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Is Gold Really A Good Investment?

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of this site. This site does not give financial, investment or medical advice.

Before going any further it must be stressed that nothing in this article is to be construed as financial advice. Having said that…

What is gold? It is element number 79 in the periodic table; its symbol is Au, from the Latin aurum, and it is denser than lead. What is gold used for? Before the modern era it was used primarily for jewellery, adornment, a symbol of wealth, and to trade. Gold is the most malleable of metals which makes it ideal for use in certain industries. Minute quantities are used in mobile phones, for example, but apart from that…

The commercial value of gold is like the commercial value of anything else; it is worth what people will pay for it, not because it is shiny and rare. Lots of things are rarer than gold but have little or no value – says the man who once sold a letter signed by Tony Blair for £2 on eBay.

Most importantly for investors, gold is said to maintain its value. Money can be printed in enormous quantities or created electronically in unlimited quantities. While most of us would like to have more money in our pockets, simply printing money (or creating credit) has disastrous effects on the economy. If you want to see how disastrous, visit eBay and search for Zimbabwe currency. It is probably more accurate to say that currencies depreciate rather than gold maintains its value.

All that being said, there are a number of YouTube channels especially that encourage their viewers to invest in gold. They will not be named here, nor will the firms they recommend, but some of you will be familiar with both of them. One company that sells gold is currently offering its customers free silver valued up to $2,500 with qualifying orders. This sounds very generous, but it begs an obvious question, how does it make money?

Any jeweller will tell you that all jewellery including gold has a massive mark up. Dealing in anything involves profit margins; shares have a selling price and a higher buying price, ditto trading in currencies. Let us say though that you purchase a quantity of gold, do you take actual possession of it? If you don’t, do you trust an institution to hold it for you? If you do, how do you know it is still there? This was how fractional reserve banking emerged; people would give their gold to a goldsmith to hold for which he would charge a fee. Goldsmiths soon learned they could lend gold and charge the borrower a fee as well. In time, the goldsmiiths realised they could lend out not the actual gold but receipts – which became banknotes. Human nature being what it is,  there were soon more banknotes in circulation than gold held by the bank. This would lead to “a run”  on the bank, people losing their money.

So you decide to take physical possession of your gold, what next, do you hide it under the mattress, bury it in your back garden? The issue of storage fees can arise as can insurance. In the United States especially, some people who buy gold can receive tax breaks, but as can be seen, the simple idea that gold is a hedge against inflation or a good investment isn’t so simple.

This short BBC video takes a look behind the scenes at the Bank Of England. Did you ever see so much gold? Now ask yourself what use it is? Ninety years ago, Louis Even published a short story called Salvation Island that debunks the fallacy of the gold standard. When a small group of men are shipwrecked on a desert island, they set about building a community. They are joined shortly by a banker who has a barrel of gold, or so they think. You can read the story for yourself, but the bottom line is that the banker ends up owning everything. The good news is that eventually, the others revolt and force him to give up his gold, but when the barrel is opened it contains only rocks.

The moral of the story is obvious, some people may grow rich using gold – even imaginary gold – but at the end of the day it is the goods and services produced by the community that is its real wealth. Our governments, all of them, need to address this problem. They need too to address the problem of war, because there is a small group of people and corporations that profit mightily from it. Again, no names but you can probably think of at least a couple. This was one of the problems Donald Trump was addressing during his Presidency, and one which the current insane Administration along with the Deep State is making worse by the day, especially in Ukraine.

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The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of this site. This site does not give financial, investment or medical advice.

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Bill Baillie
March 2, 2023
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Spot on Alexander. We have inflation today because the UK government borrowed money to pay for the subprime mortgage crisis, and the pandemic lockdown. And they are still borrowing to pay for the war in Ukraine and to subsidise the privatised industries and the National Health Service. Our children, and their children, will still be paying this debt when we are long gone. I don’t know what the answer is but I know that this system is unsustainable.

Rhisiart Gwilym
Rhisiart Gwilym
Reply to  Bill Baillie
March 2, 2023

The answer is inevitable, Bill: debt default.

Rhisiart Gwilym
Rhisiart Gwilym
March 2, 2023
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Now this article of yours, Al, I can commend wholly. And I speak as one who buys physical Sovereigns regularly to give out to my extended family – for them all to keep at home, strictly. They all continue to use sterling currency notes, credit/debit cards, etc., to pay for things. But they all know – like my Rom great-grandfather – that when times get really hairy – as they will – having that little stash of universally-accepted gold coins actually about your person could just mean the difference between life and death. Gypsies have only light truck with the… Read more »

Crass
Crass
March 2, 2023

“Is Gold Really A Good Investment?”

The only really good investment is to buy land. 

midmoor
midmoor
Reply to  Crass
March 2, 2023

Go on buy it. I recommend the Nethwerlands which boasts the world’s most farming freindly government.

Crass
Crass
Reply to  midmoor
March 3, 2023

What I meant by buying land instead of gold, is that you can not eat gold.

In the event of the predicted financial collapse, you can use your own land to grow your own food. 

Last edited 29 days ago by Crass
Team Jamie
Team Jamie
Reply to  Crass
March 6, 2023

as a naive fool.. I’m not sure you will get what you want in the end… Canada and the Truckers… Some government official will stop you from growing food because ???? After my initial post previously, I’ve been reading a heap of stuff and realise how I ‘know nothing’ but I know a lot… we are all lied to and we/I accept this to easily… right now I can only ‘be aware’… A friend told me about a video: All Wars are Bankers’ Wars a booklet from australia called: The Money Trick from Dark Man The thing I really realised… Read more »

Team Jamie
Team Jamie
March 2, 2023
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Thank you! Fantasic. I loved the island story and sent it to friends. Since I was a teenager I’ve been caught up in worldly ideas of whatever Economy, Money is supposed to mean, but to whom? In my retirement I am now questioning this system that I know very little of but am at the point that all money, used as per the island story, should and must be owned by the Citizens in a country and not the Banks. Anyway, there are many good people who are educating us abut money creation and the gold standard and this is… Read more »

penrose
penrose
March 2, 2023

Famous speech:

The Cross of Gold speech was delivered by William Jennings Bryan, a former United States Representative from Nebraska, at the Democratic National Convention in Chicago on July 9, 1896

penrose
penrose
March 2, 2023

I like silver bullets myself. Not only does silver have intrinsic value as an industrial metal, and not just “trinket” value such as gold, silver bullets can be used to deter theft. It is true that “trinkets” can be used to buy land, which is how I now own Manhattan.

InnerCynic
InnerCynic
March 2, 2023

Gold is simply “insurance”. But the fact that this form of insurance has been in demand from time immemorial, as opposed to Zimbawean dollars, tells me that its a store of value. Sure, when the time comes, when the current financial system collapses, nobody will give a shit about any precious metal save brass and lead. Food is just as precious when your life is on the line but there will come a day again where these archaic stores of value will be treasured again. You may not live to see it but your children may. Until then stock up… Read more »

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