Federal Reserve will consider QE3 if economy weakens
Precious Metal Division, Gold De Royale (09 October 2011)
The Federal Reserve will act if the economy weakens further and has the tools to do so, a top Fed official said on Friday.
St. Louis Fed President James Bullard said he expects the economy to grow modestly over the next year -- though the sluggish pace leaves it vulnerable to shocks.
"Should economic performance deteriorate, monetary policy will respond," Bullard said, according to slides of a presentation he was scheduled to make. "The Fed is not now, or ever, 'out of ammunition'."
With interest rates near zero, Bullard said, the Fed can support the economy through inflation and inflation expectations and asset purchases are a "potent tool".
Dealers polled by Reuters earlier this month gave a median chance of 32 percent that the Fed will embark on a third round of quantitative easing.
The Fed said last week it plans to buy $400 billion of longer-term Treasuries and sell the same amount of shorter-term Treasuries by the end of June 2012, in an effort to lower longer-term borrowing costs.
It also said it would support the mortgage market by reinvesting principal payments from its mortgage-related debt into mortgage-backed securities.
Bullard said policy should aim to be more rules-based than it has been since the crisis hit and return to a meeting-by-meeting approach by the Federal Open Market Committee.
"The policy approach over the last several years, with announcements of large dollar amounts, fixed end dates, and rapidly changing tactics, seems fairly discretionary," he said.
"Returning to a more rules-based approach may provide needed stability to the U.S. macroeconomy."
Bullard repeated his view that promising to keep rates low for a specific period of time has a number of drawbacks, including the possibility of its hurting Fed credibility.
He also warned against tying monetary policy to the unemployment rate, as Chicago Fed President Charles Evans has suggested.
Unemployment rates have a "checkered history" in advanced economies over the last several decades, he said. In Europe over the last 30 years, for example, the unemployment rose and stayed high.
"If such an outcome happened in the U.S. and monetary policy was explicitly tied to unemployment outcomes, monetary policy could be pulled off course for a generation."
Reported by Kristina Cooke in New York
Gold price next resistance is $2,000 per ounce
Precious Metal Division, Gold De Royale (07 September 2011)
Spot gold prices surged this morning at $1,920 per ounce, surpassing the previous record high of $1,913/oz made on August 22 by $7 per ounce as concerns about Eurozone’s economic health resurfaced and Friday’s US payroll data showed zero jobs added to the world’s largest economy in the past month.
“Concerns that the US might slip into recession and hopes of further Fed quantitative easing, received a shot in the arm from Friday’s bitterly disappointing non-farm payrolls figures. Payrolls for August were unchanged (consensus: 68,000 increase), falling abruptly from July’s 85,000 increase (revised down from 117,000),” Standard Bank analyst Marc Ground. “Underscoring the weakness seen in many Fed measures of regional industrial activity, manufacturing payrolls fell 3,000, the first decline since October last year. Safe-haven demand and the prospect of QE3 are helping gold maintain its momentum into the start of the week. Silver and platinum have also been lifted by gold’s gains, although palladium remains largely unresponsive,” Ground said.
With no let-up by investors or speculators, and with the gold buying season just beginning, the price of the yellow metal seems all set to race to the magical $2,000/oz-mark in September. “Speculative activity and ETF buying remains supportive of our view on gold. Short term, we believe that gold should find support on dips and move higher — physical demand is strong on price dips but falls away on price rallies,” said Ground.
What seems to be working in gold’s favour is that the record prices are despite the fact that speculative buying has declined and is at levels below last year’s peak. “Net speculative length for COMEX gold fell for the fourth successive week, losing 49.3 tonnes. The net speculative position for gold now stands at 747.9 tonnes – now below last year’s average of 777.6 tonnes. The decline was mostly attributable to a shedding of 70 tonnes in speculative longs, with a decrease of 20.7 tonnes in speculative shorts softening the fall in the net position,” said Ground.
On top of this, the dollar has been gaining a fair bit of currency over the past week, and the gold price rise – counterintuitive to the dollar index – suggests that the higher prices are here to stay for a while at least.
The next resistance level for gold, according to Standard Bank analysts, is $1,932 per ounce. Once that is breached, there is an uncommon consensus of sorts among most global experts that $2,000/oz will be achieved.
Gold and silver price soars due to weaker-than-forecast U.S. employment report
Precious Metal Division, Gold De Royale (03 September 2011)
Gold futures rocketed higher Friday as a weaker-than-forecast U.S. employment report added fuel to ideas that the Federal Reserve will undertake some kind of further monetary stimulus. “In a nutshell, you can already hear the band queuing up QE3,” said Jim Comiskey, senior market strategist with MF Global.
QE3 refers to a potential third round of quantitative easing in which the Federal Reserve purchases U.S. Treasury securities in a bid to push down long-term yields, which move inversely to the price. The second round concluded at the end of June. If QE3 does come about, “you’re to see more dollar weakness,” Comiskey said. “And, you’re going to see a continuation of commodity price spikes, most notably felt in the metals sector.” If not QE3, some other type of action to further loosen monetary policy is increasingly expected from the Federal Reserve, said Sterling Smith, commodity trading adviser and market analyst with Country Hedging.
Based on the current market trajectory, gold price will breach US$2000 before December 2011 and silver US$50 or higher by December 2011.
Gold to continue rising
Gold's recent run and subsequent fall back has made a number of people wary about the metal while commentators on both sides of the gold divide have used the volatility as proof of their respective positions.
Either, that gold is in a bubble or at least reaching bubble territory and this is the first of further declines, or, on the bull side, that this latest correction is nothing but a need release of steam ahead of the next up-leg.
But, while volatility has increased across the board, the fundamental situation facing the global economy has changed very little over the last few weeks.
For Dundee Wealth Economics chief economist, Martin Murenbeeld, it is this continued bleak outlook both in the US and Europe and, indeed, emerging economies as well that bodes well longer term for gold prices.
Speaking on Gold Weekly Podcast, he said, "I think there is a risk of a bank failure in Europe," he says, although unable to put a specific probability on its likelihood.
"We heard this risk expressed in various speeches in Jackson Hole; of course Trichet said there was absolutely no risk at all of a bank failure in Europe, but then we saw the merger of two banks in Greece. When banks merge there is an implication that one bank is having difficulty and needs to be merged with a stronger bank. So there is indeed an non-zero probability of bank failure in Europe."
Murenbeeld points out that a bank failure would have massive contagion effects if not properly contained and, the only way to contain such a failure, as was seen in 2008 is with massive amounts of liquidity.
"The first thing that a central bank was constituted to do is to provide liquidity as a last resort - central banks are lenders of last resort - they were really created to deal with the contagion effects of bank failures. So central bankers have no choice but to flood the system with liquidity so that payments can be made and any doubts on the part of the public and of businessman about the health of their banks can be put to rest. All that takes a lot of money! Historically when liquidity rises rapidly in response to banking crises gold prices go up."
The problem for Europe, is that the decision has to be made in light of the needs of the entire European Union, which makes life decidedly more difficult.
For Murenbeeld, the key will be the decision by Europe's fiscal authorities on the European financial stability facility, on which Germany will deliberate on September 23.
"If Germany and others do not agree to the European financial stability facility there will be a mess in Europe. There will be massive speculation that a bank is going to fail. The ECB is going to have to pump money into the system and gold prices are likely to go straight up."
Across the pond, in the US, American politicians have equally difficult decisions to make.
"The US economy is technically dead in the water. I can't see enough growth to lower unemployment rates meaningfully. (I don't see a recession either however.) So, at some point in time, the Federal Reserve is going to have start easing monetary policy further."
And, as he points out, "Given the relatively limited bang for the buck, QE3 in whatever form is going to have to be big in order to get a little bit of growth. That will help gold immensely."
Ben Bernanke warns over Washington wrangling
Precious Metal Division, Gold De Royale (31 Aug 2011)
A rough summary of Ben Bernanke's speech at the Federal Reserve's gathering in Jackson Hole on Friday is that the US economy needs more help from policymakers -- but that the central bank will only provide a bit of it.
"I do not expect the long-run growth potential of the US economy to be materially affected by the crisis and the recession if -- and I stress if -- our country takes the necessary steps to secure that outcome," the Fed chairman said.
The implicit message of those words is that, while the Fed will do everything it can, other policymakers are not taking those necessary steps. The Fed's job is to deliver low and stable inflation and economic stability, but "most of the economic policies that support robust economic growth in the long run are outside the province of the central bank".
He called for "good, proactive housing policies", expressed an implausible degree of confidence in Europe's ability to tackle its sovereign debt problems and, in some of his harshest words ever on fiscal policy, he said that Washington's agonized debate on raising the federal debt ceiling had hurt the economy.
"The country would be well served by a better process for making fiscal decisions. The negotiations that took place over the summer disrupted financial markets and probably the economy as well," Mr. Bernanke said.
Mr. Bernanke has gradually ramped up his rhetoric on fiscal policy in recent months but it was the first time that he has suggested that the US budget process is so dysfunctional that it needs reform.
"These were some very strong words from chairman Bernanke on fiscal policy, and we can only hope policymakers take note. There is no question that with all that needs to be done to grow the economy, fiscal policy continues to be the missing link," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.
Although he did not say so outright, Mr. Bernanke implied that he would support more fiscal stimulus now, in order to tackle the long-term unemployment that he said could leave a "major scar" on the US economy.
"Our economy is suffering today from an extraordinarily high level of long-term unemployment, with nearly half of the unemployed having been out of work for more than six months," he said. Fiscal policymakers urgently need to deal with America's long-term budget problems but they "should not, as a consequence, disregard the fragility of the current economic recovery".
Mr. Bernanke's words reflect a growing sense that, while the Fed can and should do more to make sure inflation stays at its 2 per cent target, tax and spending decisions have greater power to influence an economy in which consumers are still paying down debt after the financial crisis.
His statement that the Fed "is prepared to employ its tools as appropriate to promote a stronger economic recovery" was a fairly robust signal that the central bank is ready to do more, most probably at its next meeting in September, which was extended to last for two days.
But the rest of the speech, which lacked any discussion of those tools and focused on longer-run challenges and the role of fiscal and other kinds of policy, seemed designed to limit expectations of how much the central bank might do.
In particular, there was no encouragement to think that the Fed will soon launch a third round of quantitative easing -- a QE3, like the QE2 announced last November -- under which it would buy hundreds of billions of dollars more in long-term assets as part of a further attempt to drive down long-term interest rates.
Even though Mr. Bernanke did not elaborate in Jackson Hole, a more likely easing option is to tilt the Fed's existing portfolio of assets towards more long-term securities, a policy with its own nickname, a "twist".
Source: Robin Harding in Jackson Hole, Wyoming
Gold soars to a record price of US $1830 as Wall Street stocks plunged
Precious Metal Division, Gold De Royale (19 August 2011)
Stocks plunged pushing yields to record lows, amid growing signs that the economy is collapsing and speculation that European banks lack sufficient capital. Gold climbed to a record price of US $1830 as investor demand soars to an all time high. Many investors woke up this morning to find out that they have become millionaires with high prices in gold and other precious metal commodities.
“The massive exodus from risk markets reflects heightened concerns with a possible recession and the accelerated loss of trust in policymakers,” Mohamed El-Erian, chief executive officer and co-chief investment officer at Pacific Investment Management Co., the world’s biggest manager of bond funds, wrote in an e-mail. “Importantly, such worries will now be compounded by concerns about technical damage to key markets. The risk is of a rapidly deteriorating negative feedback loop of weakening fundamentals and bad policies.”
Gold price soars on economic concerns in the US and EU
Precious Metal Division, Gold De Royale (17 August 2011)
The record price set by gold on Tuesday confirms, more dramatically than ever, the lack of confidence investors increasingly have in paper currencies like the U.S. dollar and the euro and paper assets like publicly traded company stocks.
"Long-term investors are very hesitant to put their money into stocks right now," Bob Haberkorn, a senior market strategist with MF Global, told the Wall Street Journal. "Currencies are being disasters across the board. People are looking for some place to preserve wealth."
It also confirmed just how dubious Wall Street is about the ability of leaders on both sides of the Atlantic Ocean to do what voters elected them to do. In Europe, the Greek contagion has now resulted in fears about the sovereign debt of Italy and France, the continent's second largest economy. The meeting on Tuesday between the leaders of France and Germany to solve the crisis left Wall Street cold.
Meanwhile in the U.S., Commerce Department data showed that residential real estate is contributing little or zero to U.S. growth. New construction of homes and apartment buildings in July fell 1.5 percent from a month earlier to a seasonally adjusted annual rate of 604,000. The figure was better than the expected 4.6 percent drop to an annual rate of 600,000, but still underscores the weak domestic housing market.
With this rate Gold price will cross US$2000 in the coming months.
Gold main safe haven now as Japan and Switzerland try to stem the currency tide
Precious Metal Division, Gold De Royale (12 Aug 2011)
The Swiss National Bank is howling at the strength of the Swiss Franc, now standing so strong against the dollar at 0.7206. A fortnight ago it was at SF 0.80 to $1. Its international trade will be savaged with such a rise in its value.
Likewise the yen will just not weaken against the dollar despite the intervention and QE expansion they are pumping into the system.
The Swiss National Bank said that it will "significantly increase" the supply of liquidity to the money market and expand banks' sight deposits to 120 billion Swiss francs ($166 billion) from 80 billion francs. It will also conduct foreign exchange swap transactions to create liquidity. The measure was last used in 2008, the SNB said.
Expect more action from the Bank of Japan too. The reason the currencies are so strong is because holders of dollars and Euros are fleeing the weakness of those currencies and clinging to currencies and precious metals that will, hopefully, retain their value in all this financial turmoil. With the Swiss National Bank and the Bank of Japan weakening their own currencies the flight to safety looks like being disappointing.
Gold does not have a central bank of its own to protect it, but the way the price is going shows that it doesn't need one.
Mr. Bernanke's statement that interest rates would be held down for the next two years may well benefit the U.S. economy and in turn silver.
Some investors previously felt that platinum would do the same job of value protection as gold, but the loss of platinum's $300 premium in the space of a fortnight has dispelled those hopes in quick time. Platinum depends on the auto industry for its demand primarily. A developed world downturn will hurt that demand, so the price just could not rise with gold anymore. Apart from that is it not in the interests of the producers to see platinum follow gold. The producers are in a position to weaken the price too!
Source: Julian D.W. Phillips for the Gold & Silver Forecasters
Gold makes history as it passes US $1800 an ounce
Precious Metal Division, Gold De Royale (11 August 2011)
The price of gold surpassed $1800 an ounce Wednesday for the first time as investors pulled their money out of stocks and snapped up precious metals contracts.
Gold is fast becoming an asset in every investor’s portfolio. Investors are clinging to what they see as a hedge against volatile stock, share and currency markets with many investors preparing for a financial meltdown “dooms day” scenario.
December gold contracts backed off their highs, and traded around $1785 an ounce during midday trading after reaching a record $1801 an ounce earlier in the day on the New York Mercantile Exchange.
Gold prices have shot past a series of milestones over the past two years on an uninterrupted climb. Gold was trading at about $900 in the summer of 2008, before the financial crisis unfolded that year. Moreover, the Federal Reserve yesterday pledged to keep its benchmark interest rate at a record low for two years to bolster the economy. Oil and gold have more than doubled since the Fed lowered rates to near zero at the end of 2008.
Central banks buy more gold as part of their portfolio
Precious Metal Division, Gold De Royale (24 July 2011)
Central banks purchased more gold in the first half of 2011 than during the whole of last year, according to a World Gold Council report released last week. Emerging market banks continue to be the main driving force, led this quarter by Mexico’s 100-tonne increase in its gold reserves. Meanwhile, European central banks have significantly cut gold sales in the wake of the region's sovereign debt crisis.
Data released by the renowned London-based consultancy and research group GFMS shows global central banks’ net gold sales reached 235 tons in 2008, but fell to just 34 tons in 2009.Central banks contributed about 10 per cent to the global gold supply between 2001 and 2009, as GFMS reported. Seventeen major European central banks were responsible for the sale of 1,937 tons of gold during the past 12 years.
In 2010, global central banks became net buyers of gold for the first time in two decades. The move by central banks to diversify their dollar reserves comes as private investors flock to buy gold.
According to the WGC, gold is perceived as an investment safe haven and a good hedge against both currency and sovereign debt risks. At the end of last year, the International Monetary Fund (IMF) also concluded its limited gold sales program. The program was implemented to increase the Fund’s resources for refinancing economically distressed nations and lending to low-income countries. GFMS has also predicted central banks will continue the trend of buying gold during the second half of this year.
Dooms day approaching fast - Are you prepared?
Precious Metal Division, Gold De Royale (29 April 2011)
Physical gold hit fresh all-time highs above $1534 per ounce as new US data showed inflation accelerating sharply. Major-economy government bonds all rose, nudging yields lower, after the Federal Reserve last night held US interest rates near zero for the 28th month in succession. The US Dollar fell to the lowest level since July 2008 - just prior to the Lehman Bros' collapse - on its trade-weighted index. Crude oil rose to new 31-month highs. These are dangerous economic times around the world with currency losing its value rapidly and national debt mounting. Prices are rising. Unemployment is persistent. Some people believe this portends the end of the economic world, that financial doomsday is right around the corner. After all, it’s happened before, in several countries. Currencies became worthless (Zimbabwe, Argentina, Nigeria). The price of basic necessities skyrocketed. The very fabric of society unravelled.
How gold price went from $251 to $1500 US Dollars
Precious Metal Division, Gold De Royale (21 April 2011)
Gold struck a record high on Wednesday at slightly above $1,500 an ounce as a weak dollar buoyed sentiment in precious metals.
Following are key dates in gold's trading history since the early 1970s:
* August 1971 - U.S. President Richard Nixon takes the dollar off the gold standard, which had been in place with minor modifications since the Bretton Woods Agreement of 1944 fixed the conversion rate for one Troy ounce of gold at $35.
* August 1972 - The United States devalues the dollar to $38 per ounce of gold.
* March 1973 - Most major countries adopt floating exchange rate system.
* May 1973 - U.S. devalues dollar to $42.22 per ounce.
* January 1980 - Gold hits record high at $850 per ounce. High inflation because of strong oil prices, Soviet intervention in Afghanistan and the impact of the Iranian revolution prompt investors to move into the metal.
* August 1999 - Gold falls to a low at $251.70 on worries about central banks reducing reserves of gold bullion and mining companies selling gold in forward markets to protect against falling prices.
* October 1999 - Gold reaches a two-year high at $338 after agreement to limit gold sales by 15 European central banks. Market sentiment towards gold begins to turn more positive.
* February 2003 - Gold reaches a 4- year high on safe-haven buying in the run-up to the invasion of Iraq.
* December 2003-January 2004 - Gold breaks above $400, reaching levels last traded in 1988. Investors increasingly buy gold as risk insurance for portfolios.
* November 2005 - Spot gold breaches $500 for the first time since December 1987, when spot hit $502.97.
* April 11, 2006 - Gold prices surpass $600, the highest point since December 1980, with funds and investors pouring money into commodities on a weak dollar, firm oil prices and geopolitical worries.
* May 12, 2006 - Gold prices peak at $730 an ounce with funds and investors pouring money into commodities on a weak dollar, firm oil prices and political tensions over Iran's nuclear ambitions.
* June 14, 2006 - Gold falls 26 percent to $543 from its 26-year peak after investors and speculators sell out of commodity positions.
* November 7, 2007 - Spot gold hits a 28-year high of $845.40 an ounce.
* January 2, 2008 - Spot gold breaks above $850.
* March 13, 2008 - Benchmark gold contract trades over $1,000 for the first time in U.S. futures market.
* March 17, 2008 - Spot gold hits an all-time high of $1,030.80 an ounce. U.S. gold futures touch record peak of $1,033.90.
* September 17, 2008 - Spot gold rises by nearly $90 an ounce, a record one-day gain, as investors seek safety amid turmoil on the equity markets.
* Jan-March 2009 - Gold-backed exchange-traded funds report record inflows in the first quarter as financial sector insecurity spurs safe-haven buying. Holdings of the largest, the SPDR Gold Trust, rise 45 percent to 1,127.44 tonnes.
* February 20, 2009 - Gold rises back above $1,000 an ounce to a peak of $1,005.40 as investors buy bullion as a safe store of value as major economies face recession and equity markets tumble.
* April 24, 2009 - China announces it has raised its gold reserves by three-quarters since 2003 and now holds 1,054 tonnes of the precious metal, boosting expectations it may add further to its reserves.
* August 7, 2009 - European central banks opt to renew their earlier agreement to limit gold sales over a five-year period, setting the sales cap at 400 tonnes a year.
* September 8, 2009 - Gold breaks back through $1,000 an ounce for the first time since February 2009 on dollar weakness and concerns over the sustainability of the economic recovery.
* December 1, 2009 - Gold climbs above $1,200 an ounce for the first time as the dollar drops.
* December 3, 2009 - Gold hits record high at $1,226.10 an ounce, with dollar weakness and expectations for central banks to diversify reserves into gold driving prices higher.
* May 11, 2010 - Gold reaches fresh record high above $1,230 an ounce as fears over the contagion of debt issues in the euro zone fuel safe-haven buying.
* June 21, 2010 - Gold jumps to a new high at $1,264.90 an ounce as underlying fears over financial market stability and sovereign risk combine with dollar weakness to push the metal through resistance at its previous high.
* Sept 14, 2010 - Gold climbs back to record highs, this time at $1,274.75, as global markets reflect renewed uncertainty on the economic outlook.
* Sept 16-22, 2010 - Gold hits record highs for five successive sessions, peaking at $1,296.10, as investors flock to bullion after the Fed signals it may consider further quantitative easing, weakening the dollar and raising fears over future inflation.
* Sept 27 - Spot gold prices touch the $1,300 an ounce mark for the first time.
* Oct 7 - Gold rallies to a record high above $1,360 an ounce as the dollar comes under pressure from building expectations for the U.S. Federal Reserve to take extra measures to keep interest rates low and prop up the economy.
* Oct 13 - Gold jumped to record highs near $1,375 an ounce as the dollar continued to languish, with the U.S. unit coming under pressure after minutes from the Fed's September meeting signaled the U.S. economy may need further stimulus.
* Nov 8 - Gold prices break through the $1,400 an ounce mark for the first time as haven buying prompted by renewed budget problems in Ireland more than offset a sharp dollar bounce.
* Dec 7 - Gold reaches a fresh record high above $1,425 an ounce, driven by fund buying ahead of year-end, jitters over the euro zone debt crisis and speculation for further U.S. monetary easing.
* January 2011 - Gold prices fall more than 6 percent in their worst monthly performance in over a year as a revival in risk appetite diverts investment to higher-yielding assets.
* March 1 - Gold recovers to hit a record high at $1,434.65 an ounce as unrest in Tunisia and Egypt spreads across the Middle East and North Africa, boosting oil prices.
* March 7 - Gold extends record highs to $1,444.40 an ounce as oil prices hit their highest in 2- years after protests are quashed in Saudi Arabia and as violence in Libya rages.
* March 24 - The resignation of Portuguese prime minister Jose Socrates pushes the euro zone debt crisis back to centre stage, lifting gold prices to a record above $1,447 an ounce.
* April 20 - Gold climbed to a record high at $1,500.16 an ounce, supported by a weak dollar and concerns over a sovereign debt crisis.
Source: Reuters.com
The United States of America – At the Brink of Extinction
Precious Metal Division, Gold De Royale (25 March 2011)
Can superannuation funds be used to buy precious metals?
Source: Precious Metals Division, Gold De Royale
One of the questions that we get on a daily basis from many new clients is “can superannuation funds be used to buy precious metals?” The answer to the question is simple.
Self Managed Superannuation Funds also called as “SMSF” can be used to buy precious metals for investment purposes. That is, if you manage your own superannuation funds which are SMSF (not industry superannuation funds like Sun Super etc) then you can use that money to buy precious metals.
A new report called Supernomics released by the Industry Super Network on Friday 5th March 2010 showed that Australians will lose $120 Billion Dollars in superannuation funds due to bad investment choices done by the companies who manage your superannuation funds. Keep in mind that, none of the superannuation companies will allow you to invest your money in precious metals. They will only allow you to invest your money in shares, funds, stocks etc. As per Australian government regulations, money invested in SMSF can be used to buy precious metals.
We are currently seeing a large number of people using their superannuation funds in buying precious metals. Starting an SMSF is as simple as starting a bank account. Any charted accountant or financial advisor can setup a SMSF for you within weeks.
You may want to read the following article to make an informed decision whether you want to manage your own superannuation funds or not.
http://www.watoday.com.au/breaking-news-national/aussies-stand-to-lose-120b-in-super-20100304-plne.html
Keep in mind that superannuation funds are your hard earned money that you can use when you retire. There is no point in giving it to the so called Large Superannuation Companies who makes wrong investment decisions with your own money (not with their money).
What can we learn from one of the greatest rulers in the world who had an enormous gold bullion wealth?
Source: Precious Metal Division, Gold De Royale
Frequently we hear in Forbes Magazine, Times Magazine, every year the richest people in the world. In 2009, the top two richest people in the world according to Forbes were William Gates (who had US$ 40 billion) and Warren Buffett (who had US$ 37 billion). Can there be anyone who is richer than them or was there anyone who was richer than them, should be the question that we need to ask.
If you remember history, there was a great ruler and a king who lived in Israel whose name was King Solomon. That is a name that we all remember. The Holy Bible which is the inspired word of God says “...King Solomon became greater than all the kings of the earth in riches and in wisdom” (1 Kings 10:23, NASB). Bill Gates and other billionaires in the world derive their wealth primarily from their companies. So the question is, where did King Solomon derive his wealth from, did he have a company called King Solomon Finances Inc, or was it called King Solomon’s Stock Exchange? How did a wise King like him became so rich that God himself said that he was greater than anyone else in his riches. The answer to that question is simple. King Solomon did not invest in shares, he did not invest in monetary coins, he did not buy real estate properties because he was wiser than all of us. He invested only in GOLD. That’s right; he was the only King in History that invested all his wealth in Gold. Let’s now look at the amount of gold bullion he had.
According to the Holy Bible, King Solomon received 666 talents of gold per year as his salary. He also received other moneys from various merchants, traders and surrounding governments. If we just look at his annual salary, one talent of gold is approximately equal to 34.5 kg which is about 1109 troy ounces. At current market prices (November 2009), one troy ounce of gold trades for about $1100 U.S. Dollars (USD). Multiplying $1100 x 1109 troy ounces x 666 talents = 812,453,400 or roughly 812 million dollars per year. Keep in mind this was only his annual salary, not including any bonuses or investments. King Solomon ruled for 40 years so multiply 812 million dollars per year x 40 years. If you take into account all the extra income he surely would have received, we guess his net worth to be somewhere around 200 billion dollars.
The whole point of this discussion is, there are vital lessons that we need to learn from King Solomon’s wisdom which are (a) he always knew that Gold being a precious metal is more valued than monetary currency; (b) for a nation to thrive in the future they must have enormous gold bullion amounts in their central banks; and (c) great leaders would take the lead and tell people to trust in gold rather than paper money. During King Solomon’s reign, gold was so common that even a common man used to drink in a gold cup.
Will the Western nations ever have a wise leader like King Solomon? Only time will tell.
Exploring the most widely used phrase by gold bullion dealers, gold is the same!
Over time and time again we hear many gold bullion dealers in Australia and across the world convincing people that pure gold is the same, there is no difference. But is this statement really true? If you ask well known experts in the precious metal market industry they would say it is not true. There are many reasons why the statement is not true. Let’s look at a scenario. You buy a car that is made in Australia and you buy a Rolls Royce. Now everyone knows that both are cars. Both perform the same function. But the question to be asked is why a car that is made in Australia cost’s AUD 39,000 and why does a Rolls Royce in Australia cost $322,000. How can there be so much variation in the cost? Isn’t car, car! Why is Rolls Royce charging $322,000 and why is the seller who sells a car made in Australia charging $39,000! From basic common sense a normal person would know it’s because Rolls Royce represents the best that there is in the car industry. That is, it is manufactured from the highest quality materials made in the automobile industry and is absolutely perfect in its beauty. Also Rolls Royce has the highest standard rating in the world given by the Automobile Industry for many years in relation to its manufacturing details.
Now let’s shift the scenario from the automobile industry to the precious metal industry. In the precious metal industry consumers must be aware that the international body that certifies a refiner for its quality in refining gold is the London Bullion Market Association (LBMA). This is the peak body. Their main role is to recognise refiners that use the highest standards when they refine and manufacture precious metals like gold, silver, palladium and platinum bullion. This is the most important and fundamental concept that people need to understand.
Most refiners in the world would normally apply to the London Bullion Market Association for recognition as a Good Delivery Refiner and to be included in their Good Delivery List. In doing so they must meet very strict criteria that are used when refining precious metals. If they don’t follow them, they cannot get the recognition. On the LBMA website you can see for yourself the names of all refiners that are accredited by the LBMA in all countries. Now if you buy gold from these accredited refiners you can be definitely be assured that you are having one of the purest forms of gold. If the refiner that has manufactured the gold that you have purchased is not there in the list, then this is something that you really need to think about. When you look at the list you can see in the whole of Australia there is only one refiner that has this status which is the Western Australian Mint. As we scroll down the list, we see the names of all refiners that are accredited by the LBMA in Switzerland. These include PAMP, Valcambi and Argor Heraeus of Switzerland.
The question that must be asked is why are the other refiners in Australia not recognised? The answer to that question is simple. It’s all about how the gold is being refined, manufactured and its actual purity. That is why at Gold De Royale we only sell precious metals of those refiners that are accredited by the LBMA as an approved Good Delivery Refiner. These refiners show the highest industry standards when they manufacture precious metals.
