In this section

Click HereFacts about Gold

Click HereThe Right to Own Gold

Click HereGold and Currency

Click HereThe Crashing Dollar

Click HereGold's Purchasing Power

Click HereObama & the New Depression

Click HereGold Confiscation

Click HereTrading With The Enemy Act of 1917

Click HereThe 15% Rule

Click HereEminent Domain Clause

Click HereOutlook for Gold

Why Gold?

Learn Over one billion people have the lions share of their wealth in gold. For over on thousand years central banks have been holding gold as part of the nation's international monetary reserves. Today they hold (officially) about 35,000 metric tons of gold as a reserve which represents one-third of the world's holdings. What is it about gold that for centuries has made central banks view it so favorably? Why do they view it as the 'ultimate asset', a back-up to the paper currency system? These questions were answered on September 19, 1922 by Mr. Richard Scott-Ramm, Chief economist and Strategist for the Americas World Gold Council.

"The statutes of the central Bank of Switzerland state that the gold must provide 'cover' for at least 40% of domestic bank notes in circulation."

"Second, gold is viewed by certain central banks as a form of 'insurance' against unexpected changes in the structure of the world's monetary system. This system has a history of undergoing changes in unexpected occasions (for instance, the move from a gold standard to a fixed rate exchange system, to a floating rate exchange system). Thus it is prudent for a central bank to hold some insurance against such changes." (May I suggest the same holds true for individuals as well.)

"Third, gold provides central bank portfolios with excellent 'hedging' capabilities against foreign exchange rate risk. This is a particularly important consideration for all those central banks which hold a large share of their international reserves in a single currency, such as the U.S. dollar."

"Fourth, gold is viewed as an enhancement to a nations' 'creditworthiness' and 'independence'. For instance, gold was used as collateral for loans by India (in 1991) and Venezuela (1989)."

"Fifth, gold has been historically looked upon as a 'store of value'. Over the long run, gold has kept pace with inflation. While the current price of gold ($360 in June of 1993) could be viewed as being slightly below long run calculations, the evidence so far demonstrates that the long term link between inflation's and the price of gold has not been broken. The current under performance of the gold price probably reflects the 'bottoming out' of the current world economic cycle, when inflation is at its cyclical low."

"Gold has a long term tendency to grow in value in line with the underlying rate of inflation. Many economists believe that a non-inflationary growth rate for money supply must match, not exceed the growth rate for the real economy of goods and services. Gold meets this criterion. As classical economists foresaw, the inherent natural scarcity of gold has resulted in a long term increase in gold production of some 2% per year, in line with the long term productivity growth of the world economy. Gold's supply and purchasing power has turned out to be more stable over long periods than paper currencies."

"Although he world no longer manages its affairs under an international gold standard, gold is the second most popular form of official government international reserves. According to official IMF statistics, the overall ratio of gold to foreign exchange is one part gold, two parts foreign exchange."

"No substitute for gold has yet been found as an international monetary asset. There is evidently a reluctance on the part of the government of the strong currencies (such as the Deutschemark and Yen) to assume the role of "a reserve currency." In any case, a national currency is never fully free to be an international currency (such as gold), since it is encumbered by the dictates of a national economic policy."

"Gold is recognized in many parts of the world as a reliable safe haven for wealth. It has outperformed equities during two major bear markets of this century, 1929 to 1932 and 1968 to 1982. In recent months, the demand for gold equities, futures, forwards and option's have all strengthened. Indeed the ration of bullion to gold equities is lower than at any time since 1912. Furthermore, it has been demonstrated in several authoritative studies that gold is an excellent portfolio diversifier. The inclusion of gold in a portfolio often reduces the risk of that portfolio without damaging its rate of return."