Why invest in gold?

Gold currency, like other commodities, can be an exciting and profitable way to invest your money. Certainly the increased popularity of gold has enjoyed in the last few years shows no sign of dipping anytime soon. In fact, most experts agree that gold is nowhere near its peak and there is still large sums of money to be made by investors.

But the thing that separates gold from other investments is its ability to actually be possessed by an investor. Stocks, bonds and other "paper" investments are nothing more than electronic records kept on hard drives in computers. At the end of the day your investment is nothing more than a PROMISE to deliver money at your request. A promise, as many investors have found out in recent years, that cannot always be kept.

 A gold coin, gold currency or a gold bar, however, can be kept in your possession and actually USED AS REAL MONEY if needed. Or it can be sold or traded for a profit. It is the purest form of "real money" in the history of the world and is universally recognized everywhere. This portability, combined with hundreds of years of stability makes investing in gold the single smartest move an investor can make.

Gold Bullion Coins In Today's Investment World

Bullion is a precious metal in its purest form. This term is most familiar when used in conjunction with gold or silver. Gold has been used as a form of tender since the days of Croesus, although those coins were more likely an amalgam of gold and silver. China also has an ancient history involving gold coins as do most modern countries.

A  notable event relative to gold coins came about in 1933 when the United State government, in response to the grim circumstances of the Great Depression, for the most part uncoupled the value of the U.S. Dollar from the value of gold and ordered that gold coins be turned in exchange for paper currency. Most of the coins thus amassed were melted and recast as ingots. The ostensible purpose for this move was to minimize hoarding and to try to revive some economic activity. The thinking was that people would not be inclined to hoard paper money and would be forced either to deposit money in a bank or to spend it.

The purity and durability of bullion lends it to be used as specie but the market driven value of gold now makes this an unlikely use. Gold bullion is often cast as ingots of 400 Troy ounces, about 27.4 pounds, or 12.4 kilograms, so it can be stored by banks or traded among bullion traders. A smaller ingot, weighing 1,000 grams and called a kilobar, is the same bullion in a form that is easier to handle for business transactions.

The gold bullion coin is basically a way to make gold easier to buy and sell, particularly for the small investor. Its designation as legal tender makes transnational movement much easier than it would be otherwise. Such coins are often one ounce in weight - about the size of a silver dollar - and range down to sizes of one-half, one-quarter, one-tenth, even one-twentieth an ounce. The tenth ounce coin is about the size of a dime.   While the commodities market trades in gold futures, it is rare that such a contract would be fulfilled by the delivery of gold. In addition, the desire by some people to have and hold an item of value very often plays a part in the decision to buy gold bullion coins. The coins that are struck as legal tender, have a face value but it is for reference purposes as the underlying value of the gold is much higher. The South African Kruggerand and the Canadian Gold Maple Leaf are two well-known examples of a one ounce gold bullion coin. The Maple Leaf is .9999 per cent gold while the Krugerrand is an alloy with 90 per cent purity; the Krugerrand is an alloy as it was originally created to be circulated as a coin. Both coins are available in fractional sizes of an ounce. Gold is typically sold by the price of gold per ounce.

Since the days of the Nixon administration, it has been legal for Americans to own gold, other than as jewelry. A number of businesses buy and sell gold bullion coins, locally as well as on the internet. As in any such transaction, it is best to know as much as possible about a seller or a buyer if one is seeking to cash in gold bullion coins. The price of gold has climbed quite high in this century as economic turmoil has wreaked havoc on other more traditional investments. Consequently making an investment in a gold bullion coin should only be undertaken with a well established understanding of the price fluctuations that might ensue. Nonetheless, as it has been for two thousand years, gold is a very solid investment.


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Gold: The Key To Financial Freedom And Security

Gold: The Key To Financial Freedom And Security

There are two levers of power that governments never consider giving up - and these are:

1. The state controls education. It is compulsory. It teaches what the state mandates (whether delivered by public or private schools). It is a means of ensuring all citizens grow up with the right mindset - i.e. predisposed towards the very idea of big government, social welfare, taxation, war. In other words the 'Big Brother' mindset.

2. The state issues the money. This is called fiat money - money with no inherent value other than the fact the state declares it legal for all debts and financial obligations. The state then enforces a monopoly on the issue of this fiat money - ensuring it can manipulate it to its advantage.

I could wax lyrical about what I think should happen to state education, but right now I want to discuss government fiat money, and how it is a tool of enslavement. And I want to identify one possible way out of this slavery. But first I should define the term "fiat". From dictionary.com comes the following definition:

1. An arbitrary order or decree

2. Authorisation or sanction: government fiat

So fiat money is money that is declared to be money by the arbitrary order or decree of government.

Government fiat money is the end result of an evolution of money as we know it. And it can be summarised briefly as follows:

Historically, various commodities have functioned as money - that is, as a means of exchange. Some of these commodities have included unique items of special value to certain cultures and conditions, like salt or tobacco. However, historically, only two commodities stand out as having passed the test of time - gold and silver. The reason is quite simple. Both of these metals have intrinsic value and cannot be counterfeited or manufactured at will.

Throughout history both gold and silver have functioned as money. As commerce became more sophisticated, various means of dealing with gold came into being. One such way was to pass on gold receipts as negotiable financial instruments. The process was simple. You stored your gold with a goldsmith who issued you with a receipt for the same. Now you could pass on that receipt to another - and pass on the claim to your gold. In this way gold became the backing for such receipts - allowing for the easy carrying and transferring of value. Of course gold coins were also common - like the cash of today.

This process of privately issuing gold receipts became the basis for what is known today as banking. A bank became a repository for gold and issued bank notes which were redeemable in gold. And in the "good old days" a bank note was a promise to pay - a promise to pay a certain amount of gold (or silver) on demand.

Today we still have bank notes - but they are mostly issued by the state (not by private banks), and they have no redeemable value other than in exchange for another, similar, bank note. The link between gold and bank notes was broken with the abolition of the gold standard. The USA abolished it in 1933 and Great Britain abolished it in 1931. The paper money we have today is a ghost of its former self. If you walk into a bank now and ask to exchange it for something other than another note, I'm sure you'll get a very strange look!

The value of the notes you use every day is arbitrarily determined by the state, and by its capacity to disallow any monetary competition. It is this monopoly on the issuance of what we use as money, and the state's ability to determine the value of it, which is at the heart of the state's power. With this power, the state can literally manipulate the money supply for its own ends. It can "cook the books" in a way that a private company could never do. It can use this power to ensure it stays in power. And it can even steal the money you have saved by inflating the currency - i.e. by lowering its value over time.

How to break this monopoly?

Frederic Hayek, the great Austrian School economist, posited the idea of competing currencies. What he meant was that if each nation allowed for the free use and exchange of currencies from different nations within its own national borders - then this would act as a disincentive to debase currencies via inflation.

On a day-to-day basis this would mean you could go shopping and use the currency of your choice - USD, EUR, HKD, AUD, RMB etc. It may be a bit of a headache for your local shopkeeper, as he or she would have to deal with such multiple currencies at the cash register. But it's not impossible, and many duty-free stores around the world already deal in at least the main globally accepted fiat currencies. All that would be needed is a smart cash register that can handle multiple currencies.

This scenario would eliminate the monopoly nature of currency as it stands now. However, it would not address the nature of fiat money as such. It would not deal with the issue of value, and how it is determined.

There have been many suggestions as to how one could move forward to a free market money system - one where the government has no control over the money in circulation. Some of these are very interesting, and some have a look of quackery about them. But there is one way of achieving this which would be based on historical experience and on a proven track record. And that is a return to the use of gold in some form or another.

Gold is not created by the government. Gold is not inflated by the government. Gold has intrinsic value. Government fiat money has none. And gold has stood the test of time as a trusted medium of exchange. What's more, the modern digital age has created the means to deal in gold without actually having to cart it around in your pocket.

With online services like E-gold, Pecunix and GoldMoney, you can store gold and use an online interface to transfer gold to others - similar to online banking and making it a form of offshore banking. The difference is you literally own gold, something of intrinsic value. You can also own gold by holding a receipt for it - giving you ownership of real gold, without having to physically store it. And of course you can own gold by purchasing bullion - either in bars or coins.

Naturally, gold is valued by comparison to various fiat currencies, primarily the US Dollar - and as such its value fluctuates day to day. Of recent times this fluctuation has been mostly up, as gold continues to increase in value, in comparison to the world's paper currencies. This is another way of saying that fiat currencies are less trusted than gold. Gold is also the financial haven of last resort, for when the financial world starts to shake and jitter, people rush to gold. Why? Because they know that should paper currency plummet in value - even to zero - gold will hold its value.

There are a number of savvy financial experts and investment newsletter writers who are pushing the case for gold - as a means of protecting yourself from a potential future economic meltdown. People such as Bill Bonner, Peter Schiff and Doug Casey come to mind. But there are many more. The common theme amongst these financial commentators is that fiat money is headed down - and gold is headed up.

However, the true benefit of gold is the freedom it grants. Gold is a form of money which is out of state control. The state cannot inflate the gold supply. It cannot make more gold. It cannot determine the value of gold. In this way gold is a true free market financial instrument - and as such is a present and existing means of increasing both your personal and financial freedom.

Yes, perhaps there are better and more innovative ways to achieve freedom from the state's control of the money system, but gold is here and now - and in the present economic environment it is likely your best bet to avoid the potential ravages of inflating paper currencies which are looming on the horizon.

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David MacGregor has been active in the offshore world since 1998 and lives the Internationalist lifestyle he writes and advises about. He operates a private information service for those seeking more personal and financial freedom, and offers a free introductory e-course called the FreedomShift, which is available from: http://www.sovereignlife.com