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Tuesday, December 12, 2017

How Gold Could Fix Turkey's Currency Issue

Forbes' Steve Hanke believes gold could make the Lira a worthwhile currency.


According to Forbes contributor Steve Hanke, Turkey's currency continues to serve as its country's Achilles' heel. Despite the Turkish president's political maneuvering, Hanke claims in a recent article that there is no hiding the truth from the Turkish people: the lira is effectively a junk currency and a bad choice of wealth storage.

In the article, banking data shows up to 70% of deposits in Turkey are made in a foreign currency. The lira has been on a declining trajectory since 2008, and the Central Bank of Turkey was forced to replace its diminishing foreign assets with lira denominations, further complicating affairs.

Hanke believes that, in order for the country and its President to yield real power, these rampant currency issues need to be fixed. And despite the extent of Turkey's currency struggles and the length of time that they stretch, the solution might be a simple one.

The lira could be made into a worthwhile currency, says Hanke, by attaching a gold standard to it. Although some show no recollection of it, Hanke reminds us that gold was a central part of money until the 20th century, owing in no small part to its ability to preserve purchasing power.

Ever since gold was abandoned by the official monetary system, the article states that there have been calls to restore it to its former role, with some predicting that the yellow metal is bound to return. To Hanke, the most infallible way of using gold to back Turkey's economy is in the form of currency boards.

These boards have existed in some form in over 70 countries and, when applied correctly, allowed for increased financial discipline and higher growth as opposed to a system revolving around central banks.

The article reads that, for optimal effect, the currency board would be stationed in Switzerland to improve regulation, and its purpose would be to issue notes and coins wholly backed by gold reserves. Furthermore, the issued currency would be convertible to gold by Turkey's citizens upon request and without fee.

Independent from Turkey's politics, Hanke's proposed board would alter the country's everyday financial dealings without assuming the burden of the government's obligations. And, so as to remove any doubt over bullion coverage, the physical gold tethered to the board's denominations would be held in an internationally-certified gold warehouse or a similar institution.

With the added flexibility of choosing whether the currency board would be government-run or private, Hanke believes that Turks would have an all-encompassing way of returning to a system that is proven to create more stable and organized economies.

Tuesday, November 21, 2017

Seeking Alpha Writer Sees 2 Drivers That Could Send Gold Prices Higher

Gold prices could steadily rise in the short term and long term.


Seeking Alpha's Clif Droke sees two solid drivers that could send gold prices higher, one in the shorter term and one over the long-term.

The short term driver is a potential reignition of safe-haven demand due to a build-up of weakness in stocks.

Some have expressed concerns that the stock market's run is built on overly-optimistic projections, and the recent surge in 52-week lows posted by NYSE-listed stocks corroborates this. In this article, Droke expresses that the broad market faces internal selling pressure, and a continuation of this weakness could lead to a familiar flight to the safety of gold as stock market indices slump.

As his long-term driver, Droke points to an unusual combination of fear and inflation expectations. While these might not seem to go hand-in-hand, Droke argues that they have been the yellow metal's biggest backers since last year.

After a jump in prices brought on by the merciless campaigns of both presidential candidates, gold assumed a downwards trajectory when Donald Trump was elected in November. The "Trump bump" saw investors abandon safe-haven assets in order to load up on equities, riding on the promises of a stronger and more stable economy.

However, the article points out that this faith has since largely evaporated amid political concerns, including uncertainty over Trump's tax plan and its ability to stimulate the markets. A strong booster for gold on its own, political uncertainty in the U.S. is aided by inflation expectations, which Droke feels are significant enough to facilitate a gradual increase in gold prices.

While the markets aren't expecting high inflation in the near future, Droke reminds us that present-day inflation is still markedly higher than it was two years ago when deflation was on the horizon. Furthermore, signs such as a lessened appetite for money point to an upcoming increase in U.S. inflation.

Droke notes that the demand for money was at its highest immediately after the credit crash as the world economy looked to rebuild itself. Since then, economies around the world have improved, led by developed Asian countries – in turn, demand for money has subsided as investors braced for higher inflation, improving the outlook for gold over the longer term.

Despite recent dips, Droke points out that the gold price is far above its December 2015 lows and is closer to its 4-year high than it is to the low. Cracks in the equity market, concerns over the U.S. political situation and a rise in inflation expectations should provide ample support for the yellow metal moving forward.

Wednesday, November 1, 2017

Why Iran Should Go For Gold

Forbes contributor Steve Hanke sees gold as an optimal solution for Iran's economic problems.

iran should go for gold

As Iran toys with the idea of a change in currency, Forbes contributor Steve Hanke refers to the slated reforms as nothing more than "a great illusion". According to the bill passed by Hassan Rouhani's government last December, Iran's national currency would be changed from the rial to the toman. This would also require a reduction of Iran's unit of account, since one toman equals ten rials.

Hanke states this is merely another cog in the engine of Iran's economic dysfunction, a problem that has persisted since the Islamic Revolution of 1979. Since then, the rial has officially lost 99.8% of its value as the country continues to struggle with high inflation. Although official figures place the annual inflation rate at 9.6%, Hanke estimates it closer to 20%.

The article clearly shows that something needs to change with Iran's economic system. Adopting a foreign currency such as the U.S. dollar or the euro would be one way to fix the currency issues, but Hanke points out the solution is politically unacceptable.

And while it might seem that there is no easy fix to Iran's economic problems, Hanke believes that the optimal solution is simple and unjustly overlooked: a return to the gold standard.

The article states that the reintroduction of gold as currency has been a talking point for some time now – going back as far as 1997, Nobelist Robert Mundell predicted that the yellow metal would return to its role in the international monetary system in the 21st century. Hanke notes that, since President Nixon abolished the gold standard in August of 1971, many have described the international monetary regime as a chaotic non-system.

Out of the various methods of implementation, Hanke sees gold-based currency boards as the most prudent choice – currency boards have been implemented by over 70 countries and have generally contributed to the fiscal discipline, price stability and growth rates in related countries.

The gold currency unit issued by this board would have to be fully backed by gold and fully convertible to gold at a fixed rate on demand, rendering it immune to manipulation. Hanke outlines a proposition that includes the creation of a Swiss-based Iranian board whose purpose is to issue coins and denominations while maintaining enough bullion to allow convertibility.

The proposed board would be unable to increase liabilities without appropriate backing by gold or foreign exchange notes the article, and it would also be independent from the financial obligations of Iran's government.

As Hanke explains, a gold-backed solution is elegant enough to be accepted by the Iranian government without appearing as a concession. Whether such a system is adopted remains to be seen, but there is little question that it would be more effective than the inconsequential reforms suggested by Hassan's government.

Thursday, October 12, 2017

Newly Released Gold Twin Maples Available Only Through Birch Gold Group

A new beacon of value.

gold canadian twin maples coin

After being named the sole distributor of the Silver Twin Maples coin in 2017, Birch Gold Group is proud to announce that it will also have sole rights to distribute the Royal Canadian Mint's (RCM) newest piece, the Pure Gold Twin Maples. Like its silver cousin, the Gold Twin Maples is the successor to a highly-acclaimed coin that has exceeded the RCM's expectations time and again.

"For decades, the Canadian Gold Maple Leaf has been considered one of the most preeminent gold bullion coins in the world. We're thrilled to be able to offer to our customers a coin to follow in this pedigree, and believe that demand will be very high," says Peter Reagan, financial market strategist with Birch Gold Group.

Investors and collectors that have come to cherish the Canadian Gold Maple Leaf for its valuable properties will find a new beacon of value in the Gold Twin Maples coin. When designing the coin, the Royal Canadian Mint sought to make its value immediately apparent. Celia Godkin, a renowned artist responsible for the appearance of several RCM coins, adorned the Gold Twin Maples with a reverse proof finish and a serrated edge that pay tribute to the coin's background while giving it a modern appearance.

The obverse features a familiar portrait of Her Royal Highness Queen Elizabeth II, while the reverse bears the mark of Canada's native sugar maple tree. A closer look at the coin will reveal two cutting-edge security features that contribute to the coin's exceptional design: a micro laser engraving of a twin maple leaf and precise radial lines.

Following in the footsteps of one of the most popular precious metals coins in circulation, the Gold Twin Maples had to serve as an example of purity and value. The 99.99% gold content of the coin will ensure that it does just that, while its dimensions will make the coin available for addition to any portfolio or collection.

With a diameter of 20 mm (0.78 inches), a weight of 1/4 ounces (7.7 grams) and a face value of CAD $10, it's clear that the Royal Canadian Mint aimed to create an all-purpose gold coin with all the flair of its predecessor. And with the option to include the coin in a precious metals IRA, no investor will want to pass up on the opportunity to acquire the Gold Twin Maples.

To learn more about this new coin, exclusive to Birch Gold Group, visit www.birchgold.com.

Tuesday, October 10, 2017

Trump's War Position Poses as Big Reason to Own Gold

Unlike his predecessors, Trump shows lack of hesitation in waging war against North Korea.


As far as MarketWatch contributor Howard Gold is concerned, Donald Trump is the biggest friend gold bugs have had since President Nixon decided to abolish the gold standard in 1971. In a recent article, he writes that the reason for this lies in Trump's lack of hesitation to wage war, even nuclear war, against North Korea, as opposed to focusing on diplomatic solutions.

Trump's recent statement towards Secretary of State Rex Tillerson, in which the President said the latter is wasting his time trying to negotiate with the Asian nation, serves as the perfect example of his battle-ready stance says Gold.

He compares Trump's feud with North Korea's leader Kim Jong-un to the President's goading of rival candidates during the 2016 presidential race. However, the implications are far greater: not only does Kim command a nuclear arsenal that many think poses a serious threat to the U.S., but some also fear that the totalitarian leader might be dangerously unstable.

Gold notes that Trump's predecessors showed a willingness to negotiate with North Korea, aware of the danger that the country could pose if provoked. Trump, however, seems ready and willing to engage in war.

The article also states that the way the current President is handling Iran – another country with a developing nuclear arsenal – also raises concerns. According to Trump, the Iran nuclear agreement, which was designed to keep the Islamic Republic's nuclear weapons under control, is "one of the worst and most one-sided" deals ever – he went as far as to say he'd declare Iran out of compliance with the agreement, despite his own administration confirming the opposite.

Trump's back-and-forth with North Korea's foreign minister, with neither party showing a willingness to back down from the notion of war, only added fuel to a fire that could engulf several nations and plunge them into conflict on an unseen scale.

According to Howard, there is currently no better argument to own gold than Trump's stance. He warns that the risk of war is far greater than either Wall Street or Trump's supporters would like to admit, placing the chance of conflict on the Korean peninsula between 25%-50% and the likelihood of nuclear war in Asia between 10%-20%. He suggests, with odds like these, allocating at least 5% of one's portfolio to physical gold is the safest decision one can make. Bullion won't prevent a cataclysmic event from happening, but it's going to serve as insurance during a time when it's needed most.


Tuesday, September 19, 2017

Author and Precious Metal Broker Shares Reasons Behind Gold's Rise

Appetite for physical gold on the rise even after reaching one-year high.

gold on the rise

Official figures, such as soaring prices and volume metrics from precious metals companies, offer some indication of gold's appeal. To author and precious metals broker Bill Holter, however, a more telling sign that the metal is making strides is the burst of interest from first-time investors.

This, Holter told KamloopsBCNow, means that people are finally understanding the volatile nature of currencies and the difficulties of storing your wealth loss-free.

According to Holter, appetite for physical gold has been on the rise even during bearish stretches, and it hasn't dwindled as gold reaches its one-year high.

The analyst believes that money printing is reaching a boiling point and could trigger a monetary reset – in this new world, gold will stand out as one of the very few assets that kept its value through the turmoil.

"We are headed for a monetary reset and the reason we're headed for a monetary reset is there's too much debt outstanding that cannot be paid on the current terms. When I say current terms, I'm talking about with current purchasing powers of the various fiat currencies (or paper money)," Holter explained.

The article states that, as opposed to traditional investments, gold serves as a guarantee of capital preservation, one that offers bullion owners peace of mind in any scenario. One major upheaval could happen due to the piling of credit – Holter says we're in the largest credit bubble in history and that, when it bursts, currencies will go with it.

Part of why gold retains its value so well is that it's finite, as opposed to currencies that governments have been printing carelessly since 2008-2009.

"The amount of gold outstanding and produced since then shows that gold is way, way cheaper than it has been in maybe ever. Gold is extremely cheap in relation to money supplies, in relation to debt outstanding," said Holter. "There's obviously uncertainty in global markets and you're seeing a flow into gold from all over the world - not just the U.S.. It could be looked at as a flight out of fiat currency."

Holter also shares the view of some investors that gold and silver could become scarce due to limited supply – a view that could have significant influence on market sentiment. "There's no way to tell. There's no way to tell where the bottom of the barrel is - logically - the western supplies have to be getting short," said Holter of the gold supply. And while he's bearish on all currencies, Holter is especially negative on the U.S. dollar, which he believes will lose out to the Canadian dollar as the latter is part of a resource-based economy.

Thursday, August 31, 2017

Doomsday Clock Reinforces Need for Safe Haven

Global tensions increase appetite for safe-haven assets such as physical gold.


Somewhat forgotten in recent times, ValueWalk writes that the concept of the Doomsday Clock has flared up once again, due to the possibility of nuclear war between the U.S. and North Korea. The last time the clock ticked so close to midnight, they say, was 1953, when the Soviet Union tested its hydrogen bomb.

But tensions with North Korea aren't the only thing that has investors worried, the article notes. Political uncertainty in the U.S., a weakening dollar and ongoing terror attacks have all helped reinforce the value of safe-haven assets such as gold.

The metal reestablished itself in the financial crisis of 2008-2009, when the world's stock markets fell by about 50%, or a total of $34 trillion. During this time, gold helped savvy investors stay afloat due to the negative correlation that it often has with stocks. And it did more than just shield those who owned it; between 2007 and 2009, gold rose from $670 an ounce to $938 an ounce, amounting to a gain of 40%.

Gold's bull run continued after 2009, as governments around the world flooded their economies with money in a post-crisis environment. By 2011, the metal rose past $1,900 an ounce, posting its all-time high.

The article goes on to state that the money printing that allowed gold to reach peak levels shows why the metal continues to hold its value while currencies rise and fall. Unlike paper money, gold is finite, which means governments can't simply add more gold to the system as desired.

This is why, the article argues, the gold standard can't be restored: there is simply too much money in circulation compared to the finite supply of gold. It's also why the price of gold has close to doubled in the last decade, a trajectory that the metal is all but guaranteed to continue on.

Although the gold standard was abandoned in 1971, its proponents maintain that out-of-control money printing will end in disaster. It already had catastrophic results in France, China and Germany, and Zimbabwe and Venezuela are recent examples of paper money becoming worthless due to irresponsible actions from the government.

The article concludes by reminding readers that in all of those examples, those with a significant allocation to gold remained largely untouched by the consequences of central bank manipulation. And, they believe that the same will be the case when the next crisis hits, regardless of the direction it comes from.