Why Gold?

Robert L. Harwell II | Professional Numismatist

When most people today look for investing money in various income and capital assets they think of Stocks, Bonds, Real Estate, and Cash. Each of these assets has a place in a portfolio even if they are looking for income in this portfolio to pay for various living or overhead items.

The Thing Most Forget: LIQUIDITY

Consider the steps to get money out of a stock and bond portfolio:  1) You first call your broker or go online and liquidate the stocks that you want to sell; 2) There is a 2-day settlement period followed by one or two days to have your broker wire your money to you. Assuming you have been able to liquidate through you broker via phone or Internet, 4 -5 business days will have gone by.

How many were around in October 1987 when the stock and bond market took a major dive and your broker did not answer the phone?  Some might say it is different today because we have the Internet. Well maybe, assuming that all the servers (yours, your broker’s, your banks’) plus the Internet is working and have not been hacked as was the Department of Treasury several weeks ago.

In such an event, everything is shut down until authorities can figure out what is going on and maybe a RANSOM must be paid, as has happened in some cases.

You can sell your real estate as some Pension Funds had to do in 2008-2009 to pay their pensioners their monthly payments.  But no one is buying real estate at the current value because the only people that will is if they get a cheap price.

As the manager of the pension realizes, LIQUIDITY has disappeared. The house is burning down and you have NO INSURANCE on it. A BLACK SWAN has occurred and you now have no direct control over liquidating your investments for cash! (THE US DOLLAR).

ONE SOLUTION:  Currently there are over 3,000 dealers in the United States that can convert your Gold Holdings or Silver Holdings to the US Dollar. Thus, gold becomes an excellent insurance policy!

What Is Its Cost To You Today?

That is a very difficult calculation. If you compare it to the Stocks that you have held over the past year, it is expensive. If you compare it to the 6 year Investment Grade Corporate Bonds, as published by the St Louis Fed you may be .86% yield. If you compare it to Money Market Funds, much less.

The US Dollar

Since the 1973 Oil Embargo in the USA, the Dollar has been the reserve currency of the world. This means that the Central Banks of the USA, Japan, and Great Britain have swap lines of credit with each other to keep commerce going between the producing nations of the world. The key word is “producing!!  The International Monetary Fund’s SDR (Special Drawing Rights) created in 1969 was, until recently, made up of the 4 producing countries. In 2019, China was brought in to support the SDR, which is the DIGITAL currency that the IMF uses to loan money to countries that need any of the 5 currencies to fund deficits or excess sales.

Currently the BASKET of World Currencies that BACK the SDR are as follows:

  • Dollar 41.73%
  • Euro 30.93%
  • Chinese Reminbi or Yuan 10.92%
  • Yen 8.33%
  • Pound 8.09%

Before the Reminbi was admitted in 2019, the Dollar was over 50%. If we look at the NOMINAL GDP (Production of the countries), we get US #1 at over 20 Trillion, China nearly 16 Trillion and the Euro over 15 Trillion.

Houston, we have a problem!!

Because of Covid, the USA is now heading towards 30 Trillion in national debt, with more coming. This money is being created out of thin air, not GDP. As this dependency on more and more money being created by the US, there will be less confidence in our ability to pay it back.

The IMF and Central Banks of the World are concerned, as this is the case in Europe and many other countries. They cannot allow interest rates on this National Debt to go up.

The IMF’s solution-at-hand is to use the SDR, their digital money, to pay off the outstanding debts of the countries.  This is what is referred to as “The Great Reset,” the name of the June 2020 50th annual meeting of the World Economic Forum (WEF) with the theme of rebuilding society and the economy in a more sustainable way following the Covid-19 pandemic. 

To accomplish this proposed “Reset,” the IMF would reset the basket percentages based on the GDP of the country and its gold holdings, thereby automatically resetting the price of gold in the international market as they did in 1872, 1933 and 1973.

They can then generate all the inflation they want with a new digital currency that does not ever need to be printed!!

What This Means To YOU:

It would be wise to consider investing 10% of your cash holdings into gold coins which could be safely stored in your bank’s safe deposit box.  This would provide you with:

  • Immediately liquidity in the event of a cash flow emergency.
  • Likelihood that the value of gold will go up considerably if/when this “reset” takes place.

Many experts in the field believe this reset would value gold in the range of between $3,000 to $5,000/oz based on the large increases in debt and in money currently being printed in the US and Europe.

Bottom Line:  If you were to purchase gold at ~ $2,000/oz, you would realize an immediate gain of between 50 and 150% at the time of the reset.

Robert L. Harwell II is President and partner in Hancock & Harwell, a rare coin and precious metal brokerage firm serving investors, collectors and the financial services industry. Mr. Harwell has been a numismatist for almost 50 years and a full-time coin dealer for more than 42.

Bob is a life member of the American Numismatic Association and is an authorized dealer for both the Professional Coin Grading Service, Inc. (#15) and Numismatic Guaranty Corporation. Mr. Harwell is a Founding Member of the Industry Council for Tangible Assets, the industry’s watchdog group in Washington, and has served continuously on the Board of Directors since its inception in 1983. He has recently been elected to the Board of ACEF, a foundation recently set up to further education on the counterfeiting of coins in the US. He is currently a member of the prestigious Professional Numismatists Guild.

He has publicized articles about rare coins and the rare coin market. For many years Bob has been involved in the purchase and placement of numerous Mint State and Proof 65 or greater coins and coins of special rarity or quality to come on the market, including the famous and Unique Pattern Indian Head Double Eagle U.S. Gold Coin. He has continuously provided access to Gold, Silver and Platinum precious metals through three cycles.

FON Members may contact Robert Harwell at [email protected].