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KrugerRands Continued...

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GQ
Occasional Contributor
A minor rant, major cents. GOLD is not an alternative asset class to anything but CASH. Simon, the reason equities and property have been the best performing asset classes over our lifetimes is because the nature of money changed forever in 1973. During the Vietnam war, Nixon abolished the Gold Standard to stave off US bankruptcy, with no need to credibly control how wealth was translated to currency, he opened the way for money to be `created'. All that money found a home in the organization, equities, property and money markets. The whole system almost seemed credible... Now. The cracks are showing. Sub-Prime is not over, it was nearly a symptom of the something systemic - the corruption of the monetary system. And this gross offence is only 35 yrs old, the breaking of the 3000yr relationship between currency and gold is in its infancy in the context of our history as civilized men. Now, no major currency is immune from rapid inflation and sudden exchange rate devaluation. Not any more, not since they broke the link with Gold. Zimbabwe 24000% inflation?! How? Before: (x unit of currency A) = (1 oz of gold) = (y unit of currency B). Simple. Each Central Bank declared their gold holdings (after settling their forex for Gold with the relevant CB) and declared how much of their money was in supply. We worked out that ratio and compared that to `that other currencies' ratio - and `voila' we knew the currency exchange rate. Gold stabilized EVERYTHING. Now its all about `perceived' value in currency, we perceive the risks: Health Epidemics, Rising inflation, Xenophobia, Electricity Crisis, Global inflation, pending political change... THEN, we `price' the currency. Its a farce. All the while, central banks printing presses continue to print print print - and the banks lend, leverage, lend. The man on the street who speculates wisely wins, those that are actually productive members of society lose. GOLD is the only credible store of movable wealth. Not the mining house, not the specialist UnitTrust, not the ETF, but the metal. Why not invest in the ETF? 1. It is listed and therefore subject to speculative risk. 2. It needs to be reduced to Rands. Just like your pension fund. What are those Rands going to be worth in 15 yrs? In 3 yrs? Hold the bullion, dont speculate with GOLD. Store the VALUE. If the time should come when it's time to liquidate (IF ever?!), you want to be in a position to choose the conversion currency of your choice, especially with the growing erraticism of world politics and 'perception'. Accumulate the Bullion. In SA we have the KrugerRand, only 6 countries worldwide mint 24oz bullion coins. The are accepte d globally as they have been since the Greeks first minted the Gold Drachma 3000 yrs ago. The problem with bullion is the liquidity costs. Roughly 15% above the London fix going in and a further 10% on the way out. If anyone is interested in finding out more information on how to procure gold bullion from what I believe to be the lowest cost supplier of physical gold in SA you can email me at [email protected]
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10 REPLIES 10
SimonPB
Valued Contributor
GQ, sure (well - maybe, yes, no). Point is gold is not a good investment as things stand and the theory seems to be that it'll see it's real value at the end of the world, in which case I would rather have water or food? I know the Nixon story and the departure from the gold standard and how this seriously changed the worlds financial system.

Here's how I see it, the only valid reason for buying gold seems to be if you think the financial system as we know it is going to collapse - and I don't see that happening in my life time. Hnece I couldn't be bothered with gold. Lastly, as mentioned above, if the financial system collapses we're heading for a mad max realty, and then your gold ain't worth anything. Water, food, petrol, weapons, etc. - those are the things that'll have value.
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saash
Super Contributor
You can move your coin collection from shore to shore without involving foreign exchange control. Just a thought, you didn't hear it from me. Ala Zim.
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Not applicable
A minor point of correction: the gold standard was abandoned in the 1930s - Nixon only stopped the convertibility of dollars into gold and that was in august 1971. Critics of the fiat money system crawls out of the wood work whenever the international payments system face uncertainty as is currently the case. What they forget is that is that even under the various metallic standards that existed over the centuries governments always found ways to debase the currency, eg when gold coins were legal tender monarchs would clip the edges to reduce the actual gold content of the coin. Hoarding has never been a way to create wealth - find a growing asset to park your money in or engage in activites that will generate income (like the many traders/investors on this forum is trying to do)
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SimonPB
Valued Contributor
saint agreed. One of my earlier questions being is gold an asset or a libality. Frankly it is the latter and it has no income but does cost money to own (in terms of security).
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GQ. Where did you copy and paste this from?
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GQ
Occasional Contributor
1. Simon: Even in a mad max reality, there will need to be a medium of exchange. How else will able to exchange your petrol for food - across borders? Bartering of goods `evolved' when we established the first currencies. it enabled us to convert excess production into a store of value without it perishing. otherwise theres no basis for producing more `grain' than required to meet your bartering needs? No basis for expanding productivity. I am in agreement, we might not see a collapse of the current money system in our lifetimes, but we may well see the precursor effects to such an eventuality. You and I have a lifetime ahead of us. What of the aged looking to protect their wealth for the generations of their own to follow? Cash in the bank in the face of rising global inflation is leading to negative real rates of return. People are getting poorer by putting their money in the most `conservative' asset class. Cash. 2. Saint: In 1933 President Roosevelt Nationalized Gold by making it illegal for US citizens to hold Gold or ever exchange $ for Gold. He confiscated all Gold in the US by forcing the public to sell to the Reserve Bank. He did not abolish the Gold standard, quite to the contrary, he provided the impetus for $ strength through the monopolization of US gold into the hands of the Federal Reserve, he provided the basis for US$ credibility in relation to the maintenance of the Gold Standard. A ratio of $ to Gold was able to be maintained, and hence the $ became the reserve currency of choice by most central banks when faced with falling supply of the metal. You are correct, inflation did exist from time immemorial, due to gold coin debasement. The gold standard was meant to remedy this possibility. From 700BC with Gold as the global currency of the civilized world - the Byzantine and Arabian Empires flourished as the centre of Global trade for 800yrs. Notably they incurred no devaluation of their gold coins. (because they had strict regulatory controls over banking - debasement, was considered theft, punishable by amputation!) The failure of the money system has been due to the lack of regulatory controls, we have allowed the divisible hand to exert too much influence, when the gold standard was abolished in 1973 - the first money market was formed within months. Today we have worldwide stock exchange assets at $51trillion, yet the value of derivative instruments worldwide are at $480trillion! - Which goes to show that there is a hell of a lot of `created' cash chasing these limited real assets. currency risks go hand in hand with speculative risk. They are both on the increase - because of the systemic problem with the modern money system. 3. Mkadir: I copy and pasted my own sentences from MS Word, since writing directly into the forum window leaves you susceptible to losing your work if the page refreshes.
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Not applicable
GQ....excellent summary of your take on our current fiasco called a monetary system. I felt I was reading my own words...anyway you'll be surprised how many people think infaltion is rising prices as oppossed to currency debasement. Soon you will realise that trying to convince others is a waste of time.....just do what you doing hombre and quietly....the only legacy you need to leave behind is for your own genetic line....and make sure they survive whatever calamity may or may not bestow them. ADIOS!
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YNWA
Super Contributor
GQ...ditto the DMan....compadré you took the words outta my mouth....keep chilling as the J&J Trading Co. is lookin' mighty fine...adios amigo.
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JohnnyCash
Super Contributor
But can you eat it?
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org
Super Contributor
See daily articles at www.gold-eagle.com, technical analysis section.You wont get better analysis anywhere.also see rense.com
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