Authored by Axel Merk via Merk Investments,
Those who own gold often argue how to best own it. I encourage anyone holding gold to assess the pros and cons of different choices of gold ownership to make an educated rather than emotional decision. Let me explain…
I commissioned the above cartoon back in 2011 in response to an assertion by CNBC’s Steve Liesman no one would accept a gold coin in a grocery store. My take was that, hell, if I offered a gold coin, I’m pretty sure I would find a taker if I wanted to exchange it for some groceries.
There appears to be an eternal back and forth between those that “love” and those that “hate” gold; that discussion, in my humble opinion, misses the point. It is striking how this shiny metal raises emotions by both friends and foes. Maybe it is because gold is so simple, so pure, the fact that there are fairly few industrial uses for it, that emotions take over in discussing gold’s merits.
The historic context matters. Gold has been used as money for millennia; yet some say it is a “barbaric relic” preferring to use fiat currencies for commerce. All major currencies are fiat currencies these days, that is, they can be created ‘out of thin air’, by the stroke of a keyboard at a central bank. The modern world of fiat currencies, is in place in its current form since 1971 when Nixon ‘temporarily’ abandoned the last link to gold. The very notion of currency has been used in new ways as promoters of virtual tokens subject to a decentralized creation and sharing methodology referred to as crypto-currencies have touted that they will disrupt the way we transaction and store value. The value of crypto-currencies, of course, has been highly volatile, and none of this should be construed as an investment recommendation. Crypto-currencies, in my humble opinion, are as much of a currency as anything one can trade. Indeed, when a publicly traded company acquires another firm, management offers their share prices as a currency.
One might be excused to think that a currency is something with a stable value. Scanning through my past writings, I see references as far back as 2008 where I argue that there may be no such thing anymore as a “safe” asset, and that the U.S. dollar may have lost its function as a store of value. …read more