Why Hold Gold?

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Simply stated, here’s why…

Over the years, gold priced in US$ has gone up

because the value of Dollar has gone down

because lots of new Dollars have been created by the Fed

because it has to loan lots of money to the US government

because the US has a big budget deficit AND foreign governments have stopped or reduced lending

because they don’t trust the Dollar any more

because they know the USD is doomed.

But I don’t live in the US, I don’t earn or save in US$, my national currency is good, my savings are generating good interest, my stocks are flying!.. so why bother?

Because the US Dollar is the world’s reserve currency (at least for now) and the US is the world’s largest economy. When the US$ goes down, there will be competitive devaluation of other national currencies. Look at how much 45 other currencies lost their value against gold (and silver) in 2010. Unless your bank was giving you double digit interest rates, saving in fiat currencies actually yielded negative rate of returns compared to gold. Compared to stocks and other assets denominated in fiat currencies, the result is the same.

Because gold has been and still is the ultimate monetary metal & sound money. When its main competitors (fiat currencies) fall, gold shines. And finally…

Because even Central Banks no longer trust the dollar as a reserve currency. They have turned from net sellers of gold to net buyers. This is most significant because the main source of gold used in the gold price suppression scheme has been from the Central Banks.

Brief history of Central Banks moving from aggressive gold sales to limited gold sales and on to being gold buyers.
2009 Turning point - Central Bank of India’s 200 ton gold purchase from the IMF followed by Sri Lanka and tiny Mauritius
More purchases from Central Banks of Russia, China, Philippines, Kazakhstan
Casey Research (based on CPM’s 2011 Gold Yearbook): These 19 Central Banks increased their gold reserves in 2010 - Russia, Thailand, Belarus, Bangladesh, Venezuela, Tajikistan, Ukraine, Jordan, Philippines, South Africa, Sri Lanka, Germany, Kazakhstan, Mexico, Greece, Pakistan, Belgium, Czech Republic, and Malta.

In short, you have two forms of money. Pick your choice.

Paper (or electronic equivalent): Quantity in circulation has been, is being and will continued to be increased by central banks at will in enormous amounts, thereby devaluing the same paper you hold as your savings.
Gold (and silver): Finite quantity above and below ground. No government is able to create more of the same.

Debasement of Currencies, March 2012
Please read this excellent piece published by Anglo Far East (AFE) explaining how currencies have been devalued in the past, going back as far as 2600 years. It will give you an idea of the outcome of the current round of global paper currency devaluation.