> Gold is money, which is based on physical ownership, not on trust in the willingness and ability of another party to honor their promises. If you have gold, but you do not have it under your control, it is almost pointless to have gold.
Really digging this one. That's why I proactively not listen to investors/consultants who suggest to buy some gold derivates for savety purposes.
In other regards: What's the point of the author? That's how the "king's peace" works since forever. Having the biggest stick and control over the valuable stuff makes you the king. And as long as you provide a stable leadership live of people is mostly peaceful. That's why people are willing to accept this trade. It's unfair but we actually want it that way. And what should the others do? Say "yeah, we totally accept that he has us by the balls"? No they act like it would be their decision so that they also keep some of their own power.
It seems the author is smart enough to know all this, so seriously: What's he attempting to achieve here?
My read on it was that the Author is saying that maybe there is more truth to the conspiracy theories that America has looted everyone's gold out of the Fed for its own purposes than you might think.
His reasoning appears to be, "If the world is, as the Fed presents it, then we should be able get our gold back. But we can't." and then notes agencies that the auditing agency that was aggressively pushing even an accounting of the available gold has gone silent implying they have been made complicit somehow in the conspiracy.
Here on the outside we can't really know what is going on of course. And frankly if it got out that 1200 tons of gold was on the move I could imagine that would be a tasty target even for nation-state level thieves. But I also found it interesting when the Economist and others reported that the Fed was refusing to let auditors verify their gold deposits. That is a question that really needs an answer and we haven't gotten it yet.
Gold sort of works for sovereigns. It's crap for individuals. Any situation where you need to rely on physical gold is a situation where someone else will take it from you by force.
I have been to the NY Federal Reserve Building and seen much of the gold - from the outside of the open door of the vault. This is the highlight of the public tour of the FRB in lower Manhattan. There are many different cages inside the vault - some containing just a handful of bars, and some with gold stacked near to the roof. But we are not told which cage corresponds to which country - that information is secret.
All the bars look identical, to me anyway - there are no stacks of coins or goblets etc. that I could see. (Not all the cages are visible from the vault entrance).
The Fed states in the tour that sovereign nations can keep their gold in the vault, virtually free of charge. And take it back at any time. This is basically a service to the world that the US has provided since the second world war, when much of Europe wanted - for obvious reasons - to move their gold to a safe haven.
As the Federal Reserve is a very secure place, and great value for money, I think most nations have been fine to use that - much cheaper and easier than building a facility that is equally secure.
So personally I'm not sure about the conspiracy theories saying that the Fed refuses to release the gold; to me that is easy for any nation to test - just ask for it, it could be done publicly except that you signal to any thief the date/time of when to attack :-)
Gold is no longer tied to power. Real estate now defines who is to be king. Look to the wealth funds of the middle east. They dont trade oil for gold these days. They buy land, the real international currency. The man with the most diversified land across many countries is king.
It seems the author is smart enough to know all this, so seriously: What's he attempting to achieve here?
Telling the truth. If there's a doomsday scenario USA might refuse to hand you the gold. He's saying that gold not in your hand is not really gold, because when you might need it everyone else will and they have it.
This puts me in mind of the rai stones of Yap, and particularly of one that was lost at sea, but which continued to be used in transactions because of a general agreement that it still existed and so its ownership could be recognized.
> The US had paid for its imports with pieces of paper on the promise, that these pieces of paper were as good as gold and would be exchanged for gold at a fixed rate upon request. In 1971 Nixon just said screw you, you can keep those papers and we will keep your commodities and the gold. We stayed friends anyway. We had to.
It's a bit more complicated, isn't it? Wasn't it West Germany, in May 1971, that said "screw you" to the US and the Bretton Woods system (the same system that helped them rebuild their economy after the war) and performed a competitive appreciation by floating the currency, contributing to the resulting Gold crisis? The Nixon shock happened in August 1971, when the game was up.
This Germany may have done, but "the gold crisis" / general Bretton-Woods-Exchange-Mechanism crisis brewed since the mid-late 60s and culminated visibly in France (de Gaulle I think) sending a tanker to collect their $ trade surpluses in physical bullion form, see the ending of the https://en.wikipedia.org/wiki/London_Gold_Pool --- all Nixon did in Aug 1971 was basically just confirming to the world the completion of a transition that had been in progress for years, at that point.
It all started with the emergence of "Eurodollars" in the City of London, in the late 50s --- in itself, and their consequences, an inevitably that only a few thinkers such as https://en.wikipedia.org/wiki/Jacques_Rueff foresaw with any kind of accuracy (even though his favouring a gold standard isn't something I personally buy into as a good idea for the modern globalized economy --- same goes for a dollar standard or Euro standard or crypto-standard or any such notion though)
I think the background to this is that, during the Cold War, Germans were worried about a possible Soviet invasion, so storing gold in the US at the time made sense. As the article states, conditions have changed somewhat and there has been political pressure to return some of the gold in recent years.
Speculating here, but as a defeated and occupied WW2 power - indeed still hosting U.S. troops to this day - Germany might not have had very much say in where its gold got stored.
You read the news "Robberies in <your area> have increased by 30%". Would that make you more willing to redirect half your savings to my account? If so, I'm happy to discuss further via email.
> the New York Fed, an institution that is owned and controlled by Wall-Street-banks
No, it isn't.
> In a country, whose current president considers it an imposition that the law and so-called judges tell him what he is allowed to do and not allowed to do.
His rhetoric doesn't prevent the judiciary from acting or render the other two branches moot.
> The way in which the official gold of the US, and the gold held in custody for other countries, is guarded against public scrutiny and shielded from its owners, gives fodder to any number of conspiracy theories.
You can bet the largest repository of gold is off-fucking-limits. And, no, it doesn't.
> Had the New York Fed refused to let a foreign central bank, which was under such obvious pressure, retrieve some of their gold, these conspiracy theories around official gold might very well have become intense enough to damage trust in the dollar.
Can you really say with a straight face that if they can't produce what they say they are storing for a third party that their reputation is not going to go down the drain?
If any bank prevents anyone from getting their deposited money, for reasons other than legal, there would be serious questions about their trust
It appears to be just another one of these fluff pieces gold bugs keep on sharing. Full of allegations and semi-truths in order to suggest that gold is all that matters.
> It consisted in the promise that in exchange for getting those 300 tons, they would leave four times as much in New York and stop forever fussing about it. This is my reading anyway, based on what I understand is usual diplomatic custom and lingo in such affairs.
That reminds me of the history of Spanish gold. In summary: the republican government made an arrangement with Russia to send their gold reserves to not let Franco capture it.
Suddenly the russian military help became quite expensive. Paid in gold of course. All of it.
"In 2013 and 2014 they melted 55 of the 90 tons they retrieved in these two years, destroying all evidence if anything should have been wrong, like some of that gold being inferior "coin-gold", for example." - and I'm done.
Melting bullion is the standard way to determine that it is in fact gold. If it were "inferior coin-gold" (which I assume he means some form of alloy), that would have been detected through the process of melting.
This man is too far into conspiracy theories to present a neutral view of anything.
I think that at 41k per kilo one tonne of gold is worth $41m.
1300 tonnes of gold is therefore worth a bit more than $51bn, which is a lot, but approximately 1 year of the UK's defence budget, so in the scale of things not really all that much.
Now, this would mean that (given that Germany is a big economy) there would be what... 20 times that amount of gold available to back a gold currency - so about $1trn. I think that the world economy is about $80trn which leaves a big problem with the assertion that a gold backed currency could challenge the $.
Gold is valued at only $41k per kilo because central banks managed to convince us that we don't need it to back up our currency.
If China really created gold-backed currency then gold price would skyrocket, increasing at lest 6 times (that's how much inflation we had since 1971, when the gold standard was abandoned)
Centuries ago countries, or strongmen anyway, used to formalize allegiances by trading human hostages. We're friends for all eternity because your cousin is a valued "guest" of my court and vice versa. We do that with central banks and gold now a days.
So keeping a relationship of balanced trust, yanking assets from one location will have an equal and opposite reaction probably in a completely different form somewhere else. The manipulated currency exchange rates will wiggle. Imported black forest cuckoo clocks will get a different tariff. The ratio of central bank interest rates will wiggle. Sometimes 3rd parties get roped into the deal so perhaps the GBP-USD ratio will wiggle in some manner. Something is gonna happen to balance it and you can either control what happens, influence what happens, or toss hands in air and hope the free market does the right thing. A lot of people are paid a lot of money to not do the later, so you can generally assume that politician-like or IT consultant-like, the strongly advised reaction by the people is never for their paycheck writing organization to do nothing.
So something of equal and opposite reaction, probably agreed upon ahead of time, is about to happen.
Ideally in some sort of pacifistic utopia it would be illegal for citizens to store movable assets in-country or invest locally. We're rather unlikely to bomb Germany again anytime soon, or unrestricted submarine warfare in the Atlantic, but it is sad to see the old (by my human lifespan standards) relationship on shakier grounds. Oh well.
Why do countries bother to hold gold? Wouldn't it be sensible to sell as much of it off as possible? (I'm asking like "ELI5" because I'm sure there is a reason)
Currencies actually fail quite regularly (hints: Zimbabwe, Venezuela) - it makes a lot of sense to hold wealth in a form that will survive that. Maybe someone wants to claim that any individual country "will never" suffer from a currency crisis. I'll just point out that America went from Barack Obama to Donald Trump in one election then agree to disagree.
Countries want an asset that can hold wealth through a crisis where the way things work radically changes. This asset needs to be:
* As indestructible as possible
* Easy to transport if an adversary is approaching (see also, European history :P)
* Hard to create
Gold satisfies these requirements really well; and as an added bonus it is nearly useless so hoarding it doesn't risk the real economy (see also; the US helium reserves and the risk to medical imaging or such when they run out).
EDIT I'll add that the 'easy to transport' part is what makes this Fed-Bundesbank business so completely weird - this quantity of gold is physically quite small and should be easy to inspect and audit.
They do. Switzerland sold more than half of their gold in the past 20 years, including all their holdings at the Federal Reserve in New York (that's like 1300 tons of gold that was sold, in comparison the hundreds of tons that are mentioned on the article for germany and netherlands).
Not sure why the article doesn't mention that fact, maybe it doesn't feed into the FUD/conspiracy theory?
Diversification of "hard assets" because the value of sovereign currency is illusory and often fleeting.
I agree that mining, storing and transporting gold around the planet is a waste of resources, but there are only so many places to store wealth in a physical manner. The fact that gold has historically been useless in industry probably adds to its value.
Nowadays, a chief reason is "because the others do, too" ;) it is also a brilliant instrument to stabilize/tweak currency fluctuations without buying/selling "too much" of another country's currency/debt or more generally, any third party's nominal promises/future obligations. It may prove exceptionally useful in future defence of a given currency's (global) purchasing power. Gold is the only asset that can accept any currency valuation (in both directions) without some broad group or other of real people, producers or consumers, complaining loudly (other than a tiny group of hobbyist speculators) while also showing a multi-millenium track record of durability, also in value, on a planetary scale and immunity to EMP or endless forks or Nixons. It need not perform any specific role 99% of the time, it need not even "perform" nominally at all, on the country scale (CB scale / oil wealth scale / giant old-family-wealth scale) it just needs to sit, tight and guarded, through changing times and the rare geopolitical/monetary transition or other.
If you make the money, i.e., print the paper and convince people to associate it with value, then money has no value in itself to you. But gold is nothing you produce. It's already there and people already associate value to it. Even another country who doesn't like you is willing to listen to your demands if you promise them gold in return. Therefore having as much gold as possible is one of the things that grand you power as a country. Other things are valuabe trade goods like oil, high tech, cars, etc. Again other sources of power are technology&science, knowledge, military, lots of people.
Gold is extremely rare on Earth, because it is extremely rare in the universe - it comes from neutron star collisions. [1] To underline the scarcity on Earth, there are thoughts that we are reaching 'peak gold.' [2] You can read here the lengths we go to to get at small seams of gold: http://gizmodo.com/terrifying-facts-about-the-worlds-deepest... Asteroid mining may be a check on this.
Most of the gold in the world is used for jewelery approx 68-78% depending on the estimate. It does have its uses as an industrial metal, but if there wasn't gold tomorrow, the sun would still rise.
In the US, we don't have the same cultural relationship with gold that exists in India, China and elsewhere, where most of the demand is. Keynes called gold a 'barbarous relic,' and I think that's been adopted to some degree in our culture. Central banks hold many currencies, and in some cases baskets of currency. Gold is another that can't be printed, and has a multi-thousand year track record (what currency can claim that?).
More immediately, if I was in the shoes of a central banker, I would be looking to participate in the future gold-backed currency markets. Gaddhafi tried to start a gold-backed Dinar as a pan-African currency and to settle oil trades that would have competed with the petrodollar system. A bayonet and several bullets put these plans on hold. There has been talk of Russia, the top oil producer [3][4], and China moving to gold backed currencies [4].
I have exposure to gold mining stocks. For me, I'm thinking about the reasons above. I'm also thinking about the next financial crisis with the backdrop of rates barely above 0%, a massively leveraged derivatives market that will eventually be looking for real assets at the end of all of the complex chained structures, a massive debt overhang, and looking at what Moody's thinks about our pension system, Social Security, and Medicare [5]. Trying to stay hedged.
You miss the point. The value of money is based on trust and belief. Hence the word fiducial (fiduceo) money.
One part of a market is holding your promises. If you don't all your current transactions are considered shady (standards& poors, ...), hence the notation agency on currency: it measures how likely you are to reimburse your debt.
USA being one of the largest emitter of bound on the market, the word they are being crooks on an important topic would damage on the long term reputation hence the value of their currency, hence triggering a strong recession + hyper-inflation.
In the case trust in USA Feb bank (which is private) is broken, USA may turn abruptly in Venezuela.
Since most notation agencies are in the USA, it might have a domino effect creating major chaotic fluctuations between currencies, hence automatically triggering a safe backing off from every hedge fund out of their countries ...
If USA lose the trust of the market since globalisation is labelled in US$ it means either people are going to diversify to Swiss Francs, Euro, CAD, Pounds ... and a big loss for USA.
No one want this. Not the big european, asian groups.
Workers and modests people would be totally glad, but it would mean a 1929 situation in the USA for sure, and in a lot of connected economies.
...the US will allow central banks to repatriate as much gold from New York as is absolutely necessary to allow them to have half of their gold at home....
What the actual fuck? Why do we need permission from the US to have our own gold?
States tend to act like psychopaths. It should come as no surprise that the US doesn't honor the original agreement if it's in their self-interest to not honor that agreement.
I'd be interested to know how the US came to hold the gold for Germany in the first place. Because it seems to me that Germany's mistake was to swap the gold for a promise.
Everyone, stop. This guy is literally batshit insane.
Germany isn't being stiffed, strong-armed or muzzled. They are distributing assets amongst the world's soundest systems at will - at home in Germany, the UK, US and France. This guy isn't just speculating, he's making stuff up with absolutely no basis for it.
If there really is a doubt that the US holds less gold than it claims, surely this would be reflected in the pricing of US-held gold? Yet I've never heard that such a price gap exists. What am I missing?
For anyone interested in reading more about the standards of gold storage and exchange, the company BuillionVault has some good information on their help/FAQ pages, such as explaining what 'good delivery' bars of gold mean, and how professional gold vaulting works. (Naturally, the pages also promote their own services, but you can ignore all of that)
Unfortunately, all of the people of this world are not always as virtuous and honest as I would hope, especially those people in positions of great power.
Why did we drop 26,000 bombs on Muslim countries last year? Why is Snowden in Russia? Why did no one go to jail when evidence leaked of CIA torture, except the whistle blower? Why do the people of this planet produce a surplus of food and watch as some starve? Why did evidence the Bush admin lied about Iraq WMDs go unpunished?
The point is the leaders that exist dont mind cheating, and they usually get away with it.
The advantage is that if they decide to take it, they can easily do so (and in the meantime it's significant bargaining leverage).
I'm surprised to see on HN an article clearly written by a conspiracy theorist without any proof. As soon as he started adding in his own opinions of what might have been taking place, I checked out.
This is my reading anyway, based on what I understand is usual diplomatic custom and lingo in such affairs.
Good grace. In Germany, this opinion is considered to be in the militant right wing spectrum (aka sovereign citizens/Reichsbürger movement), I'm surprised and disgusted to see this here on HN as the top-rated comment.
[+] [-] erikb|9 years ago|reply
Really digging this one. That's why I proactively not listen to investors/consultants who suggest to buy some gold derivates for savety purposes.
In other regards: What's the point of the author? That's how the "king's peace" works since forever. Having the biggest stick and control over the valuable stuff makes you the king. And as long as you provide a stable leadership live of people is mostly peaceful. That's why people are willing to accept this trade. It's unfair but we actually want it that way. And what should the others do? Say "yeah, we totally accept that he has us by the balls"? No they act like it would be their decision so that they also keep some of their own power.
It seems the author is smart enough to know all this, so seriously: What's he attempting to achieve here?
[+] [-] ChuckMcM|9 years ago|reply
His reasoning appears to be, "If the world is, as the Fed presents it, then we should be able get our gold back. But we can't." and then notes agencies that the auditing agency that was aggressively pushing even an accounting of the available gold has gone silent implying they have been made complicit somehow in the conspiracy.
Here on the outside we can't really know what is going on of course. And frankly if it got out that 1200 tons of gold was on the move I could imagine that would be a tasty target even for nation-state level thieves. But I also found it interesting when the Economist and others reported that the Fed was refusing to let auditors verify their gold deposits. That is a question that really needs an answer and we haven't gotten it yet.
[+] [-] JumpCrisscross|9 years ago|reply
[+] [-] portent|9 years ago|reply
All the bars look identical, to me anyway - there are no stacks of coins or goblets etc. that I could see. (Not all the cages are visible from the vault entrance).
The Fed states in the tour that sovereign nations can keep their gold in the vault, virtually free of charge. And take it back at any time. This is basically a service to the world that the US has provided since the second world war, when much of Europe wanted - for obvious reasons - to move their gold to a safe haven.
As the Federal Reserve is a very secure place, and great value for money, I think most nations have been fine to use that - much cheaper and easier than building a facility that is equally secure.
So personally I'm not sure about the conspiracy theories saying that the Fed refuses to release the gold; to me that is easy for any nation to test - just ask for it, it could be done publicly except that you signal to any thief the date/time of when to attack :-)
[+] [-] sandworm101|9 years ago|reply
[+] [-] dualogy|9 years ago|reply
[+] [-] easilyBored|9 years ago|reply
Telling the truth. If there's a doomsday scenario USA might refuse to hand you the gold. He's saying that gold not in your hand is not really gold, because when you might need it everyone else will and they have it.
[+] [-] patrickk|9 years ago|reply
Reading in between the lines, it seems as if a good chunk of gold has gone missing and there is an attempt by both sides to save face.
[+] [-] mannykannot|9 years ago|reply
I have lost track of the clearest version of this story that I have seen, but it is mentioned in the 'Transfers by Clearing' section here: http://www.wondermondo.com/Countries/Au/MicronesiaFS/Yap/Rai...
[+] [-] krona|9 years ago|reply
It's a bit more complicated, isn't it? Wasn't it West Germany, in May 1971, that said "screw you" to the US and the Bretton Woods system (the same system that helped them rebuild their economy after the war) and performed a competitive appreciation by floating the currency, contributing to the resulting Gold crisis? The Nixon shock happened in August 1971, when the game was up.
[+] [-] dualogy|9 years ago|reply
It all started with the emergence of "Eurodollars" in the City of London, in the late 50s --- in itself, and their consequences, an inevitably that only a few thinkers such as https://en.wikipedia.org/wiki/Jacques_Rueff foresaw with any kind of accuracy (even though his favouring a gold standard isn't something I personally buy into as a good idea for the modern globalized economy --- same goes for a dollar standard or Euro standard or crypto-standard or any such notion though)
[+] [-] f_allwein|9 years ago|reply
[+] [-] uncle_d|9 years ago|reply
Compare and contrast with speculation about what happened to Ukraine's gold: http://www.zerohedge.com/news/2014-11-18/ukraine-admits-its-...
[+] [-] erikb|9 years ago|reply
[+] [-] tonfa|9 years ago|reply
(and moving the gold physically is a pain, easier to have them all in the same location, that's what the FRBNY account is for)
[+] [-] mercurialshark|9 years ago|reply
> the New York Fed, an institution that is owned and controlled by Wall-Street-banks
No, it isn't.
> In a country, whose current president considers it an imposition that the law and so-called judges tell him what he is allowed to do and not allowed to do.
His rhetoric doesn't prevent the judiciary from acting or render the other two branches moot.
> The way in which the official gold of the US, and the gold held in custody for other countries, is guarded against public scrutiny and shielded from its owners, gives fodder to any number of conspiracy theories.
You can bet the largest repository of gold is off-fucking-limits. And, no, it doesn't.
> Had the New York Fed refused to let a foreign central bank, which was under such obvious pressure, retrieve some of their gold, these conspiracy theories around official gold might very well have become intense enough to damage trust in the dollar.
What? How? Negative.
[+] [-] raverbashing|9 years ago|reply
If any bank prevents anyone from getting their deposited money, for reasons other than legal, there would be serious questions about their trust
[+] [-] jcfrei|9 years ago|reply
> It consisted in the promise that in exchange for getting those 300 tons, they would leave four times as much in New York and stop forever fussing about it. This is my reading anyway, based on what I understand is usual diplomatic custom and lingo in such affairs.
No factual evidence is provided to back up those claims. And other news outlets about the same event (eg. https://www.nytimes.com/2017/02/09/business/germany-gold-res... ) don't feature any similar interpretations.
[+] [-] haddr|9 years ago|reply
Suddenly the russian military help became quite expensive. Paid in gold of course. All of it.
[+] [-] prodmerc|9 years ago|reply
[+] [-] powera|9 years ago|reply
Melting bullion is the standard way to determine that it is in fact gold. If it were "inferior coin-gold" (which I assume he means some form of alloy), that would have been detected through the process of melting.
This man is too far into conspiracy theories to present a neutral view of anything.
[+] [-] sgt101|9 years ago|reply
1300 tonnes of gold is therefore worth a bit more than $51bn, which is a lot, but approximately 1 year of the UK's defence budget, so in the scale of things not really all that much.
Now, this would mean that (given that Germany is a big economy) there would be what... 20 times that amount of gold available to back a gold currency - so about $1trn. I think that the world economy is about $80trn which leaves a big problem with the assertion that a gold backed currency could challenge the $.
[+] [-] mamon|9 years ago|reply
If China really created gold-backed currency then gold price would skyrocket, increasing at lest 6 times (that's how much inflation we had since 1971, when the gold standard was abandoned)
[+] [-] chinathrow|9 years ago|reply
I do not even understand why one country would need to negotiate about their properties held abroad.
There are two reasons I can come up with right now:
- Country A holding assets of Country B wants leverage over Country B or
- Country A does not hold 100% of these assets any longer
[+] [-] VLM|9 years ago|reply
So keeping a relationship of balanced trust, yanking assets from one location will have an equal and opposite reaction probably in a completely different form somewhere else. The manipulated currency exchange rates will wiggle. Imported black forest cuckoo clocks will get a different tariff. The ratio of central bank interest rates will wiggle. Sometimes 3rd parties get roped into the deal so perhaps the GBP-USD ratio will wiggle in some manner. Something is gonna happen to balance it and you can either control what happens, influence what happens, or toss hands in air and hope the free market does the right thing. A lot of people are paid a lot of money to not do the later, so you can generally assume that politician-like or IT consultant-like, the strongly advised reaction by the people is never for their paycheck writing organization to do nothing.
So something of equal and opposite reaction, probably agreed upon ahead of time, is about to happen.
Ideally in some sort of pacifistic utopia it would be illegal for citizens to store movable assets in-country or invest locally. We're rather unlikely to bomb Germany again anytime soon, or unrestricted submarine warfare in the Atlantic, but it is sad to see the old (by my human lifespan standards) relationship on shakier grounds. Oh well.
[+] [-] late2part|9 years ago|reply
[+] [-] rwmj|9 years ago|reply
[+] [-] roenxi|9 years ago|reply
Countries want an asset that can hold wealth through a crisis where the way things work radically changes. This asset needs to be:
* As indestructible as possible
* Easy to transport if an adversary is approaching (see also, European history :P)
* Hard to create
Gold satisfies these requirements really well; and as an added bonus it is nearly useless so hoarding it doesn't risk the real economy (see also; the US helium reserves and the risk to medical imaging or such when they run out).
EDIT I'll add that the 'easy to transport' part is what makes this Fed-Bundesbank business so completely weird - this quantity of gold is physically quite small and should be easy to inspect and audit.
[+] [-] tonfa|9 years ago|reply
Not sure why the article doesn't mention that fact, maybe it doesn't feed into the FUD/conspiracy theory?
[+] [-] stupidhn|9 years ago|reply
I agree that mining, storing and transporting gold around the planet is a waste of resources, but there are only so many places to store wealth in a physical manner. The fact that gold has historically been useless in industry probably adds to its value.
[+] [-] dualogy|9 years ago|reply
Nowadays, a chief reason is "because the others do, too" ;) it is also a brilliant instrument to stabilize/tweak currency fluctuations without buying/selling "too much" of another country's currency/debt or more generally, any third party's nominal promises/future obligations. It may prove exceptionally useful in future defence of a given currency's (global) purchasing power. Gold is the only asset that can accept any currency valuation (in both directions) without some broad group or other of real people, producers or consumers, complaining loudly (other than a tiny group of hobbyist speculators) while also showing a multi-millenium track record of durability, also in value, on a planetary scale and immunity to EMP or endless forks or Nixons. It need not perform any specific role 99% of the time, it need not even "perform" nominally at all, on the country scale (CB scale / oil wealth scale / giant old-family-wealth scale) it just needs to sit, tight and guarded, through changing times and the rare geopolitical/monetary transition or other.
[+] [-] erikb|9 years ago|reply
[+] [-] 1001101|9 years ago|reply
Most of the gold in the world is used for jewelery approx 68-78% depending on the estimate. It does have its uses as an industrial metal, but if there wasn't gold tomorrow, the sun would still rise.
In the US, we don't have the same cultural relationship with gold that exists in India, China and elsewhere, where most of the demand is. Keynes called gold a 'barbarous relic,' and I think that's been adopted to some degree in our culture. Central banks hold many currencies, and in some cases baskets of currency. Gold is another that can't be printed, and has a multi-thousand year track record (what currency can claim that?).
More immediately, if I was in the shoes of a central banker, I would be looking to participate in the future gold-backed currency markets. Gaddhafi tried to start a gold-backed Dinar as a pan-African currency and to settle oil trades that would have competed with the petrodollar system. A bayonet and several bullets put these plans on hold. There has been talk of Russia, the top oil producer [3][4], and China moving to gold backed currencies [4].
I have exposure to gold mining stocks. For me, I'm thinking about the reasons above. I'm also thinking about the next financial crisis with the backdrop of rates barely above 0%, a massively leveraged derivatives market that will eventually be looking for real assets at the end of all of the complex chained structures, a massive debt overhang, and looking at what Moody's thinks about our pension system, Social Security, and Medicare [5]. Trying to stay hedged.
[1] https://www.cfa.harvard.edu/news/2013-19 [2] https://en.wikipedia.org/wiki/Peak_gold [3] https://www.bloomberg.com/news/articles/2017-02-20/russia-ov... [4] https://www.forbes.com/sites/nathanlewis/2016/05/05/china-is... (note: commentary piece) [5] https://www.moodys.com/research/Moodys-US-government-pension...
[+] [-] SFJulie|9 years ago|reply
One part of a market is holding your promises. If you don't all your current transactions are considered shady (standards& poors, ...), hence the notation agency on currency: it measures how likely you are to reimburse your debt.
USA being one of the largest emitter of bound on the market, the word they are being crooks on an important topic would damage on the long term reputation hence the value of their currency, hence triggering a strong recession + hyper-inflation.
In the case trust in USA Feb bank (which is private) is broken, USA may turn abruptly in Venezuela.
Since most notation agencies are in the USA, it might have a domino effect creating major chaotic fluctuations between currencies, hence automatically triggering a safe backing off from every hedge fund out of their countries ...
If USA lose the trust of the market since globalisation is labelled in US$ it means either people are going to diversify to Swiss Francs, Euro, CAD, Pounds ... and a big loss for USA.
No one want this. Not the big european, asian groups.
Workers and modests people would be totally glad, but it would mean a 1929 situation in the USA for sure, and in a lot of connected economies.
So no one wants this.
[+] [-] mdekkers|9 years ago|reply
What the actual fuck? Why do we need permission from the US to have our own gold?
[+] [-] erikb|9 years ago|reply
[+] [-] VarFarYonder|9 years ago|reply
I'd be interested to know how the US came to hold the gold for Germany in the first place. Because it seems to me that Germany's mistake was to swap the gold for a promise.
[+] [-] mercurialshark|9 years ago|reply
Germany isn't being stiffed, strong-armed or muzzled. They are distributing assets amongst the world's soundest systems at will - at home in Germany, the UK, US and France. This guy isn't just speculating, he's making stuff up with absolutely no basis for it.
http://www.bundesbank.de/Redaktion/EN/Pressemitteilungen/BBK...
[+] [-] chvid|9 years ago|reply
The real threat to the US dollar system comes from China; slowly thru many decades.
[+] [-] joosters|9 years ago|reply
[+] [-] pg314|9 years ago|reply
[+] [-] joosters|9 years ago|reply
e.g. https://www.bullionvault.com/gold-guide/ready-to-buy-gold
[+] [-] mariuolo|9 years ago|reply
[+] [-] saalweachter|9 years ago|reply
[1] http://www.bbc.com/news/business-15748696
[+] [-] mtempm|9 years ago|reply
Why did we drop 26,000 bombs on Muslim countries last year? Why is Snowden in Russia? Why did no one go to jail when evidence leaked of CIA torture, except the whistle blower? Why do the people of this planet produce a surplus of food and watch as some starve? Why did evidence the Bush admin lied about Iraq WMDs go unpunished?
The point is the leaders that exist dont mind cheating, and they usually get away with it. The advantage is that if they decide to take it, they can easily do so (and in the meantime it's significant bargaining leverage).
[+] [-] kelvin0|9 years ago|reply
Chavez was the one I remember who got his gold back onto Venezualian soil: http://www.bbc.com/news/world-latin-america-15900885
[+] [-] micahgoulart|9 years ago|reply
This is my reading anyway, based on what I understand is usual diplomatic custom and lingo in such affairs.
Pass.
[+] [-] unknown|9 years ago|reply
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[+] [-] maehwasu|9 years ago|reply
[+] [-] mschuster91|9 years ago|reply