Getting Gold Back Into the System

Getting Gold Back Into the System
American Eagle and South African Krugerrand gold bullion at the Chicago Coin Company in Chicago, Ill., on May 11, 2006. Monetary Metals, Inc. wants to make gold useful in the economy again. Scott Olson/Getty Images
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There are people who think the financial system based on the dollar will collapse sooner rather than later. For this event, they are hoarding gold, silver, and sometimes guns and canned food.

“If people lose confidence in the other forms of money, they'll go to gold,” said James Rickards, author of “The New Case for Gold.

“Sometimes gold rallies because it’s an inflation hedge, which it is, but gold can also be a deflation hedge. But most importantly gold is money, and when I see the dollar price of gold going up in this environment, it tells me that people are losing confidence in central banks, thinking of gold as money, thinking they want to allocate part of their portfolio not to dollars, or yen, or euros, or yuan, but to gold.” Rickards recommends a 10 percent allocation to physical gold to protect the investor from extreme economic risk.

The problem with this strategy is that hoarding gold outside the financial system in safe deposit boxes, or by burying it in the back yard, is akin to taking your chips off the poker table and going home. You are not participating in the economic game anymore.

Gold jewelry and other artifacts in a treasure chest. (Forrest Fenn via AP)
Gold jewelry and other artifacts in a treasure chest. Forrest Fenn via AP
Valentin Schmid
Valentin Schmid
Author
Valentin Schmid is a former business editor for the Epoch Times. His areas of expertise include global macroeconomic trends and financial markets, China, and Bitcoin. Before joining the paper in 2012, he worked as a portfolio manager for BNP Paribas in Amsterdam, London, Paris, and Hong Kong.