The Degeneration Of Gold Ira Culture

States have always tried to manipulate money, credit and interest. In a world where the gold standard exists, their attempts quickly lead to crises. Without the security of gold, their attempts become more daring and their influence on currencies becomes more extensive. That is why, in the last 5 decades, we have witnessed more and more phenomena that were either unseen or almost non-existent before.

Thus, fiat money leads to a reversible change in human culture, insofar as “culture” means “a way of doing something.” In the work Consequences of Monetary Interventions ,Jörg Guido Hülsmann emphasizes the following aspects of cultural changes:

Making Short-Term Decisions Instead Of Long-Term Ones

This is especially true for individuals and governments. “Thinking and action are oriented toward short-term problems and material goals; long-term effects, especially if they are intangible, are ignored.”

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Instability

As mentioned above, in an environment of artificially low interest rates, people have no incentive to increase their savings in conventional deposits. On the contrary, this seems more economically sensible. The phenomenon undermines the structure of capital, and since capital is used less often and is less and less, every institution tries to direct it only for commercial purposes. The result is the disappearance of the non-commercial.

Politicization Of Life And Restriction Of Freedom

To maintain and support the system, every business and household will eventually be instructed in the smallest details of how and when they can spend or invest their money.

Today, this type of argument is already evident in other government “systems” – notably health insurance.

There may be a need to justify even the most draconian measures by simply pointing out that deviant behavior threatens the functioning of the entire system.

Other Cultural Consequences Of The Removal Of The Gold Standard

The destruction of the gold standard not only leads to high indebtedness (private and public) and the undermining of the purchasing power of the currency. It has many more consequences.

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Gold Standardisation Economy

With their government policies and with the help of money printing, governments incentivize and nationalize student loan programs. The result is that in the United States, where such programs are most pronounced, by the end of 2020, student loans exceed $1.7 trillion. They add up to more than car loans and the size of credit cards combined and make up 8.7% of the GDP of the world’s largest economy. Such a number is not surprising – as students graduate with loans, universities can increase the cost of higher education to infinity. That’s exactly what happens.

Post War Gold Version

This leads to delayed marriage, struggling to build up savings, much slower home purchases and fewer children. Such phenomena would never have been possible if the world had remained on the gold standard, taking into account the fact that their post-war version was “diluted”.

Conclusion

For 50 years, the global financial system has been like a ship without anchors, steered by an inexperienced but self-centered crew. Therefore, it moves as the captain requests, and the only beneficiaries of this “course” are the crew of sailors and their associates. Most passengers travel in the hold, mostly against their will, and are forced to row. Everyone knows this ship will sink eventually, but the crew and those close to them hope it won’t be there any longer and that they’ve gotten as much benefit as possible before that happens.

Today, the financial system comes with good and bad news. The good thing is that mankind knows what real money is – gold and silver. Although Western civilization has forgotten this, in many parts of the world precious metals are the only preferred form of savings. The bad news is that if we don’t remember quickly, we stand an even greater chance of financial collapse.

Why It’s Always A Good Idea To Say Yes To Gold

In chemistry, gold (Au) is an element with atomic number 79, a heavy, soft, shiny, malleable and ductile (plastic) metal. But in everyday life, gold is associated with power and respect, because throughout history it has been identified with wealth.

The use of gold as money began thousands of years ago, with some of the first gold coins discovered dating back to the 8th century BC. when the Lydian king Croesus stood out for his extravagant wealth. The king was therefore among the first rulers to mint gold coins.

But gold is not a “barbarian relic.” It is still used in many cultures,  including Turkey , India, China, as well as in developed economies as a long-term store of value.

It Preserves And Increases Its Value Over Time

Unlike the various fiat currencies around the world, gold holds its value and despite economic cycles, its price has only increased in the last three centuries, from $19.3 per ounce (in 1792) to $1,743.3 per ounce nowadays .

And we don’t even have to go back in time for that long. The last half century is also evidence of the almost constant rise in the price of gold.

Due to its durability – in monetary terms and as a physical asset – gold is also an extremely good means of inheritance. For example, even today, in some countries, gold is given as a wedding dowry. Which brings us to our second reason for investing in gold.

Gold Stores Immense Monetary Value In A Small Amount Of Metal

Given the historical appreciation of gold, a smaller and smaller amount of the metal brings more and more monetary value. For example, if we convert gold into known assets, then with one bar we can buy an extremely luxurious new car or almost a new luxurious apartment in major cities not only from us in the country, but also from the world.

The Devaluation Of Fiat Money And The Instability Of The Financial System

Gold is the best friend of people who want to save in times of currency fluctuations such as fiat inflation. However, inflation is the typical condition of all currencies in the world, as the amount in circulation is constantly increasing.

The example in the chart is for the US, but the devaluation of fiat money is seen all over the world – Europe, Russia, China, Japan, etc. And the downward trend in their purchasing power will not only not reverse.

These central bank policies are the cause  of recurring cycles of economic growth and recessions, that is, for crises  (grey areas in Chart 2). Thus, financial regulators not only fail to achieve the objective for which they were created – keeping currencies stable – they also fail in practice. They regularly affect the functioning of financial systems because money is not backed by anything, unlike in the past when gold acted as an anchor of monetary stability.

Limited Offer

Unlike many other assets, the global supply of gold is limited, and its growth is associated with huge investments, so over the past five years, its production has been almost unchanged

Demand for gold is expected to increase as life returns to normal post-pandemic, and the macroeconomic environment, characterized by low or zero interest rates and high inflation, has historically supported the metal’s performance, according to a  study  by Oxford Economics .

Investment Gold Is VAT Exempt

Under European law, investment gold treated as bars or slabs with a purity of at least 995 or gold coins with a purity of more than 900 minted after 1800 are exempt from value added tax. The list of VAT-exempt currencies is updated annually.

At the same time, almost all other investment assets or trading in them are taxed. This is true even for interest income on deposits made in the banking system. The irony is that in the developed economies and in the Balkan Peninsula, interest rates on deposits have fallen to almost 0%.…

The Geopolitical Uncertainty Around Gold Investment

Brexit, the US-China trade war, protests in many countries, the shutdown of the economy and the ban on international travel due to the coronavirus pandemic, or in other words, the reality we live in, further undermine the value of paper money as new geopolitical risks emerge.

For example, the price of gold rose slightly due to the uncertainty of the UK’s exit from the EU.

Therefore, in such situations, gold shines both literally and figuratively. Bars and coins are standardized, meaning they are accepted worldwide, unlike some fiat currencies. In addition, there is always a reference price for gold, which makes it not only a savior of purchasing power in crises, but also in geopolitical chaos.

Increasing Demand

Gold has many sources of demand that do not decrease. This applies even in crisis years. In 2020, when much of the tech sector shut down and industrial demand fell,  demand for gold for investment  increased to values ​​nearly 50% higher than the average of recent years.

But it is wrong to look at gold demand only in terms of changes for a year or two. The reason is that, like supply, demand for the metal is growing slowly. But if we look at long-term trends, it has almost doubled in the last 25 years. The increase is from  just over  2.5 thousand tons in 1995 to 4.5 thousand tons in 2019.

When the economy returns to “normal”, gold segments are expected to continue to grow.

Diversification Of The Investment Portfolio

Legendary investor Sir John Templeton directly recommends: “Diversify.” Even though to some of his peers, diversification is “the key to mediocrity,” ultimately, Templeton proves that he certainly knows what he’s talking about. It’s not for nothing that 99.9% of people are not professional investors.

Therefore, they can easily panic when they see momentary fluctuations in a particular asset. For example, the 1970s were great for gold prices, but terrible for world reserves. Over the next two decades, the yield of gold increased, but this led to a certain decrease in its price.

The right investment strategy is not to bet everything on one card, but to always have a backup option.

Gold has proven to be a safe asset throughout history. Gold has risen during crises, inflations and low interest rates. It certainly deserves a special place in any long-term investment portfolio.…

When The Price Falls Is The Right Time To Invest In Gold, A Fact Proven By The Shares Of The Funds

June was the weakest month since the end of 2016 so far, and the potential investment in gold seemed like the wrong move to many. In June, the precious metal fell 7.6% and the London Bullion Market Association (LBMA) fell 7.1%. As a result, in the first half of 2021 the price of gold fell by 6.6%. We have seen this drop across almost all currencies except the Japanese yen and the Turkish lira.

However, exchange-traded funds (ETFs) have acted like never before – amid falling prices, they have increased their gold holdings. In this article, we’ll look at the dynamics that have led to fluctuations in its value, the history of exchange-traded funds, and the importance of their growing investment in gold.

Why Did The Price Of Gold Fall In June And Why Is It Now Rising Again?

The reason for the decline in the price of gold was related to the forecast that the major global economies are returning to growth and that inflation is starting to fall. In mid-June, the dollar was relatively stable against other currencies, and the dollar index rose to its highest level since late March.

Last but not least, there was a slight increase in interest rates on US government bonds in June. However, it was an extremely small and short-lived increase. Subsequently, their profitability fell to the level of the end of February. US government interest rates are an important guide to gold price changes and are good to keep in mind when monitoring gold price swings.

Thus, the reasons that led to the sharp drop in the price of gold in June are no longer observed in the markets.

Currently, we are witnessing a different situation. The European Central Bank has changed its inflation target so that it can increase money printing almost indefinitely. This will undermine the purchasing power of the euro.

In the United States, the overall picture is not very encouraging. In May (data for June was not available at the time of writing), the US dollar saw its fastest depreciation since 2008. A growing number of analysts expect inflation to remain high over the next few years. Bank of America recently joined this view, in opposition to the position of Federal Reserve Chairman Jerome Powell, who argues that the weakening of the dollar’s purchasing power is a “transitional” phenomenon.

Is It Good To Invest In Gold When The Price Is Falling?

Before discussing gold as an institutional investment, it’s good to have an overview. When the price of gold rises, exchange-traded funds increase their buying volume. Instead, as the price falls, they reduce their gold reserves.

This behavior makes complete sense given the way exchange-traded funds operate. ETFs hold a certain amount of physical gold against the shares they issue. In this alternative gold investment channel, investors do not buy the metal, but exchange-traded fund shares, which are a “reflection” of its price.

The relationship between the price of gold and ETF investments is always the same, usually with an extremely small gap. In June, however, an almost unprecedented phenomenon occurred: Although the price of gold fell sharply, exchange-traded funds not only did not reduce their net reserves, they increased them. Net ETFs sold 23.7 tonnes and bought 26.6 tonnes of gold. Thus, their gold reserves increased by almost 3 tons globally.

Data from the World Gold Council show that the slight decline in Europe (-0.6% from May) was fully offset by North America (+0.6%) and Asia (+1.7%). Thus, at the end of June, funds traded on the stock exchange held 3.6 thousand tons of gold.

Although today their gold holdings are below the all-time high of last summer and fall, since the financial crisis of 2008, the ETF’s holdings have increased by an impressive 230%.…

Why Etfs Have Increased Their Holdings In Gold

The dynamics we have witnessed are so strange that they require explanation. There are at least 2 reasons for the behavior of exchange traded funds:

– A Short-Term Drop In The Price Of Gold Is Expected

If a category of institutions has always sold gold when its price was falling, but suddenly stops doing so, with the most dramatic decline in recent years, it is clear that the decline is not expected to last long. In hindsight, we know that’s exactly what happened. A month apart, the price of gold rose again and crossed the psychological limit of $1,800 per ounce;

– Etfs Continue To See Gold As A Good Investment Despite Its Falling Price

The sharp decline of more than 7% in just one month might seem like a “total collapse” for gold. It’s not necessary. The precious metal continues to be seen as a savior of purchasing power.

This is true not only for exchange-traded funds, but also for central banks, the other major category of institutional investors in gold. In June, central banks around the world continued to buy gold. The actions of financial institutions and ETFs clearly show that investing in this precious metal is safe and profitable.

As in life, in the world of investing, facts speak louder than words. They tell the story of the stability of gold and the instability of fiat money . Short-term volatility in the precious metal caused by unfounded optimism in the markets has led to good returns for institutional investors.

There is no other way when the fundamental behind the price of gold remains stable. The solidity is due to the actions of central bankers, who send inflation to unprecedented levels and suppress interest rates. As they have no prospect of changing any time soon, the price of gold will receive guaranteed support.

In the title, I used the phrase “ideal time” because in the current economic climate, such price drops represent a very good opportunity to invest in gold. The actions of institutions, turning their backs on traditional dynamics, prove it. That is why it is important to monitor their actions and see where they direct their money, especially when we are talking about unprecedented phenomena, such as the purchase of gold by exchange-traded funds.