Category Archives: Buy Gold

Gold is Good Money

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Last year the Chairman of the Federal Reserve told me that gold is not money, a position which central banks, governments, and mainstream economists have claimed is the consensus for decades.  But lately there have been some high-profile defections from that consensus.  As Forbes recently reported, the president of the Bundesbank (Germany’s central bank) and two highly-respected analysts at Deutsche Bank have praised gold as good money.

Why is gold good money?  Because it possesses all the monetary properties that the market demands: it is divisible, portable, recognizable and, most importantly, scarce – making it a stable store of value. It is all things the market needs good money to be and has been recognized as such throughout history.  Gold rose to nearly $1800 an ounce after the Fed’s most recent round of quantitative easing because the people know that gold is money when fiat money fails.

Central bankers recognize this too, even if they officially deny it.  Some analysts have speculated that the International Monetary Fund’s real clout is due to its large holdings of gold.  And central banks around the world have increased their gold holdings over the last year, especially in emerging market economies trying to protect themselves from the collapse of Western fiat currencies.

Fiat money is not good money because it can be issued without limit and therefore cannot act as a stable store of value. A fiat monetary system gives complete discretion to those who run the printing press, allowing governments to spend money without having to suffer the political consequences of raising taxes.  Fiat money benefits those who create it and receive it first, enriching government and its cronies.  And the negative effects of fiat money are disguised so that people do not realize that money the Fed creates today is the reason for the busts, rising prices and unemployment, and diminished standard of living tomorrow.

This is why it is so important to allow people the freedom to choose stable money.  Earlier this Congress I introduced the Free Competition in Currency Act (H.R. 1098) to permit people to use gold as money again. By eliminating taxes on gold and other precious metals and repealing legal tender laws, people are given the option between using good money or fiat money. If the government persists in debasing the dollar – as money monopolists have always done – then the people would be able to protect themselves by using alternatives such as gold that are both sound and stable.

As the fiat money pyramid crumbles, gold retains its luster.  Rather than being the barbarous relic Keynesians have tried to lead us to believe it is, gold is, as the Bundesbank president put it, “a timeless classic.”  The defamation of gold wrought by central banks and governments is because gold exposes the devaluation of fiat currencies and the flawed policies of government.  Governments hate gold because the people cannot be fooled by it.

Ron Paul

Gold: Not Just for Nutjobs

By: Zoe Tustain, BullionVault

Squirreling away a gold reserve no longer seems nuts…

THERE ARE some who seem to think only western speculators buy gold – either that or paranoid conspiracy theorists preparing for Armageddon.

This couldn’t be further from the truth. In fact, China and India alone account for more than half of the world’s gold demand, while central banks – not exactly known for being gung ho – are increasingly using their reserves to buy gold.

In fact, the world’s central banks bought more gold in the first half of this year than they did in the whole of 2010, according to figures published by the World Gold Council.

Away from the debt-laden economies of Europe and the US, both advanced and developing nations have added to their official gold bullion reserves:

  • South Korea almost tripled its gold reserves by buying 25 tonnes of gold in the last two months.
  • The Bank of Thailand bought 27 tonnes since March.
  • Mexico bought over $4 billion worth of Gold (about 90 tonnes) in the first quarter of 2011.

And it’s not just central banks. All across the world, private individuals are choosing to store more of their wealth as gold.

Take India. The world’s largest gold market last year spent a staggering 2.5% of its GDP on gold. Four years ago the figure was only 1.5%. The implication is clear – as India’s economy grows, Indians are putting a bigger slice of their income into gold.

In economic terms, Indians’ marginal propensity to buy gold – the share of additional income allocated to the metal – has gone up.

In 2006, Indians on average spent around $1.40 of every extra $100 they earned on gold. By 2010, this had jumped to over $7.

We find the same story in China – source of the world’s second-largest private gold bullion demand.

In 2010, the percentage of GDP spent on gold in China was a mere 0.4%, a figure dwarfed not only by India, but also neighboring Vietnam – where the equivalent of 3.1% of GDP was used to buy gold in 2010.

But if we look at China’s marginal propensity to buy gold we see the same sort of growth.

Four years ago, for every extra $100 of income in China, less than one third of a Dollar went on gold. By last year it had jumped to $1 – lagging behind India, but still a remarkable rate of growth.

Individuals in these emerging powerhouses have increasing confidence in gold and are willing to invest more of their money in it.

“Paper money is increasingly worthless and they are worried about inflation” explains Shi Heqing, an analyst at state-backed metals consultancy Antaike in Beijing.

Hardly surprising – China’s consumer price inflation rose to 6.5% in July – up from 3.3% a year earlier.

But why are people choosing to buy gold? Of all things, why an industrially useless piece of shiny metal?

Because, in a sense, it’s uselessness is what makes it so valuable. Because it has no industrial use – and because, unlike paper money, it cannot be produced from thin air via “quantitative easing” – its stock is stable over time.

Thanks to these properties, gold has proven itself as a store of value over thousands of years. And with returns elsewhere so difficult to attain – thanks to low interest rates and stock market weakness – investors are now more interested in preserving capital than chasing return.

So it is not a random choice that has led so many to buy gold. They’re choosing gold because it works.

They may be squirreling away a winter reserve, but these days, that’s not nuts.

Zoe Tustain

Zoe Tustain is working as a research assistant at BullionVault, the No.1 gold and silver ownership service for private investors.

(c) BullionVault 2011

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Gold Value: Where to Now?

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Gold value presentation from Paul Tustain of BullionVault

Gold remains materially under-valued, says BullionVault founder and CEO Paul Tustain – even now, after 6 years of almost continuous price rises.

Based on historical data, in fact – plus his expectations of future inflation – Paul Tustain believes the true value of gold is nearer $3,844 per ounce today.

Leading finance columnists have already called his gold value analysis “a bold view…giving more reasons to buy gold.” Paul’s new 5-part presentation shows why. You can download this video here, for free.

Part 1 – Gold fundamentals (17 mins)

Part 2 – Debt and Keynes (17 mins)

Part 3 – Commodities & our standard of living (10 mins)

Part 4 – Western currency devaluation (24 mins)

Part 5 – Valuing gold (23 mins)

Gold, says Paul Tustain, can “rescue your finances when things go badly wrong.” Its value today comes because “our governments have behaved very irresponsibly,” he believes, “and we’re now not so different from the ‘banana republics’ which have lurched from crisis to crisis over the last 100 years.

“I think our future is likely to look a bit like their past.”

Paul Tustain’s gold value of $3,844 is not a prediction of its future price; it is what BullionVault’s analysis says the precious metal is worth today on a risk-adjusted basis, calculated as an actuary would value insurance.

Gold’s value is open to debate, of course. So you can challenge and judge what you think gold is worth for yourself, using the Gold Value Calculator which Paul created for his research.

Download the Gold Value Calculator used in Part 5.

Please Note: This presentation is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

BullionVault Gold Holdings Break $1 Billion – Up 49% On The Year!

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Hello fellow gold bugs. I’ve got some gold related news to share with you. Gold holdings at my favorite online gold dealer BullionVault are now valued at over $1 billion, up 49% from a year earlier, the company said. The steep increase is a reflection of “continued demand” for gold as a store of wealth, BullionVault said.

“Despite a recent dip in prices below their all time high of $1,430 a troy ounce in early December, our $1 billion milestone indicates that demand for the traditional inflation hedge remains strong due to the ongoing threat of currency devaluation,” said Adrian Ash, head of research at BullionVault.

By volume, BullionVault customers now own more than 22 metric tons of physical gold, the equivalent to total gold holdings in Morocco and 4.5 tons more than in Sri Lanka. The dealer’s silver holdings now stand at more than 150 tons. BullionVault has over 21,000 customers in 97 countries, with an average holding of $48,000.

Good to see more people doing the smart thing and protecting their hard earned wealth by buying gold.

By the way, I syndicate all of Adrian Ash’s articles over at my finance blog, so if you’re intersted stop by.

Cheers,

Alan

A one-ounce gold bar could be yours

Attention Canadian traders!  The current stock broker that I’m using – Questrade – has an interesting promotional offer that you may wish to know about. Apparently if you open and fund a new Questrade account by December 17th you could win a one-ounce gold bar, provided by Kitco, Canada’s premier precious metals supplier. Want more chances to win? Every time you trade gold in your account you get another entry. Pretty cool!

Also, if you move an account with a minimum of $25,000 from another broker, they will pay your transfer-out fees up to $150 and you qualify for yet another entry for the contest.

So basically you have 3 different ways to win the one-ounce gold bar:

  • Open and fund a Questrade standard or registered account by December 17th, 2010.
  • Trade gold in your account by December 17th, 2010.
  • Transfer an account with a minimum of $25,000 from another broker.

Also, I guess it may be helpful to mention that Questrade deals in physical gold – ie REAL gold bullion- NOT certificates or shares. I for one recommend outright ownership of gold bullion as the best method of investing in gold.

To open an account with this broker or to find out more details about them, see this link:

http://www.questrade.com/campaigns/democratic.aspx?refid=83ddc8f8

Anyways, I wish you all luck in winning that free one ounce gold bar!

Cheers,
Alan

Towards Hyperinflation: A review of the gold market in the context of Western hyperinflation

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In the light of the surge in the gold price in recent
days, and the fact it has now held above $1,000 for
some time, I wanted to share this new report with you.

Paul Tustain, Founder and CEO of BullionVault, recently
completed a speaking tour of the Far East. His subject
was:

“Towards Hyperinflation: a review of the gold market
in the context of Western hyperinflation”

Anyway, he sent this report in PDF format to all his
clients (including me), and I felt it important enough
to ask him if I could make it available to my members
and subscribers – to which he agreed.

Given the seriousness of the present economic and
political situation, I believe it’s in your best interest
to give it a read.

You can download it immediately from this link:

http://alansmoneyblog.com/files/ebooks/Paul_Tustain-Towards_Hyperinflation.pdf

I hope you enjoy the ebook as much as I did.

Cheers,

Alan