Why You Should Acquire Your Physical Gold Now — Gold is Money

Why You Should Acquire Your Physical Gold Now — Gold is Money

Dear Reader,

If all the gold bullion in the world were the only way to trade gold, most people would still not understand the market. The fact that ‘gold’ can be traded in paper form — gold futures, unallocated gold forwards, gold ETFs, etc — only makes the puzzle more confusing. But for the ultimate in confusion and mystery, one only need consider the interaction of physical gold and paper gold as described in this article.

First some basics: Gold is not a commodity; it’s money. Yes, I know that gold is mined from the ground like other commodities and it is traded on commodity exchanges, but it’s not a commodity. The definition of a commodity is a generic and fungible input used with other inputs in a manufacturing or other processing activity. Copper is a commodity used in wires. Coal is a commodity used to make steel. Corn is a commodity used in food processing. And so on.

Gold is not good for much of anything except as money. There are some specialised applications, such as coatings for space helmets and ultra-thin wires made from ‘five nines’ gold, but that’s about it. Jewellery is just bullion that you can wear; it’s not a generic input.

Gold is only good as money, but it’s the best form of money

That has led to ‘paper gold’ contracts that offer price exposure but are nothing more than hugely leveraged bets on the price of the underlying metal. The paper gold market is now so big that, in effect, the paper gold markets dictate the physical gold price rather than the other way around. That won’t last. Sooner rather than later, physical gold prices will soar, and paper gold markets will collapse (you’ll get a cheque for yesterday’s closing price but miss out on all future gains that you had been hoping to capture).

The paper gold panic won’t happen tomorrow, but it is on the horizon. Vaults in London and New York have been juggling physical gold back-and-forth to back up gold futures in New York and gold forwards in London.

REVEALED: What’s Next for Aussie Gold Stock Prices? Learn more.

No one really knows where all the physical gold is

The London vaults in particular are non-transparent, and their inventory figures don’t add up. If all were well, it would not be necessary to be so opaque.

The bullion dealers don’t want you to know that the physical gold available is about 1% of all the paper gold outstanding. They don’t want you to know that the gold in vaults has been leased, pledged, or rehypothecated, even if it happens still to be parked in the vault.

All these ruses will be exposed when the physical gold-buying panic hits and paper traders scramble to get their hands on physical gold. There won’t be enough to go around, not even close. Smart investors will acquire their physical gold now, while it’s still available and the price is somewhat suppressed by the paper traders. Then you can sit back and enjoy the show.

Does the world still need New York City? Probably not…

In the long list of the world’s greatest cities including London, Paris, Rome, Tokyo, Shanghai, and others, New York City holds pride of place as the most dynamic, creative, and richest city on Earth. At least it did before the pandemic.

The change in New York in the past year can only be described as devastating. Some of the causes relate specifically to the pandemic, including the fact that New York and its surrounding area was hit with the Italian strain of the coronavirus (which arrived from China via Milan and mutated into a more contagious variant in Italy), while the rest of the US was dealing with the original Wuhan strain that, while still lethal, was less contagious.

The Big Apple suffers a big fall

Other causes of New York’s decline were part of longstanding factors including out-migration due to high taxes, over-regulation, and demographic trends. Finally, the city was hit hard by the gross incompetence of Governor Andrew Cuomo and Mayor Bill de Blasio.

New York recently passed a so-called bail reform that released violent criminals on the streets without bail. Prisons were also emptied because of COVID fears. Murders doubled in 2020 compared to 2019.

De Blasio stood by while rioters burned stores and smashed windows in all parts of the city, especially the high-end shopping areas that drew tourist dollars and generated sales taxes. Cuomo forced COVID patients back into nursing homes instead of finding alternative suitable venues. This led to over 5,000 unnecessary deaths on top of the 40,000 deaths New York suffered from COVID generally.

New York is suffering — and emptying out

This article describes these and other blunders in detail. New York is also suffering from COVID-related developments including work-from-home, reduced travel, and a shuttered Broadway theatre district that may never reopen. Rents are not being paid, evictions are suspended, landlords are going broke, and small businesses such as restaurants, bars, salons, and bodegas are locked down (again). Perhaps half will never reopen.

Cities are the greatest wealth-generating phenomena in the history of civilisation with their concentrations of talent, brains, money, and creativity. New York was the greatest of them all. Not anymore. New York is emptying out. Those with the most talent or money leave first because they have the most options. What’s left is a shell. We are witnessing not just a recession, but a large step in the decline of civilisation. The implications for the economy and markets are ominous.

All the best,

Jim Rickards Signature

Jim Rickards,
Strategist, The Daily Reckoning Australia

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