Man's fascination with - and our desire to own - history's most enduring asset and most precious metal has not dimmed in the slightest over the centuries.
Man’s fascination with – and our desire to own – history’s most enduring asset and most precious metal has not dimmed in the slightest over the centuries.
While it has been a form of money for over 6,000 years, there is still great debate over gold’s place in the financial system. Described as a ‘Barbarous Relic’ by Keynes and regarded as worthless as a pet rock to others, gold still provides for many, the ultimate store of wealth and a key investment option.
Real Vision’s commentators are the authoritative voices on gold, with fascinating perspectives from the likes of Simon Mikhailovich, Brent Johnson, James Turk and Rick Rule.
Seen as the ultimate safe haven from volatile asset markets, particularly in times of crisis, ‘gold bugs’ are waiting for the real break higher as the world (in their view) edges closer to financial crisis once more.
For those who feel the day of financial reckoning is coming, fueled by the inexorable and seemingly unsustainable rise in global debt, the attraction of gold has not faded.
Whether investing in gold ETFs, speculating in junior mining companies or owning physical gold, kept either in the vault or buried at the bottom of the garden, allocations to the precious metal deemed to be sensible in today’s climate have certainly edged higher. This has taken place alongside rising fears, ranging from overvalued stocks, global debt levels and growing concerns over a future of financial repression.
Many of us have heard the familiar facts about gold and it’s true to say that all the gold mined in history would fit into two Olympic sized swimming pools. Every ounce of that 187,000 tonnes still exists today and will have been melted down and recast many times over.
In spite of these properties, the challenge of mining for gold has grown immensely over history. In the early days gold was collected in rivers and stream beds, using primitive mining techniques, now prospectors have to drill deeper to reach the harder to find deposits.
The amount of capital and labor that goes into pulling gold from the earth these days is immense and that’s part of the reason why gold is so expensive. Even with today’s ultra modern methods that see computer operators in places like Australia scan the earth with geo-thermal sensors to identify the best places to set up mining operations.
For the future of gold, probably the biggest concern for economists is that the level of global debt is so high that it simply can never be repaid. This situation, or some other massive economic shock, could lead governments into taking some kind of extraordinary measures, such as dramatically increasing the money supply, or confiscating assets, which would technically be highly positive for the gold price. As the value of paper money is debased, gold would provide the ability to protect purchasing power in times of such crisis. As Simon Mikhailovich of Tocqueville Bullion Reserve, pointed out in his Real Vision interview, global debt has now reached the mind boggling level of $220 trillion, which is 325% of the world’s economic output, suggesting that an elegant solution to the debt problem is getting further and further away,
Dan Oliver meanwhile, who runs the highly successful, small cap gold fund Myrmikan Capital, recommends that while gold itself should be a major part of your portfolio at this juncture in history, junior gold miners should not be your only exposure to gold.
While gold has been with us for thousands of years, it is interesting to consider whether that will always be the case. Some have contended that digital currencies like Bitcoin contain many of the same attributes and it’s only a matter of time before Bitcoin’s market cap starts to eat away at gold’s share.
The question of whether Bitcoin is the new gold, or whether gold will co-exist alongside cryptocurrencies will be answered in time, as well as what kind of role gold will play in any possible resolution to our heavily indebted world and the future crises for governments.