March 16, 2016

Your Personal Gold Standard

An excellent article why gold and money is the same thing and why prices rise or fall

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Gold is the same. It has no yield. An ounce of gold today will be an ounce of gold next year and the year after that. It will not mysteriously turn into two ounces. It will not rust or change shape or color. It is just gold. Yet it is money.

It’s true that the value of gold may change when measured in dollars. It is also true that the value of a dollar may change when measured in euros or ounces of gold. But these changes in relative value do not turn these units into investments; they just reflect supply and demand for different forms of money.

There isn’t a central bank in the world that wants to go back to a gold standard. But that’s not the point. The point is whether they will have to.

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It’s like putting a thermometer in a patient, getting a 104-degree temperature and blaming the thermometer. The thermometer’s not to blame; it’s just telling you what’s going on. Likewise, the price of gold is not an economic object or aim in itself; it’s a price signal. It tells you what’s going on in the economy. And gold at the levels I’m talking about would mean that you’ve now verged into hyperinflation, or something close to it, because nothing happens in isolation.

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But if there’s a run on paper currencies (which is entirely possible) and there’s borderline hyperinflation (which is entirely possible), they may have to go to a gold standard… Not because they want to, but because they find it necessary to calm the markets.

I suggest you buy your gold at current levels — around $1,244 — and ride the wave up to these much higher levels ($4,000-5,000 an ounce) and then assess the situation. Be nimble.

Read complete article at http://dailyreckoning.com/your-personal-gold-standard-2


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