Welcome to the FGMR website! Having published my paid subscription newsletter from 1987 to 2009, I am pleased to now offer these same commentaries, market insights and more in this free, online report – the Free Gold Money Report.
My objective is to share with you my views on gold, which in recent decades has become one of the world’s most misunderstood asset classes. This low level of knowledge about gold creates a wonderful opportunity and competitive edge to everyone who truly understands gold and money. It is my aim to help everyone – whether you are a novice investor or an experienced trader – who follows these commentaries to take advantage of the opportunity gold now offers.
I approach the gold market from two different perspectives. The way to use these commentaries depends upon which of the following groups you belong:
a long-term investor who views gold as money, and is accumulating gold as a form of savings in order to protect the purchasing power of what they save.
short-term traders who aim to profit from swings in gold’s “exchange rate” if they view gold to be money (as I do), or gold’s “price” if they view it to be a commodity.
Everyone needs some savings, whether for a ‘rainy day’ or to build up some cash prior to making a purchase or an investment. Given these purposes and particularly the importance of having a ‘nest egg’ to protect you and your family from an uncertain future, never put your savings at risk. Unfortunately, this important principle is often overlooked today in two different ways.
First, there is counterparty risk. Wealth comes in two forms – tangible assets and financial assets. When you own a tangible asset, like physical gold, there is no counterparty risk. The usefulness of the tangible asset is not dependent upon any counterparty, which is the case with financial assets. For example, the money you have in a bank is only as good as the financial capacity of the bank or the government guaranteeing that deposit to return your money to you when you choose to spend it or ask for it in cash. Given the excessive amount of promises issued in recent decades, counterparty risk has grown substantially, as evidenced by the world’s financial problems beginning in 2007.
Second, there is purchasing power risk. In other words, do not measure your savings in terms of dollars, euros, pounds or any other national currency. Measure your savings in terms of purchasing power. The following chart illustrates this point.
Crude oil is becoming more expensive when its price is measured in terms of dollars and other national currencies. But the price of crude oil is essentially unchanged since 1950 when its price is measured in terms of gold. Had the gold standard not been abandoned in 1971, nobody today would be talking about the rising price of crude oil simply because the price of crude oil would not be rising.
While the loss of national currency purchasing power is clear from the above long-term chart, the following table illustrates just how poorly national currencies have done in recent years.
There are some important points to make from the above table.
Gold has appreciated against all of the world’s currencies, or in other words, the purchasing power of all the world’s currencies have depreciated against gold’s purchasing power. National currencies are not a safe haven.
Gold is often accused of being volatile. In fact, in a world of fiat currencies backed by nothing but government promises, the volatility actually comes from these currencies bobbing up-and-down relative to each other. Note the consistency of the depreciation of these currencies against gold, which appreciated from 10.6% to 17.1% per annum.
The important point is that all national currencies are sinking relative to gold, but they are sinking at different rates. In the above table, the Swiss franc is the best currency (losing the least amount of purchasing power), and the British pound is the worst (losing purchasing power the fastest).
Thus, gold best meets the needs for saving money. Physical gold does not have counterparty risk, and gold preserves purchasing power over long periods of time.
Trading is not for everyone. It is risky and requires special skills, particularly the self-discipline to exit a trade when your stop point is hit. But if you have these skills and the resources and knowledge necessary for trading, my periodic market comments may be useful to you.
To see the record of my past trading results published in my newsletter as well as my current recommendations, click here.
I have put the above insights about gold and money into practice, and even founded a company, GoldMoney to help you accumulate physical gold, silver and platinum. My objective and my hope is that this website and GoldMoney will be helpful to you in making financial decisions to prepare for the future.
Note: This article is based on my presentation to the Mines &
Leverage is the use of credit or borrowed capital to increase the