The Case for Owning Gold


Today’s #SmartMoney comes courtesy of Grant Williams who, with 28 years of experience in finance on the Asian, Australian, European, and US markets, and having held senior positions at several international investment houses, is arguably one of the best-qualified people on the planet to discuss the case for owning gold: what he doesn’t know about the yellow metal probably isn’t worth knowing.

November Update
Interestingly, there are potentially big things afoot for gold, and not just because the Russians and the Chinese are sucking up all the available physical supplies on the market: after allowing the Swiss National Bank to systematically trash the Swiss franc for the past six years, at the end of November a referendum will be held in Switzerland to decide what the SNB should do about its gold holdings.

A YES vote for the Swiss Gold Referendum would require the Swiss National Bank to:

  • Stop selling gold
  • Increase its gold reserves to 20% of its assets
  • Hold all Swiss gold reserves in Switzerland

So far the Swiss Gold initiative has been played down by the Swiss media, but it is being billed as “the way to protect your children’s future” and if the vote is passed, it may mean Switzerland has to buy 1,500 to 1,700 tons of gold over the next five years. That alone will not drive the price massively higher of course, but with the Chinese and Russians on a buying spree, there’s not a lot of excess in the market as it is. And it with stocks at nose-bleed levels at the moment, a correction could send investors into a flight to safety… got gold?!

According to the initiative’s website, a NO vote means:

  • Switzerland’s economic policy will be dictated by the EU
  • Swiss Franc will be tied to a weak EU and a weak Euro
  • UK and Canada will hold CHF 12 billion of our gold that we might never get back
  • Inflation and cost of living will increase dramatically
  • Swiss National Bank will print additional CHF 100s of billions
  • Swiss Franc will go down. A weak currency leads to a weak economy
  • Switzerland will own at least CHF 400 billion of EU bonds that could become worthless

A YES vote, on the other hand, means that:

  • Switzerland will remain a strong independent nation not influenced by EU or USA
  • The Swiss Franc will be the only currency in the world (partially) backed by gold
  • The Swiss Franc will be very stable, leading to a strong economy
  • Swiss National Bank can no longer gamble with our economy by printing hundreds of billions of worthless paper money

Egon von Greyerz, one of the masterminds behind the scheme says,

“To tie the Swiss Franc to a weak currency like the Euro and a very weak economic area like the Eurozone is a recipe for disaster. To align your country to a failed political and economic experiment can only lead to failure.”

Clearly this is a very emotive subject for the Swiss, and the fact that their constitution demands that the people are allowed to decide matters of policy (what, you mean like a real democracy?!) could be the wake-up call which gold bugs have been waiting for for the past few years — the thing which alerts investors to the value of gold in a world where stock markets are rigged by central banks and governments, and which reverses the downward trend, driving the gold price higher.

Got gold?