Tuesday, January 31, 2012

Gold: The Ultimate Store of Value

"...the world is now waking up to the fact that gold is not a commodity, but currency with many functions such as performing insurance, liquidity, store of value, etc all because of gold’s absence of counter party risk. Gold’s risk has been paid forward. That is how it became a coin.

When one holds physical gold they are paid in full at that moment. All the blood, sweat, tears, intellect, etc that went into not only discovering a mineral deposit but the shear amount of man’s time, energy, and effort to extract, refine, mint etc that yellow element is trapped inside that physical asset. In a world awash in liabilities and the "daisy chains" of counterparty risks, very few assets stand outside that realm. Gold, the wealth and reserve asset of the ages, is coming back and will leave many a wondering "How did we miss this?"

This is a statement (I think) from Bill Haynes, of CMI Gold and Silver. It explains well the function of gold and leads in well to the topic of this blog post.

Recently I have been doing some reading around the concept of 'freegold'. There are quite a few websites out there which help explain this concept. It is nothing new, but it does help explain why the gold price is caught in a fiat valuation trap now and why, soon, this will stop when gold reverts to it's primary purpose as a store of wealth and value.

Here are a few sites for you to do some reading:
FOFOA
How the West was Lost 

A quote:

"Freegold is beneficial to everyone - except those that can print a currency out of thin air that can be used to buy goods anywhere in the world. You and I CANNOT print money. You and I can only go into debt for currency today (Committing future work for currency today). That going in debt subjects us to the political ramifications of the management of the currency. That may be good or bad depending on how it's managed.

Gold stands separate of this mis-management.

And, as you may have already figured, the way the reserve-currency of the world has been managed, gold is extremely undervalued. We are going through the process of discovery - where those with paper riches figure out that it's really not real until it is settled. As the settlement process accelerates, so will the scarcity of gold."

If gold stands seperate, and I think it does, then when it is 'set free' from being inside the fiat paper system, then it's true value will be set free as well.

The basic tenet here is that gold is the ultimate store of value, no other asset holds the properties that gold does in order for value to be measured and stored. Why? Because of it's physical properties and scarcity and because it has been through the fire of history and is still recognised as such.

Got gold; at least some?


Gold in New Zealand dollars: $2113.15 per oz
Previous all-time high: $2311.02 per oz (15 Nov, 2011)

Silver in New Zealand dollars: $40.95 per oz
Previous all-time high: $59.19
per oz (30 Apr, 2011)
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physical gold or silver grams for as little as US$25 per month.

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AFE is the gold bullion custodial provider of choice for the sophisticated investor,
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