Is it time to go back to gold?

Seeking some freedom within an environment one can’t control

Gold prices have risen almost 30 percent during the last year. Most central banks have also been increasing their gold reserves through purchasing, due to long term concerns over the future of the US Dollar as an almost universal means of trade. Consumer purchases of gold are on the rebound after the Covid-19 pandemic as an investment.

The price of gold over the last few months has been in a steady fluctuation on the strong side. There are expectations the price of gold could bump again after the US Federal Reserve lowers interest rates in September, just before the US presidential election on November 5. We are seeing the effects of this on the gold price today.

There are stormy seas ahead from the global economy. China, Europe and the US are in danger of economic downturns. There are wars going on in Europe and the Middle East, which further increase the magnitude of economic turbulence. This will dent global demand and cause havoc with supply routes. There is great amounts of debt and inflated size of money supplies, which destroys the value of fiat currencies.  

Economic recessions, especially with high inflation play havoc with traditional assets, which include land, real estate, equities, digital currencies, and investment funds. One only has to go back to 2008 to remember banks, insurance companies and funds that went completely ‘belly up’.

One of the newest fears are the threats to your funds that banks now pose. Banks can ration your own funds or even deny you access to your own account without any reasons given to the account holder. Your money in the bank is not necessarily your own legal money. Once funds are deposited in an account, the money becomes the property of the bank, where you become a creditor of the bank. If you don’t believe this, just read the contract you made with the bank when you opened the bank account.

Finally, as the financial system is all digitised electronically, any outage of electricity, or fault in the financial system software could render your funds unavailable to you. In any emergency, cash may cease to be available if ATMs are not replenished due to any emergency or unforeseen issue. This could leave some without cash and means to survive in the immediate short-term. This is not idle talk as there was a major bank outage just a while ago.

Gaining some personal freedom in the financial system

With financial systems being tightened up in almost every country in the world, people will soon be at the mercy of decisions made by faceless people that you will not be able to reach and discuss their decisions with. The advent of digital currencies and doing away with cash, means all your funds will be locked away in a system you have little control over.

Chinese gold shops are becoming a de-facto banking system

Its necessary to take on the wisdom of our ancestors and relatives before us. They kept cash, precious metals, and other physical assets hidden somewhere in their homes. Gold was a favourite.

Gold could be purchased in small amounts on a regular basis, as a means of saving. It was durable. Gold has always appreciated, and has lived through all the financial fads of the centuries. Unlike, crypto-currencies that are just electrons in computer systems, gold will survive any attack on the digital infrastructure of a nation.

The best thing about gold is it is easily redeemable in gold shops around South-east Asia. You can buy and sell without any formal need of documentations (at least so far). Storing your gold in small denominations allows you to cash-in what you need for the immediate future, without the need to cash in a larger bar. Gold shops around Asia are potentially providing a decentralised independent and free system of currency trade, using gold as the store of value. For this reason alone having enough gold to support you (and your family) is good insurance against the increasing controls government is putting in place.

Some concluding remarks on gold as an investment

Gold should be seen as a personal security. A current asset that can be quickly converted into cash, if need be. Consequently, a percentage of your annual income should be available in a convertible asset, in case of an emergency.

Gold is also a store of value and will certainly appreciate.

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