I am of the belief that owning gold and silver is NOT “investing”; it is storing your net profits in REAL MONEY.
However you earn your INCOME from the products or services you provide to the world, any SURPLUS you are able to accumulate becomes MONEY when it is in the form of an ASSET which stores its value, as savings, until you decide to exchange it for some other ASSET of intrinsic value
If you get paid in dollars, or other CURRENCY, whether in a check, paper Federal Reserve notes, or a digital representation of same, you are holding a NOTE, representing the work product you already delivered to your employer. He/she gives you a paper note acknowledging the debt. It has NO intrinsic value except for the EXPECTATION it can be exchanged for someone else’s work product, or an hard asset or product, or for MONEY, such as Gold or Silver. Meanwhile, you are merely holding a chit, which you are hopeful can be traded for something you want NOW, or STORED away until you do.
Wouldn’t it be nice if your employer paid you in Gold or Silver in exchange for your time, talent and energy expended on his behalf? But he doesn’t HAVE gold or silver, so he gives you a paper that says you have paper credits which you should be able to exchange with other people who accept similar papers or digits on the computer, and who have accumulated similar Notes of indebtedness from other people. Currency is a debt swap. Until you can EXCHANGE currency for something that STORES value, it is not money itself. Money is gold and silver. Currency, the longer you hold it, the less value it has in purchasing power. It is like a gradually expiring coupon.
Fiat (paper) currencies have not had a good track record of long term preservation of value when stored. Historically, for 5000 years, gold and silver have been the medium of choice worldwide to accomplish that role. Currencies ALWAYS lose value. Gold holds it value as a storehouse of value regardless of what currencies do. Prices in currency are a standardized means to identify ratios of value between assets, that eliminate the need for direct barter. Currency should never be mistaken to be an asset itself, because while it may attempt to define or be an agent of money, it is NOT money.
Currency ‘prices’ describing precious metals are only useful in the moment, because they try to standardize the relative value of different assets at a given moment in time IN THE VERNACULAR OF THE CURRENCY. Because we have been off the gold standard for 40 years, many people have never learned the difference between currency and money. It is about the same as this: “These are my children. This is a PICTURE of my children.” They are not the same thing.
As far as INVESTING in gold, I prefer to think of Precious metals as the accumulated storehouse of prior work surplus or capital. In order to keep up with currency debasement and inflation, many people INVEST their surplus capital into companies or their own enterprises, and to compound and multiply it’s effect without having to continually input their own labor. They have their stored MONEY work for them as well as their own labor.
Therefore INVESTING is making surplus stored MONEY work for you. If you invest on margin, you have credit (anticipated stored value) trying to work for you. Holding stored value as money is simply that, holding it. When you invest capital, you put it at risk, hoping for a worthwhile and commensurate reward. Gold just protects what you have accumulated. The precious metals are the reference point of value, against which other assets can be valued and later exchanged. Over time, there is no risk in gold. When there is currency speculation, there are times when variations in the liquidity of currency creates an imbalance in the purchasing power of that currency, relative to other currencies or consumer goods. But because it has no intrinsic value, currency maintains only a temporary advantage which is subject to market fluctuations. If held for too long WITHOUT constant exchange, inflation will reduce it’s eventual exchange value as prices of real goods rise. As long as you are holding the chits, the Notes, instead of Money, your exchange value is at risk. Keep it moving and you may find a profitable arbitrage.
Once the relative purchasing power of a currency becomes suspect, or rigged by financier manipulation, or unregulated exchanges, the last remaining safeguard is the actual MONEY they represent. As the volatility of QE influxes increases, safe havens (value-preserving assets and REAL MONEY) will be increasingly sought after to store value, rather than the constant trading of currencies to offset inflation.
How can gold be a safe haven when its dollar-exchange-price has dropped so steeply so quickly?? Many have recently pointed to the slide in Gold ‘price’ relative to the measure of the dollar, and questioned its role. This is why:
The constant trading of currency for temporary financial currency appreciation is a game of speculation not storing accumulated wealth.The critical point here is the comparison of Gold ‘price’ in terms of ALREADY inflated 2013 dollars. What is the price of gold in terms of 1913 Dollars? What is the price of today’s Dollar, in terms of 1913 dollars? It makes no sense to compare anything to today’s dollar because it is a debased, devalued currency, fraudulently presented as an intrinsic asset. It is NOT an asset. The assets it can be exchanged for require more and more dollars in exchange, not because THEY are more valuable, but because the inflated dollar is LESS valuable.
GOLD is not worth what it was???? DOLLARS are not worth what they were. TODAY’S Dollar is worth 2c in 1913 dollars. The vocabulary of money has been hijacked and redefined.
Gold is worth, even at todays exchange $1200. Multiply x .02 = 24 (1913 dollars)… just about what it was ALWAYS worth, and still exchangeable for other real commodities at the same direct barter rate as always. Always will be, not as an active INVESTMENT compared to faster/slower market opportunities, but as PROTECTION against erratic fiat currencies. J.P. Morgan was right. Gold is money. Nothing else is.
And I think his legacy namesake bank believes it too. I believe it will be shown that they created the price drop because they COULD; they will ride it down by selling short and forcing computerized stop losses; when they think it can’t go further down, or can’t shake any more out of the bear tree, they will be long and physical, and ride it all the way back up…. What would YOU do, if you could control the market?
The drop in PAPER gold demand, and therefore its dollar price, is to cover market shorts by the big four banks, and to accumulate as much as they can before the rest of the market realizes they were manipulated. Once the shorts are covered and they have acquired as much physical metal as possible, and acquired control of the mines that produce it by first driving them out of business, Gold will rise again in terms of its dollar ‘price. Gold’s value never wavered, just our attention.