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Coins & bullion since 1973





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Discussion Topics -- May 19, 2014
Peak Gold
Low Interest Rates Forever?

(May 19, 2014 discussion)

"Owning gold isn't about the price. Trading it is. Owning gold is all about possession."

Yesterday (May 19) marked the signing of the 4th Central Bank Gold Agreement. While such an agreement appears superfluous as Central Banks have been net buyers of gold for 4 years now, and the limits on sales from the 3rd agreement were functionally meaningless, it was the statement that "Gold remains an important element of global monetary reserves," that caught our eye. Here in the US, and in western economies in general, we've spent the better part of most of our lives hearing that gold is a 'barbarous relic' that serves no functional role in modern finance. It would seem that Central Banks around the world disagree with such a notion. Of equal interest is the supply picture for gold both looking back and moving forward. It is nothing short of ironic that more gold has been mined over the past fifty years than in the roughly 3000 years of civilization preceding it. Of course this flies in the face of the barbarous relic moniker, but also highlights an interesting takeaway from this year's CBGA. It would appear that, more than ever, possession of gold is what matters. One look at the supply picture moving forward magnifies this even further. There is no denying the fact that the easy gold (as we know it), is gone. Gone are the miles long gold fields in South Africa, the big nuggets of California. More and more, it takes processing hundreds of tons of rock just to pull a single ounce of gold. The CEO of Natural Resource Holdings, Roy Sebag, compiled a report a couple of years ago looking at in ground deposits of all major mining companies to determine when we might hit "Peak Gold" - the moment when production hits a max, and begins to decline. His research concluded, that at current rates, peak gold would be reached sometime in the next 7-10 years. Is there a connection between this reality, the growing demand from Asian countries, and the unwillingness of Central Banks to part with gold? It would sure seem logical enough. Meanwhile, here in the states, we're being given plenty of reasons to look at precious metals. Though the prices have been range bound for the better part of a year now, the housing market is showing increasing signs of froth, the stock market is inconsistent, and a near permanent commitment to low interest rates is destroying the bond market. One could very easily argue that the only undervalued asset class is precious metals. 31:29 Minutes, with Jonathan Kosares, Peter Grant and George Cooper.

"The point of owning gold is NOT to get rich but to stay rich, and sometimes, simply by staying rich, you can become very wealthy indeed"

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Coins & bullion since 1973

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