• 288 days Will The ECB Continue To Hike Rates?
  • 288 days Forbes: Aramco Remains Largest Company In The Middle East
  • 290 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 690 days Could Crypto Overtake Traditional Investment?
  • 695 days Americans Still Quitting Jobs At Record Pace
  • 697 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 700 days Is The Dollar Too Strong?
  • 700 days Big Tech Disappoints Investors on Earnings Calls
  • 701 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 703 days China Is Quietly Trying To Distance Itself From Russia
  • 703 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 707 days Crypto Investors Won Big In 2021
  • 707 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 708 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 710 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 711 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 714 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 715 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 715 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 717 days Are NFTs About To Take Over Gaming?
Strong U.S. Dollar Weighs On Blue Chip Earnings

Strong U.S. Dollar Weighs On Blue Chip Earnings

Earnings season is well underway,…

How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

Trade In Counterfeit Goods Hits Half A Trillion Dollars

Trade In Counterfeit Goods Hits Half A Trillion Dollars

The counterfeit market has breached…

Global Precious Metals

Global Precious Metals

Global Precious Metals

Global Precious Metals was set up in Singapore by a team of professionals with extensive experience in the wealth management and precious metals industries. The…

Contact Author

  1. Home
  2. Markets
  3. Other

The Case for Gold in One Chart

Following is an excerpt from the Global Precious Metals guide on "How to Own Precious Metals." The complete paper in PDF from is available here: How to Own Precious Metals


 

The purpose of this paper is not to make the case for investing in precious metals (plenty has already been written on this topic), but rather to lay out the options available to the investors who has made up his mind to do so.

Before going into any great detail, let's pause for a moment to take a helicopter view of our financial system in order to better understand gold's position in it. Most people are well aware that gold is a scarce resource but are usually not aware of the sheer volume of other financial products which currently exist. The following chart provides an overview of our financial system and lays the case for gold quite succinctly.

Total Global Assets

Sources:

  1. Bank of International Settlement, OTC derivatives statistics at end-June 2013; Bank's annual reports.
  2. Savills World Research, Around The World In Dollars And Cents, 2014.
  3. Mc Kinsey & Company, Financial Globalization: Retreat or Reset?, 2013.
  4. World Federation of Exchanges, 2014.
  5. Estimated using M1 data from the Central Banks of: Euro Area, United Kingdom, United States, Japan, China, Australia, Brazil, Canada, India, Russia.
  6. Estimated using the quantity of gold ever mined of 171,000 tons from the World Gold Council, 2013.

A financial meltdown would see the upper layers of the pyramid being liquidated in a panic that would likely involve the opaque over-the-counter derivatives markets. A few of the world's largest banks hold the bulk of all derivative contracts, which have notional amounts in the 10s of times their assets and 100s of times their market capitalizations.

Whilst the upper layers evaporate as the market for most IOUs simply stops existing, capital will seek refuge in the "most marketable good" or the most liquid asset further down the pyramid. Many people holding assets located at the top of the pyramid will lose parts of their capital on the way down in the flight to liquid and to less-risky assets. After most of their wealth literally has evaporated, they will finally come to the conclusion that gold is the ultimate store of value.

A look at recent history reminds us of the intrinsic value of paper money, which is the paper that it is printed on. One picture in support of this case is certainly worth a thousand words.

House of Cards

"Paper money eventually returns to its intrinsic value - zero." ~ Voltaire

Download the complete paper: How to Own Precious Metals

 

Back to homepage

Leave a comment

Leave a comment