The History of the Value of Gold can tell the Future
Here is a look at one of the best articles regarding the history of gold value that may provide insightful looks at future investments. This article is long but to good to hack apart. With the economy in poor shape looking at the history of golds value and the economy is worthy reading.
Fundamentals Revisited
By Barry Forst
Since recent action in the gold market has been quite volatile, I think it's important to refocus on the long term fundamentals. Many times, investors are sidetracked by dramatic price swings, reacting emotionally with either greed or fear. During the current decline we recommend that clients add to their hedge positions. The bull market is still intact and that the "fundamentals for gold" are stronger than ever.
Perspective: Gold is a commodity that has functioned throughout history as a "store of value", a refuge from depreciating money of all types. For more than 5,000 years, citizens have learned and the history of the value of gold has proven(sometimes the hard way) .
Remember This: there has never been a paper currency that has not been depreciated to the point of being virtually worthless; only gold has remained a viable store of value. And this will most likely be the future of golds value.
The beginning: The first step to converting the dollar into fiat currency was the creation of the federal reserve system in 1914. The FED was given absolute power to issue notes and create credit for its own profit without accounting to congress or the general accounting office. The FED was patterned after European central banks. Specifically, the German Reichsbank.
Until 1934, the gold standard acted as a restraint on the FED, preventing serious monetary expansion. But in 1934 Roosevelt confiscated U.S gold coins. That left the citizens holding $20 dollars in paper money for every once of gold. He then raised the gold value by 67 % to $35 an ounce, enabling the government to receive the profit that resulted. With domestic convertibility no longer a restraint, only international conversion prevented unlimited monetary expansion. In 1971 however, Nixon removed this final barrier when he "closed the gold window" as part of his anti-inflation program. The resulting currency depreciation is now part of our, unfortunate financial history.
The FED functions today as a governmental body that issues fiat money and influences the level of consumer credit through the manipulation of bank reserves. The FED, therefore, creates "elasticity" which allows our government the flexibility of printing worthless pieces of paper to cover its own debt obligations. In the absence of any restraint, our government continues to depreciate the dollar. We need to get gold back into the monetary system. But our current FED chairman, Paul Volcker, is strongly opposed to any monetary role for gold. We strongly disagree with Mr. Volcker and think that John Exter ( Formally of New York City and Bank and the Federal Reserve System) has a much better grasp of the current situation. See if you don't agree with Exter: (remember this section of the history of the value of gold was written in 1980)
Read the full article about the value of gold
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