards to pay off old credit cards and down the toilet pipes of history goes another World Reserve Currency. It will take a while but the writing is on the proverbial wall. Gold is NOT an investment per se but insurance that store value and purchasing power that may be used directly or be the backing of a new “gold backed” currency. The world would welcome a return to the Gold Standard because it enforces discipline of willy nilly Government spending. THAT is a BIG problem and not just in the US. It is a world problem but less so in some countries than others. Even so, the USD as the World's reserve currency is still the cleanest shirt in the hamper so it is at present maintaining its relative strength…relative to other currency not having Reserve status. So why then are Central banks accumulating Gold? Because they smell something is in the air and that something is the gradual slow motion collapse of the USD and Gold will give them a good leg up transitioning to whatever comes next. Even a CBDC can be tied to Gold and bit would I like that. A Block chain ledger consisting of Gold could easily be tied to that ledger and used around the world like a Gold Backed currency but in this case it would be actual Gold being used not just backed. Block Chain technology makes that possible. The only drawback is that it takes a lot of electricity to maintain block chains and that is unpopular by greenies. But in the absence of anything superior to it, I say that is OK.
I advise my clients to get some insurance by purchasing Gold. How much, well at least 5% and better yet 10% of any set aside portfolio funds. I like the idea of keeping some physical Gold nearby in case of wild goings on in society. Gold is easily recognized and if bought in recognizable Mint versions like US Gold Eagles or S. African Krugerrand, British Sovereigns, Aussie Kangaroos etc, it will be fairly easy to find takers. In that sense it is insurance against a societal and systemic failure. It happens and I dare say, it is highly probable. Maybe not in my remaining lifetime but Gen Z will likely see it.
You learn a lot about Gold by reading up at Schiff Gold, watch Rafi Farber on Youtube, Jim Rickards a personal favorite wise man is a proponent of Gold. It is pretty easy to read up on Gold and you will find those against it saying it is an irrelevant relic of the past. Hmm, I wonder if anything God has created can be considered a relic? Of course, there are quite a few godless men and women in the world of finance so take it with another of God's creations, a grain of salt.
Buy some Gold, put it safely away and let it be. Someday you may need to call upon it in order to find your way in a new day after a collapse. That's insurance not investing.
Best,
Donn Marier