Best of the Week
Most Popular
1. Five Charts That Show We Are on the Brink of an Unthinkable Financial Crisis- John_Mauldin
2.Bitcoin Parabolic Mania - Zeal_LLC
3.Bitcoin Doesn’t Exist – 2 - Raul_I_Meijer
4.Best Time / Month of Year to BUY a USED Car is DECEMBER, UK Analysis - Nadeem_Walayat
5.Labour Sheffield City Council Election Panic Could Prompt Suspension of Tree Felling's Private Security - N_Walayat
6.War on Gold Intensifies: It Betrays the Elitists’ Panic and Augurs Their Coming Defeat Part2 - Stewart_Dougherty
7.How High Will Gold Go? - Harry_Dent
8.Bitcoin Doesn’t Exist – Forks and Mad Max - Raul_I_Meijer
9.UK Stagflation Risk As Inflation Hits 3.1% and House Prices Fall - GoldCore
10.New EU Rules For Cross-Border Cash, Gold Bullion Movements - GoldCore
Last 7 days
Government Shutdown Ends – Markets Ignore Looming Debt and Bond Market Threat - 23rd Jan 18
Stock Risks to Watch: Choose Your Bear Market Dashboard - 23rd Jan 18
Worse than Watergate - Release the Memo - Investigate Uranium One - 23rd Jan 18
CAT Stock Bouncing after JPM Upgrade How High and How Long Can This CAT Jump? - 23rd Jan 18
Why Banks Will Be Slammed In The Next Crisis—And That May Be Good News - 23rd Jan 18
Medicare Premiums Are A Shared Pool - Coming Changes That Will Transform Retirement - 23rd Jan 18
Charged Atmosphere of Heavy Police and Security Presence at Sheffield Street Tree Felling Protests - 23rd Jan 18
Pension Crisis And Deficit of £2.6 Billion At Carillion To Impact UK - 22nd Jan 18
Two Factors for Gold That You Don’t Want to Miss - 22nd Jan 18
Why You Must Own Silver in 2018 - 22nd Jan 18
This Could Be The Hottest Mining Stock Of 2018 - 22nd Jan 18
Stock Index Trend Trade Setups for the SP500 & NASDAQ - 22nd Jan 18
Stock Market Deceleration / Distribution - 22nd Jan 18
US Markets vs Govt Shutdown: Stock Markets at all time highs - 22nd Jan 18
Land Rover Discovery Sport - 1 Month Driving Test Review - 22nd Jan 18
Why should you use high-quality YouTube to mp3 converter? - 22nd Jan 18
Silver As Strategic Metal: Why Its Price Will Soar - 21st Jan 18
Stocks, Gold and Interest Rates Three Amigos Ride On - 21st Jan 18
Why Sometimes, "Beating the S&P 500" Isn't Good Enough - 21st Jan 18
Bunnies and Geckos of Sheffield Street Tree Fellings Protests Explained - 21st Jan 18
Jim Rickards: Next Financial Panic Will Be the Biggest of All, with Only One Place to Turn… - 20th Jan 18
Macro Trend Changes for Gold in 2018 and Beyond - Empire Club of Canada - 20th Jan 18
Top 5 Trader Information Sources for Timely, Successful Investing - 20th Jan 18
Bond Market Bear Creating Gold Bull Market - 19th Jan 18
Gold Stocks GDX $25 Breakout on Earnings - 19th Jan 18
SPX is Higher But No Breakout - 19th Jan 18
Game Changer for Bitcoin - 19th Jan 18
Upside Risk for Gold in 2018 - 19th Jan 18
Money Minute - A 60-second snapshot of the UK Economy - 19th Jan 18
Discovery Sport Real MPG Fuel Economy Vs Land Rover 53.3 MPG Sales Pitch - 19th Jan 18
For Americans Buying Gold and Silver: Still a Big U.S. Pricing Advantage - 19th Jan 18
5 Maps And Charts That Predict Geopolitical Trends In 2018 - 19th Jan 18
North Korean Quagmire: Part 2. Bombing, Nuclear Threats, and Resolution - 19th Jan 18
Complete Guide On Forex Trading Market - 19th Jan 18
Bitcoin Crash Sees Flight To Physical Gold Coins and Bars - 18th Jan 18
The Interest Rates Are What Matter In This Market - 18th Jan 18
Crude Oil Sweat, Blood and Tears - 18th Jan 18
Land Rover Discovery Sport - Week 3 HSE Black Test Review - 18th Jan 18
The North Korea Quagmire: Part 1, A Contest of Colonialism and Communism - 18th Jan 18
Understand Currency Trade and Make Plenty of Money - 18th Jan 18
Bitcoin Price Crash Below $10,000. What's Next? We have answers… - 18th Jan 18
How to Trade Gold During Second Half of January, Daily Cycle Prediction - 18th Jan 18
More U.S. States Are Knocking Down Gold & Silver Barriers - 18th Jan 18
5 Economic Predictions for 2018 - 18th Jan 18
Land Rover Discovery Sport - What You Need to Know Before Buying - Owning Week 2 - 17th Jan 18
Bitcoin and Stock Prices, Both Symptoms of Speculative Extremes! - 17th Jan 18
So That’s What Stock Market Volatility Looks Like - 17th Jan 18
Tips On Choosing the Right Forex Dealer - 17th Jan 18
Crude Oil is Starting 2018 Strong but there's Undeniable Risk to the Downside - 16th Jan 18
SPX, NDX, INDU and RUT Stock Indices all at Resistance Levels - 16th Jan 18
Silver Prices To Surge – JP Morgan Has Acquired A “Massive Quantity of Physical Silver” - 16th Jan 18
Carillion Bankruptcy and the PFI Sector Spiraling Costs Crisis, Amey, G4S, Balfour Beatty, Serco.... - 16th Jan 18
Artificial Intelligence - Extermination of Humanity - 16th Jan 18
Carillion Goes Bust, as Government Refuses to Bailout PFI Contractors Debt and Pensions Liabilities - 15th Jan 18
What Really Happens in Iran?  - 15th Jan 18
Stock Market Near an Intermediate Top? - 15th Jan 18
The Key Economic Indicator You Should Watch in 2018 - 15th Jan 18
London Property Market Crash Looms As Prices Drop To 2 1/2 Year Low - 15th Jan 18
Some Fascinating Stock Market Fibonacci Relationships... - 15th Jan 18

Market Oracle FREE Newsletter

6 Critical Money Making Rules

3 Types Of Life-Changing Crisis That Make You Wish You Had Some Gold

Commodities / Gold and Silver 2017 Apr 20, 2017 - 10:51 AM GMT

By: HAA

Commodities

Stephen McBride : On November 8, Indian Prime Minister Narendra Modi took to the airwaves to declare that Rs500 and Rs1,000 banknotes—which made up 86% of the currency in circulation—would be invalid effective from midnight. While the policy created chaos at banks, the real story lies elsewhere.

When rumors of a ban on gold spread two weeks later, Indians began rioting. To quell the panic, the Finance Ministry was forced to release a statement saying there was “no plan to restrict gold holdings.”


So, Indians took demonetization lying down, but rioted on the rumor of a gold ban. The people of India have a deep-rooted affinity for gold. As such, they understand it is a store of wealth and intrinsically valuable. Rupees? They are just paper.

Gold is known as an inflation hedge; however, its role as a crisis hedge is even more important. Gold is antifragile, to use the term coined by risk analyst and bestselling author Nassim Taleb. When currencies collapse and economies falter, gold can ensure your survival—financially and literally.

Below are three examples of crises during which you would have been lucky to own gold.

#1: An Economic Crisis

During the Great Depression, 37% of all nonfarm workers were unemployed and many families were financially destitute. Investments and economic growth were at abysmal levels: from 1929 to 1933, the Dow Jones fell by 90% and GDP dropped 30%.

Up until 1934, the US was on a gold standard, which allowed citizens to redeem paper dollars for gold. There are many indications that Americans flock to gold when economic problems begin to emerge.

After the initial crash of 1929, redemptions of paper for gold skyrocketed. Withdrawals were so large throughout 1929–1930 that interest rates had to be raised to halt outflows.

Just like Indians today, Americans understood that gold was superior to paper currency. As gold is money, it is payment in and of itself. Paper currency is simply a promise to pay.

Withdrawals eventually became so overwhelming that on April 5, 1933, President Franklin D. Roosevelt signed Executive Order 6102, which prohibited private ownership of gold. The following year, as part of the Gold Reserve Act, the government changed the gold price from $20.67 to $35 per ounce.

Another indicator of the move into gold was the performance of the largest gold mining company at the time, Homestake Mining. While the Dow Jones fell 90%, Homestake was up 474% between 1929 and 1933.


Source: Longwave Group

From increasing redemptions to investing in gold companies, the actions of Americans show that even in a deflationary collapse, gold is the “go-to” asset.

#2: A Currency Crisis

During Weimar Germany’s episode of hyperinflation, inflation peaked at 200,000,000,000% (that’s 200 billion) in 1923. Prices doubled every 15 hours. Millions of hard-working, thrifty Germans found that their life’s savings would not buy a cup of coffee.

While the German mark was being inflated out of existence, the price of gold increased exponentially. In January 1919, one ounce of gold sold for 170 marks; by November 1923, it cost 87 trillion marks.


Source: BullionMark

As in many currency crises throughout history, those who held a portion of their savings in gold escaped total wipeout.

But gold doesn’t need a full-blown currency crisis to perform well. In the two weeks in 2016 following Britain’s Brexit vote, gold priced in pound sterling rose 24%. The same happened in Russia in late 2014 when gold priced in rubles rose 79% in just three months.

#3: A Banking Crisis

Bank holidays are directly punishing depositors and savers, as the citizens on the Mediterranean island of Cyprus discovered first hand.

Needing a cash injection to stay afloat, Cypriot banks raided customer accounts in early 2013, taking 6.75% of deposits in accounts under €100,000 and a whopping 40% in accounts over €100,000. This happened overnight, without warning.

By the time depositors pulled their money out of the banks, it was too late.


Source: Central Bank of Cyprus

Cypriots with savings outside of the banking system—such as in gold—escaped intact. During the debacle, gold priced in euros rose by around €50.

Gold has proved a useful asset to own during banking crises throughout history. Not only is it useful when thieving banks try to take your savings, gold also profits from the uncertainty that arises from these events.

Having looked at the yellow metal’s performance during different crises, what lessons can we learn?

Gold Is Crisis Insurance

Whether there’s an episode of hyperinflation or a banking collapse, gold has historically been the asset to own in times of turmoil. Given its intrinsic value and safe-haven status, there’s no doubt that gold will remain a wealth preservation tool during future crises.

The reaction of the Indian people to a potential gold ban is just the latest reminder of why owning gold is important. Crises do not come along often… but when they do, you’d better be prepared before they hit.

Get A Free Ebook On Precious Metals Investing

You want at least 10% of your investable assets to be in physical gold. However, before you buy, make sure to do your homework first. You’ll find everything you need to know in the definitive ebook, Investing in Precious Metals 101: which type of gold you should buy and which type you should stay away from, where to securely store your gold, why pools aren’t safe places, and much more. Click here to get your free copy now.

© 2017 Copyright Hard Assets Alliance - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable,


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules