Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Cash Usage Down, Gold Correspondingly Up?

Commodities / Gold & Silver 2019 Apr 03, 2019 - 02:28 PM GMT

By: Arkadiusz_Sieron

Commodities

In February, the World Gold Council released the newest edition of Gold Investor. What can we learn from the report? Let’s discuss gold’s role in the onslaught of the cashless society, its role as a portfolio diversifier, reverse asset and source of liquidity.

Rogoff Wants Cashless Society, but Appreciates Gold

As a lot has happened recently, we didn’t have time to analyze the latest Gold Investor edition. Let’s do it today, starting with the cover article about Rogoff’s call for cashless society!


Cash is in decline. According to the report, in the US, the share of all legal transactions by value conducted in cash decreased from 35 percent at the turn of the century to just 7 percent today. And it is expected to fall to around 2 percent in the next decade. For some economists this is a positive trend, as in the cashless society there would be less crime, while monetary policy would be more effective. For example, Ken Rogoff, a famous American economist, argues in the cover article that “being able to introduce effective negative interest rates is very important, at certain times. And it would be much easier to do so in a cashless economy.”

Sounds scary, doesn’t it? Apparently the zero interest rates policy was not enough, so technocrats are ready to support the abolition of cash because it would facilitate the introduction of negative interest rates. At least Rogoff appreciates gold’s unique role as a monetary asset. He also correctly notes that the move towards cashless society, and interest rates below zero, could increase the appeal of gold as a store of wealth:

As we have less and less paper currency, there will still be a need to store wealth, to have privacy and to carry out transactions between parties who don’t trust one another – gold fills that role. It’s probably the best substitute for paper currency so it’s hard to imagine its transaction value won’t go up over time.

Moreover, Rogoff notes that gold is a portfolio diversifier. He believes that emerging market central banks should increase their gold reserves by several percentage points, amid shrinking share of the US in the global economy and rising federal debt. Individuals also can use gold as a safe haven in difficult times, such as high inflation or negative interest rates implemented to get out of debt trap:

As a hedge, gold has enormous value. You never know what’s going to happen and when something really bad happens, gold is probably going to be worth a lot to you. So it makes sense for high net worth individuals and perhaps even for some pension funds to hold a small percentage of their assets in gold.

Gold’s Perspective on the Decade after Lehman Brothers’ Bankruptcy

There are a few other interesting article in the February’s Gold Investor. For example, in an article about central banks’ purchases of gold, Ezechiel Copic notes that central banks are among the world’s largest investors in gold, with total holdings of more than 30,000 tons. And that they are increasing their gold reserves still further, while many central banks (Poland, Hungary or India) returning to the market after multi-year absence.

Loy Cheow Chew writes about another potentially important player in the gold market: the sovereign wealth funds. He argues that they should allocate higher percentage of their holdings to gold, as the shiny metal “can provide a potential hedge against calamity, today or in the future. After all, (…) a currency is just an IOU. Gold is a permanent asset.”

And there is even a piece about gold’s role in a low-carbon economy. The author’s conclusion is that gold’s overall carbon footprint is relatively small, which constitutes another argument for adding gold to the portfolio.

However, what we found very insightful was the article about the gold’s perspective on 10 years after the bankruptcy of Lehman Brothers. The author reminds, as we also repeatedly do, that gold fell in the fourth quarter of 2008, as the dollar strengthened and gold was used as a source of liquidity. The reason is that in crisis cash is king – investors’ first instinct is to sell assets and accumulate US dollars.

However, as soon as in the first quarter of 2009, gold was comfortably above its pre-crisis level and ready to rally further. Although the price of gold started to decline in 2013, the lasting legacy of the Great Recession was that the yellow metal has become a more mainstream asset. Glad to hear that!

Thank you.

If you enjoyed the above analysis and would you like to know more about the gold ETFs and their impact on gold price, we invite you to read the April Market Overview report. If you're interested in the detailed price analysis and price projections with targets, we invite you to sign up for our Gold & Silver Trading Alerts . If you're not ready to subscribe at this time, we invite you to sign up for our gold newsletter and stay up-to-date with our latest free articles. It's free and you can unsubscribe anytime.

Arkadiusz Sieron

Sunshine Profits‘ Market Overview Editor

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Arkadiusz Sieron Archive

© 2005-2019 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