As I write this Update, the price of gold has risen back to US$ 1,775 per troy ounce. The bull market trend has been, once again, forcefully confirmed. It is alive and well both technically and fundamentally. Until the root problems of the global fiat currency and banking system are addressed and solved sustainably, I expect this trend to go on.
However, what has occurred in gold markets over the past few weeks is not merely a continuation of the same. I observed a change in tides of the speech and actions of the very market participants that have vociferously denigrated the status and opposed the advance of the price of gold over the past decades – namely central bankers, large commercial banks, government officials, and the mainstream press.
Recent developments might be compared with the proverbial cracks in the dam. Things are starting to move in favor of gold prices, and rapidly.
The game-changer: banks are starting to love gold!
A few weeks back we wrote about the fact that central banks have globally turned into the largest net buyers of gold since 2011, despite a continuance of the generally negative rhetoric of their most prominent figure heads. We also highlighted the fact that, in the realm of Basel III, gold is to become a “Tier 1 asset”. In other words, gold is to be treated as a “zero percent risk-weighted item”, next to such items as cash, US Treasury papers or IMF claims.
This clearly indicates another considerable catalyst for the price of gold. The impact is already trickling down. Last week, Deutsche Bank Research, for instance, issued an amazingly gold-friendly research paper. Here´s a sample of what they had to say:
“We believe there are nearly zero real options available to global policy-makers. The world needs growth and is willing to go to extraordinary lengths to get it. This is creating distortions where old rules don´t seem to apply and where investors face a number of paradoxes. We believe the macro-economic environment for gold is once again turning more positive and forecast prices to exceed USD 2,000/oz in the first half of 2013. We believe the growth in supply of fiat currencies such as the USD will remain an important driver.”
It almost makes us blush to see how much their point of view has changed and how it suddenly resembles what we´ve been saying for quite some time. Take a look for yourself. We are unashamed, although a little surprised, to say that we agree entirely!
What is the greatest threat to your gold ownership?
A question that I am asked again and again is if our government will confiscate gold. This question is being asked from Berlin, to Beijing, to Washington DC. It is a good question. As you will see in the News Briefs below, we are currently observing a change in tide on how central bankers and bankers in general view gold. The days of shunning the metal as a “useless relic of the past” appear numbered.
The recent special report by Deutsche Bank Research has made some waves in this regard. Meanwhile, Jens Weidmann, head of Germany´s Bundesbank, has called Mario Draghi´s bond buying program the “devil´s work”. Clearly, a change of perspective is permeating through the mainstream and government speaks.
It is, therefore, quite logical to raise the aforementioned question again of whether or not gold will be confiscated. This question came up quite a bit at our Briefings in the US as well. The question echoes another question that was posed: “How far will governments go to defend the status quo?”
The answer to both questions is best stated with two words: CONSULT HISTORY! Governments have gone and will go far again. They have confiscated and may confiscate again. Nobody has a crystal ball. However, the risk of confiscatory policies in the current context of unprecedented debt levels – and the government measures that come with it, namely financial repression, inflation, austerity, default – are very real. You need to consider this risk in your wealth planning. Clearly, geographic diversification is a critical piece of the strategy required.
Instead of re-inventing the wheel on this topic, I would like to refer you to an excellent article written by Jeff Thomas and published by International Man. It´s titled The Greatest Threat to Gold Ownership. The article is certainly worth your time and consideration, if for nothing else to at least spark a discussion on a very timely and potentially important subject.
It is time to stock up on gold, but to own it the RIGHT WAY
If you have not allocated a considerable part of your portfolio toward gold, this is the time to seriously consider…or reconsider.
If you own paper gold – ETFs, claim accounts, fractional digital accounts and the like – you need to consider adjusting your ownership. Paper gold will not give you the protection you seek. It will not allow you to fully profit from this once-in-a-lifetime bull market. The fact is that nobody will be interested in paper gold as we see gold prices rise further and supplies of ‘the real deal´ become scarce.
If you own physically allocated precious metals – gold and silver coins and bars – you are on the right track. In addition, you must ask yourself whether you are concerned about gold confiscation in your home country. If you are, I strongly recommend you consider a program that affords physically allocated gold ownership in a safe jurisdiction.
Global Gold offers precisely that kind of solution. It is a Swiss-based program that offers high security storage in Switzerland, Hong Kong and Singapore. It is one of the few truly solid international solutions. If you have not stocked up on physically allocated gold yet, and if you are looking for the best possible international solution, I strongly recommend you get in touch with Global Gold. It´s not too late – yet.