Why Gold

By Andres Marcacy


Work Of Art By Laurence Longueville – Geneva, Switzerland

All the talk of gold infuriates some investors.  They argue it is too expensive, and its price could drop sharply if the hedge funds and asset managers with the largest positions in the market sell.  There is so much hype attached to gold mainly because it’s perceived to be a safe haven.

A cadre of loyalists claim that gold offers a hedge against both inflation and deflation and is a store of value when equity and bond markets fall apart.  Their enthusiasm ranges from mild appreciation of gold’s ability to outperform in a downturn to more zealous admiration.

One thing some “gold bugs” do not buy is the idea that gold is too expensive; in fact, they argue that the price would be much higher were it not for the manipulation of the market by central banks and bullion banks, which handle government trades.  “This price suppression is a scandal and it’s going to be huge when it is exposed.

Since 1999, Gata, one of many gold bug organizations promoting conspiracy theories, has fought to pull back the curtain on the gold market.  “Gold is the economy’s thermometer and every time its price goes up, it’s bad for banks, for Wall Street and politicians.  So it’s in their interest to keep it down.”

Ron Paul, a Republican congressman, has been calling for an audit of the gold held by the US Federal Reserve since 1982, when he served on the US gold commission – set up to examine the role of gold in the monetary system.  There hasn’t been an independent audit of US gold reserves since 1955.  “We were in a financial crisis and inflation was high,” Ron Paul recalls, “but the Federal Reserve wasn’t interested.  I remember Paul Volcker [then president of the Federal Reserve] walking into a room in 1980 – at the height of the financial crisis, when gold went up to more than $800 per ounce – and saying, ‘What’s the price of gold?’  Everyone knows a high gold price is a vote of no-confidence in paper.  That is why governments will manipulate and try to give you an artificial price for gold.”

In his book Gold, Peace and Prosperity, Paul decries the end of the gold standard – the practice of backing currencies with a fixed weighting in the metal, which took many forms through history.  Paul thinks the system of fiat money facilitates ‘governments’ attempts to inflate, control the economy, run up deficits and fight senseless wars.

The US still possesses the most gold, according to the World Gold Council.  Germany is in second place, then comes the IMF, Italy, and France, Russia, which went on a buying spree in 2010, the UK and the European Central Bank.  And what of China?  It now produces more gold than any other country.

Gold is a vast market, and it’s not subject to national boundaries.  Gold and silver are the DNA of currency.  When the chips are down, I advise you… to vote for gold.

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