Golden series: The danger of holding Gold in the long term “Gold has no utility other than looking shiny and pretty. Gold demand equals fear demand and when people becomes more afraid than you in a year or two, then you will make money but if they are less afraid, then you will lose money. Gold by itself doesn’t produce anything and is a bad investment in the long run” – Warren Buffet on Gold Investment Gold is not an Investment as perceived by a lot of investors but rather it is an Insurance against bad times.
As Warren Buffet said, the demand for gold is equal to fear demand. That means the demand of gold will be correlated to the level of uncertainty in the marketplace .The more uncertain the marketplace, the higher the demand for gold. An intelligent investor during uncertain times, will add gold in his/her portfolio as part of asset allocation. It will be a smart move to just allocate a small percentage of your portfolio, probably about 3-5% to gold. This is to ensure that, if there are any huge dislocations in currencies and economies, you will still be protected in one way or another. Why only allocate such a small percentage and not more? Is Gold not a good investment? Two camps Firstly, gold price is highly manipulative, as demonstrated during the past decades. There is always a tendency for the fiat currency regime to suppress the price of gold whenever it possess a threat. Currently, we have two camps of people. One belonging to the fiat currency, while the other is pro-gold standard. As such, there is a war going on between the fiat currency regime and the gold standard.
Unfortunately, those people that are calling the shots are the ones that are running the “fiat currency” regime. They will not hesitate to use any means available, either through the central bank, Presidential Orders and etc to suppress gold. Contrary to popular belief that The Federal Reserve is government owned because of the word FEDERAL, it is not. The Federal Reserve is actually a privately owned entity. It consists of 12 regional Reserve Banks and are mainly owned by the many member commercial banks. The Federal Reserve Bank of New York holds the largest percentage of shares (53%) in the Federal Reserve System. The two largest shareholders of the New York Federal Reserve are JPMorgan Chase and Citigroup. JPMorgan and Citibank are the financial cornerstone of Morgan and Rockefeller empires. So, being the largest shareholders of New York Federal Reserve meant that, they are also the largest shareholders of the Federal Reservesystem in the U.S, since NY Federal Reserve holds the largest share in the system. The cartel that owns the “fiat currency” also owns CME. So basically by owning the Federal Reserve, these cartels virtually have unlimited supply of “fiat money” at their disposal. Rockefeller is also known to be a shareholder of Chicago Mercantile Exchange (CME) and at the same time also has a very large short position in gold futures, up to the tune of a few hundred billion dollars. So, there is a natural tendency for him to suppress the price of gold by using CME to hike the trading margins in gold. Volcker sent gold into a 20-year downtrend Secondly, if the margin hikes by CME don’t work, the Federal Reserve through Bernanke will not hesitate to invoke a Paul Volcker 1981’s “shock and awe’. In 1981, the then Chairman of the Federal Reserve, Paul Volcker in his bid to end the effects of ravaging inflation (13.5% in 1981) from commodities and gold, raised the interest rate to 21.5% in 1981. At the same time, foreign dollar holders were then also dumping the dollar in protest over the foreign policies of the Carter administration. As a result of the interest hike, it has officially ended the bull market for gold from the 1970s to 1981. Gold price went into a downward spiral for the next 20 years. The tripling of the interest rate at the same time also forces global interest rates to go through the roof, triggering a global recession. By 1982, the dollar’s status as the world reserve currency was restored.
Roosevelt confiscated gold, will Obama follow
Finally, during the last Great Depression in the 1930s, there were bank runs and shutdowns. Also, following England’s 1931 decision to remove the pound sterling from the gold standard, foreigners returned to the US for gold. At that time, the Federal Reserve Note (FRN) was 40% backed by gold. The authorities know that that if everyone starts converting their dollar holdings into gold, then in no time there would be no gold left to back the currency. Hence, the money supply system would collapse completely. Something drastic needed to be done, to halt the alarming trend. So on 5th April 1933, President Roosevelt confiscated the gold of Americans by changing the FRN from a promise to pay in gold into legal tender itself, backed by the full faith and credit of the United States. He debased the US dollar by 40% overnight, by raising the price of gold from $20.67 per troy ounce to $35.00 per troy ounce. However, nobody could take advantage of Roosevelt’s offer because people were not allowed to exchange their gold until 31st December 1974, when Americans were then allowed to buy, sell and hold gold. It is like having a counter in the KLSE suspended for the next 40 years and by the time it reopens in 2051, I don’t think many of us will be around. Desperate time requires desperate measure and we will not be surprise if the Obama administration will again confiscate gold. As you can see the odds of winning in this game in the long run is biased towards the cartels.
As long as those in charge are pro “fiat currency”, then gold price will always be suppressed and they can resort to any measures that they deemed right, even by using arm twisting tactics. Then the biggest killer – gold futures vs spot Nobel laureate Nouriel Roubini, after several false calls for a market top when the price of gold touched USD830 and USD1,300 twittered the following message, with emphasis added. “SPAM (American pork luncheon meat) is a better hedge against inflation than gold: you can eat it and it can lasts 1000 years. Gold is as Keynes aptly said, a barbarous relic.” Anyway for the sake of discussion, as we know the price of gold futures precedes spot gold price. So, when everyone starts to scramble for physical gold, naturally all those who are holding paper gold futures will start dumping when they realize there will be no physical gold for delivery. This will lead to a collapse in the price of gold futures. Since spot gold price follows the price of gold futures, what will it be of spot gold prices? Can anyone enlighten me on this, please? – Malaysia Chronicle
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The agenda to keep the ‘Fiat Currency’ machinery which can can print limitless quantities of paper with zeros alive is what @Sam Chee Kong (probably another ‘funny money’ ‘monopoly money’ advocates) seems to be pushing. We have to take away that power from all governments to end their dominance of the economy. Sack all governments giving raises when the economy is at negative GDP, it cannot grow forever as overpopulation will be occur. And when debt cannot be covered by growth that cannot occur beyond absolute ecological limits on population support, barring crony/nepotist free new governance or technological paradigms, the debt which was intended to be covered by growth that will never come will result in wars of attrition, economic depression and starvation, and the high crime levels and loss of democratic rights. At that point all fiat will be worth nothing, gold however could maintain it’s minimal value which is reflective of the state of economy – so long as a modicum of civilisation remains. In a Mad Max/Water World scenario, of course gold will be worth nothing. But that is quite unlikely, so gold is still alright to invest in and gives much power to the citizens over the unlimited printing of fiat. The dishonest politician (like Pakatan 1 foot in the door) of course wants to be in control of such governance paradigms that allow unlimited printing of fiat (enrich slevs faster than economy destroys itself).
PAS, please send one of your Dinar proponents to handle this DAP globalist fiat stooge, stop the promotion of fiat by greedy and unaccountable F(i)atheads ! http://www.malaysia-chronicle.com/index.php?option=com_k2&view=item&id=18043%3Abelieve-it-or-not-paper-or-fiat-money-is-stull-better-than-gold&Itemid=2 Expect gold to at least maintain it’s value when the fait currency system collapses or to match inflation at the very least – it cannot drop in value. Note also that paper gold (pass book gold) is 80 times oversold (i.e. the bank does not have the actual reserves – it is selling you an empty promise in hopes that it’s investment of your money will outstrip the value of the rise of gold, if thaty doesn’t occur, you will find a bankrupt bank unable to physically deliber when all fiat currencies become Banana notes, starting with the 87 trillion in debt USA). Meanwhile remember what we are voting for :
1) Freedom from Apartheid/Fascism
2) Freedom from Religious-Persecution/Religious-Supremacy.
3) Equality for all ethnicities and faiths in all aspects of policy, Law and Constitution. ;and vote only for MPs or Assemblymen that can endorse clearly on the 3 items.
***Commentary : This comment was censored by Malaysia Chronicle. No reason was given. No discourse was allowed. (Seem familiar? Thats authoritarian Malaysian media portals for you. Think of the way they titles the programmes here as well. In USA it’s all about the Apprentice, in Malaysia it’s all about the ‘Mentor’ . . .