A report from Goldman Sachs by way of Marketwatch.com corresponds to a warning that I have been giving, which is that in light of the virus, and noting that while I do not give financial advice, I said that a serious trend to watch would be the investment of mutual funds and stocks as well as precious metals such as gold and silver as they are historical places in which wealth is conserved in times of serious economic trouble.
The current coronavirus-induced economic and financial market turmoil is seemingly the perfect environment for gold.
“We have long argued that gold is the currency of last resort, acting as a hedge against currency debasement when policy makers act to accommodate shocks such as the one being experienced now,” said analysts at Goldman Sachs led by Jeffrey Currie.
Yet while the yellow metal GC00, 5.716% has done far better than other assets, it has slipped 2% over the last month.
The Goldman analysts, with a 12-month price target of $1800 an ounce, said that is about to change, thanks to the Federal Reserve’s aggressive bond purchase plan unveiled on Monday, in which the U.S. central bank said it would buy as many Treasurys and mortgage-backed securities as needed to keep financial markets running smoothly. (source)
Gold is expensive, and is sometimes called the money of kings. However, since the silver markets run directly with the gold markets (and arguably can even be more profitable) but are more accessible due to their lower prices, is sometimes called the money of gentlemen. Both are excellent stores of value in hard times because they provide historical barriers against which value can be fixed. Unlike usurious money, physical metals cannot grow artificially. There is only so much gold and silver in the world, and while supplies can vary, the value of the metal can never reach nothing because it is a thing. Indeed, even bags of manure or bales of hay have more objective value than paper money because they are things that exist in the physical world and have physical value. A dollar has value based on perception- it is worth a dollar because of an agreed upon social contract. It does not have intrinsic value- meaning that its value comes from its substance itself.
The easy way to understand this is in light of the recent “toilet paper” controversy. There is no difference in value of the paper that one wipes his soiled gluteals on and a dollar bill, except the dollar is assigned a value, while toilet paper is assigned to the sewer. However, one would not wipe oneself with gold or silver bars because the metal, while it may only have the given face or social value of a dollar, is intrinsically worth far more, and it would be an insane thing to soil.
This is why I speak of precious metals as a safe haven in hard times. People will flock to them because they do not artificially grow, nor do they generally change in value, as their value is from their being. The way to have less value is to have less actual gold or silver in quantity.
This is what I have been warning about for a long time, and what I am concerned about. There are additional market reasons that artificially inflate or reduce the price of gold and silver, but it does not change the intrinsic value of the metal.
Remember the “golden rule”, as in the man who has the “gold” makes the rules.
This is why there is so much talk also about fortunes potentially being made or lost in this time right now, because the means of exchange (money) is changing as the US dollar is losing value. Indeed, it was always meant to lose value in order to consolidate power under the influence of a few major banks. The dollar was engineered to fail for political reasons decades ago, and with the intention of resetting it as he who controls the medium of exchange between nations (money) controls economies, politics, and culture.
What Goldman Sachs is saying is the exact explanation. They know this, as does JP Morgan (the largest silver holder), and other major investment houses. They are not fools, and they have been preparing for a long time for such an event, which will happen because it is not an economic or production issue, but a debt issue based on the existence of fiat currency, and the most inflated one in world history.
Remember the story in the New Testament of the wise man who built his home on rock. When storms came, the house stood because it was built on rock, but the man who built his house on sand saw his house crumble amid the same storm. Tangible things such as gold and silver, while not always the best investments, are historically accepted “rocks” of financial stability in hard times. Paper money is good, but when economic instability strikes (as it is right now, and has the serious potential to get worse), stable options are usually superior ones just as a foundation build on rock is always superior to one build on sand. Likewise, remember that history does not repeat, but is a song that rhymes, and when the rhyme changes, one can generally expect what is coming. When this is placed in the light of past historical experiences, one can use the lessons and experience of others to help predict fundamentals and direct one’s actions to the most successful end, lest a man find himself in the place of the man in the hackneyed quote by the atheist Spanish philosopher Santayana, “those who forget the lessons of the past are doomed to repeat them.”
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