“With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people.” - Friedrich Von Hayek

I’m not advocating a return to the gold standard but when governments lose on printing money, as is the case today, investors should buy gold.

A way to protect yourself is to obtain good information about your bank from an independent research source. At Cumberland, we have utilized the services of Chris Whalen’s firm, a custom analytics provider: Institutional Risk Analytics (www.institutionalriskanalytics.com) .

Their services range from an automated report showing the bank’s financial and credit performance ($50) to a detailed profile of an institution prepared by one of their analysts. That costs $1,000. For additional information, contact Christopher Whalen (914) 827-9272 or cwhalen@institutionalriskanalytics.com .

Our advice is that depositors should try to lower that risk as much as possible. Here is one idea.

The analysis set forth in this article is focused on gold but the same conclusions are largely applicable to the other precious metals with monetary characteristics: silver and platinum.

Gold has been trading in the $900-$1,000 range, which is all-time high, slightly above the 1980 brief peak above the $800 range, however, on an inflation-adjusted basis (please see chart below) it is still way below the peak and average range during the stagflation period of the seventies; a period that greatly resembles the current macro-economic setting.

I expect gold to continue to appreciate substantially in the medium and long term, with strong chances of moving in a sustained fashion above $2,000 within the next two to three years.

After you have spread your insured deposits around and IF you still have uninsured deposits that need some liquidity placement, consider placement of the funds in gold or other precious metal with www.weinvestonline.com.

Isn’t gold considered to be just a commodity with no real monetary role anymore?

I’d like to refer to an article by Tony Fell , and it’s particularly interesting, given that he was chairman of RBC Capital Markets at the time of writing. He talks about how gold has three attributes: it’s a commodity, a store of value and a currency. He says so many people now think of gold only as a commodity or jewelry, or as an archaic relic, that there’s a feeling of “who needs it anymore?” People don’t think of it as money.

However, the daily sales volume gives a conclusive indicator that gold is much more than an industrial commodity. The physical turnover of gold by members of the UK’s London Bullion Marketing Association is about $25 billion per day. We’re talking about net turnover between the LBMA members. The volume is estimated at 7-10 times that amount.

It’s pretty clear that these are currency transactions. That’s why gold, silver and platinum trade on the currency desks of all the banks and brokerages, not the commodity desks. What people need to know is that gold is a currency [like dollars or euros or yen]. Gold is not trading at these volumes as a commodity or as some archaic relic.

Investors choosing to ignore these trends do so at grave peril to their wealth. As Churchill once said: “The time for procrastination and delays and excuses is over, we are into a period of consequences”.

Ron Wellman
We Invest Online, Inc.
Investment Concierge
www.weinvestonline.com