Gold - Commodity With Outstanding Benefits

Gold, chemical symbol Au (from Latin aurum meaning “shining dawn”), boasts a fascinating monetary history. The precious metal has been money for more than 5000 years.

The desire of gold is not for gold. It is for the means of freedom and benefit. Ralph Waldo Emerson, American philosopher

Gold Is Everlasting Money

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And it still is. Gold was used by the greatest civilizations on Earth, such as the Sumerians, Egyptians, Minoans, Greeks, Romans and many more. It has survived authoritarian regimes, cruel dictatorships, endless conflicts and ruthless wars, economic hardship, stock market crashes and even the Great Depression in 1929. Currencies may come and go, but gold always remains precious. JP Morgan, founder of today’s biggest US bank stated that “gold is money. Everything else is credit.”

Gold Is Precious Because It Is Limited

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From 1944 to 1971 the gold standard (“Bretton Woods”) entitled every citizen to exchange American Dollars for physical gold. Thus, paper money was “backed” by a commodity with intrinsic value. In 1971, however, the US Administration needed more money for the war in Vietnam, so their central bank, the Federal Reserve started printing bank notes.

The problem was that they actually printed more money than the gold in their vaults could ever back up. Consequently, the gold standard was replaced by the fiat money system, which is based on nothing else but trust and faith (Latin: fiat).

Fiat money can be printed without limit, gold is a limited precious metal and cannot be multiplied by humans: it takes a lot of work and energy (i.e. money) to dig it out of the earth. That’s why gold will never be worthless and holds intrinsic value.

Gold Is an Insurance

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Think of gold as an insurance within the financial system. In times of crisis and economic hardship it can serve as a medium of exchange worldwide. People can lose faith in fiat money, but they won’t lose faith in a precious metal with intrinsic value.

Private banks can run out of money or close your bank account. Governments can go bankrupt. Central banks can print money and cause hyperinflation.

Monetary reforms can destroy your life savings. In June 1948 all German citizens lost 90% of their nominal assets because the government pushed through a nationwide currency reset. Owning gold, you are safe and sound. It is an independent store of value no matter what happens on planet Earth.

Gold Can Not Be Taxed When Inherited

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In many countries around the world, citizens are to pay inheritance tax when they pass away. In Great Britain for instance, the magic number is £325,000. It is set by the government and called “nil-rate band”.

Above that amount of money, anything you leave behind is subject to a 40% tax rate. So, if you leave behind assets worth £400,000, you pay nothing on the first £325,000, but still 40% on the remaining £75,000 - which is a total tax amount of £30,000. Owning gold, you never lose money to the government.

The taxman can see your bank account statement, but he cannot see the shiny treasure you keep in a safe place.

Gold Is a Cultural Tradition

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In many emerging countries such as China, India, Russia or Turkey, gold is deeply rooted in society. On important occasions people give it away as a gift or for later retirement.

Whenever the Chinese celebrate their New Year festival, the demand for gold exceeds the supply in the market. Consequently, the price of gold usually goes up. On Indian weddings, the average amount of gold bought for each ceremony is roughly 1 ounce.

With a staggering 10 million weddings a year, the demand for gold is 300 to 400 tonnes. Regarding the future of gold you can be sure of one thing: With a rising world population the demand for gold will surely grow.