CHICAGO: All that glitters is not gold but all that gold does glitter all the time, says Anil Shah, CEO of World Money Exchange, a front ranking business firm dealing in precious metals and foreign exchange.
“To many an investor, that glitter seems to be fading a bit in the wake of a minor setback in values in recent days, but I am reasonably sure that the golden days are ahead for long term investors, judging from its decade long track,” he said
Analyzing the gold situation in US and in the global market, Shah observed that ‘the headlong rush for gold bullion amid the ongoing global market turmoil had pushed the price to an all-time high of $1,878 an ounce in 2012 getting the metal increase in value by 70 per cent. ‘
“Demand was driven by the impact of the Euro crisis, the downgrading of US debt, inflationary pressures and the fragile outlook for Western economies.
There was a pause but market got a boost a couple of months ago in the wake of continued Euro crisis, Middle East political imbroglio ( Syrian revolt, disturbances in Iraq, Iran nuclear ambitions, Yemen troubles), slowing down of emerging market economies (India -China -Brazil) and US fiscal cliff talks.’
“But the situation has changed with the US economy showing a sign of small resurgence and the fiscal cliff getting averted for the time being and this has led to some strengthening of the dollar and push up in stock prices. The Chinese economy also seems to be looking up a bit. Savvy investors have begun questioning if investing in gold is still a good proposition. And this cautionary approach has applied a break to bullish trend in gold prices for the time being.”
“The moot question is whether investment in gold is worth its value? I am not a soothsayer but I would ask the investors to have a historical look at gold value and judge by themselves. In the last one decade, gold has surged 600 per cent in value (see the charts) and is still considered safe haven for investment by many. The moral is that the market ups and down notwithstanding, gold has not let down its investors in long run.”
Anil Shah also cited an interesting analysis by a prominent banker in Switzerland on money supply in world economies, and its impact on the value of currencies the world over, including USA and dollar that exemplified relation between the supply of money and its value.
The study said that the New Year should see some major changes in value of gold and silver and how they are regarded in the West, once the general public begins feeling that their confidence in government-issued money as a medium of exchange is misplaced.
An item or an asset costs so-many-dollars and if there is change in its price, it is normally assumed it is the value of the item or asset that has altered, not the purchasing power of the money.
The moment ordinary people become alive to the fact that prices are rising because the value of money is falling, the currency is doomed.
This awakening to currency debasement is a gradual process. If government or central bank sidetracks facing this reality head on, then the monetary inflation must continue to accelerate. Dollar-money has gone hyperbolic. And interestingly, the dollar is not alone in this trend. The question is how long can this continue before the man in the street realizes that price rises are due to the flood of available money relative to the quantity of goods?
It should become increasingly obvious to more and more people in 2013 that money is being debased, unless of course there is a return to sound money. But sound money and government economics are like oil and water.
It will be the public at large who will seek sound money when it starts ditching the government money and turning the paper money into essential goods. A move to get cash reserves and liquid capital into precious metals could be a likely scenario in the wake of growing realization that it is the only way to preserve our purchasing power.
The sum total of the study is that debasing the value of paper money should induce many to turn their liquid assets into essential goods and precious metals. The obvious inference is that the investment in metals like gold is a good bargain in long run.
Ramesh Soparawala
India Post News Serviceb
