So says James Turk (www.goldmoney.com) in edited excerpts from an article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!),
Turk goes on to say:
1) Gold is not a commodity; it is money
Soybeans, crude oil, copper and other raw materials and agricultural products are consumed and disappear. They are commodities. Their value arises from their usefulness as a consumable item. In contrast, gold is not consumed and therefore does not disappear. Essentially all the gold mined throughout history still exists. This above ground stock of gold has value because gold is useful in economic calculation and preserves purchasing power over long periods of time. For example, the price of crude oil in terms of gold is unchanged from 60 years ago, or in other words, an ounce of gold purchases the same amount of crude oil today as it did in 1951.
2) Gold is not an investment; it is money
Gold does not generate cash-flow. Gold is not a wealth producing franchise, like a company that creates wealth by producing marketable goods and services. When you buy gold, you are not making an investment. You are simply exchanging one form of money – the national currency used in your purchase – for another form of money, namely, gold. Therefore, the decision to buy gold should be based on gold’s attributes compared to those of national currencies. In this regard, gold emerges as the clear winner. Using the example in #1 above to highlight one of gold’s most important attributes and a major weakness of the dollar, a barrel of crude oil today costs more than $100, compared to less than $3 in 1951. The dollar has not preserved purchasing power. The interest income earned on a dollar deposit over this period of time will offset some of that loss, but it is important to remember why interest is paid in the first place. It compensates you for the risk of holding dollars – risks like inflation, a bank default, capital controls and other pernicious events that are harmful to your purchasing power. You do not have these risks with gold.
3) Do not trade gold; accumulate it ..........
Don’t let gold’s high price distract you from the important points that gold does not have counter-party risk and preserves purchasing power over long periods of time. Gold is sound money, which everybody should be saving.
*http://www.goldmoney.com/gold-research/are-you-a-newcomer-to-the-precious-metals-.html
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