People making Gold Investments break into 3 different types... OVER THE LAST 10
YEARS , the Gold Price has risen from $300 to $1400 an ounce, writes Julian
Phillips of the Gold Forecaster . There are several more important reasons than
its being 'just a commodity.' The strongest driving force behind gold's rise in
the last four years has been investment demand. As a commodity, it doesn't
tarnish, it's a great conductor, and makes good looking jewelry. But these
reasons are not the reasons why people invest in gold. When they do Buy Gold ,
people lock it away. When they do keep it close, they take it out only
occasionally to look at it. Most gold is never looked at or ever seen by its
owners. It is stuck in a vault below ground. So if gold is not used or admired,
why was so much of it bought so as to make the Gold Price multiply more than
four times over this century and why will so much be bought in the future so as
to make it likely to multiply a few times more in the future? In short, the Gold
Price is not about gold, but what the investor believes it to be and the value
he assigns to it. More than that, it is about the gold investor and what drives
him. Gold Investment requirements are different for different investors. In
gold, there are three types of investor. The first type is one who starts Gold
Investing for profit. His aim is to buy low and sell high. He usually uses
technicals (charts) and other similar tools to guide him to do this well. He
will use currencies as his measuring rod. So to buy for $100 and sell for $200
would mean to make a 100% profit. The assumption is that the Dollar's value will
remain constant. Whereas, the reality is that when one is Buying Gold , one
sells the Dollar and when one sells gold one buys the Dollar. (Remember that the
writer of the Dollar note stated that he trusts in God – which God?)
Nevertheless, since the last war the Dollar, equities and the plethora of
different investment instruments available to the US investor have served the
purpose of building up a store of wealth that can take care of him in his old
age or be left to his heirs. The mindset of the developed world investor is to
use his education and investment skills to build up profits to create his
wealth. But more than that, he uses and implicitly trusts financial institutions
to support his quest for wealth. The second type of investor has the same
eventual aim of creating wealth for his old age or to leave to his heirs.
However the path to that wealth is not through the use of profits to create
more, but primarily through his own separate endeavors taking profits from them
and investing in a safe place such as property or Gold Bullion – two assets
that represent a store of wealth not associated with profits, but simply a
recognized store of wealth that will retain its value throughout his life. More
than that, he puts his wealth out of the reach of financial institutions and his
government. The third type of investor is government, which is completely
different today, in that it wants gold to sit in his reserves on a permanent
basis, with no profit in mind at all. Government holds it for the best reason
and that is to keep things going on the dark rainy days, when its own currency
just won't do the job it should and to counter the swings in his other currency
holdings. It is used as a measure of stability in his reserves and gold helps to
get that. Apart from a 40 year courtship without gold at center stage, gold has
always been internationally respected and valued as money. It is still, as the
central banks now confirm, through the cessation of their gold sales and by
those who are persistently buying irrespective of the price. It is the central
banks alone that will ensure that the Gold Price will continue to rise, because
it is not about gold itself, but about gold as money trusted internationally by
people and governments. The profiteer may well find the second investor's
approach too simple, until he looks back over the last ten years and measures
the growth of the value of gold against that of equities. The second type of
investor usually comes from the world east of Europe, where corruption, changes
of government and turmoil have left a people with little trust in institutions
and a great deal of self-sufficiency. Until a few years ago the west could
trumpet that their institutions were part and parcel of wealth creation. That is
changing now. While the east has far less institutional cohesion as a result of
their past, they have never lost their belief that gold is the real money. The
west is headed back that way now. And the central banks are now either holders
or buyers, but not sellers. Why? Gold is money in a crisis when nothing else can
be trusted or relied on. It retains it value when enemies exchange it. It is an
international asset. A man from China will value it as much as a man from South
Africa or Canada. Its price is set in London and used in the far reaches of the
earth. There are no unfulfilled obligations attached to it. It is free from all
national restraints that come with paper cash. Today, most importantly it
reflects no national economic fundamentals and is not under the control of any
individual or group of nations. It is free of government! Nothing else fits that
bill, nor will it. As we watch the Gold Price move like a flowing tide subject
to the ebbing and flowing waves of price movements, we are intrigued that there
are still so many commentators that believe it is a metal in a bull market that
will inevitably be followed by a bear market. We do not subscribe to that
opinion. We feel that mankind is moving back to a period of time marked by
uncertainty, instability and a tremendous shift in world power, when debt
obligations issued by individual governments, called currencies will have a
relative value. Gold on the other hand, will reach the point where it will be an
arbiter of value. Even the head of the World Bank has suggested that role.
Despite the restraint it puts on all governments, the pressure we see ahead for
the world will ensure that more and more people will come to consider gold as
real money. Buying Gold today...?
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