The easiest way to store small quantities and lower values of bullion is to take full possession of the metal, and hide it somewhere in your home, either in a safe, concealed inside a false wall or secret cupboard, or even buried in your back yard! This makes your precious metals easily accessible should you need to trade them for any basic necessities in times of trouble.

It may therefore be prudent to:-
Divide up your bullion holding and conceal in different places.
Choose a place that is not obvious to any burglars.
Remember that precious metals could melt if your house has a severe fire.
Not tell anyone about your precious metals, not even your friends as most thefts are usually linked by a common denominator

Naturally, there are also disadvantages to this form of storage in that it is a potential security risk, could either be forgotten about altogether, you may not remember exactly where it has been hidden, or if something should ever happen to you, would anyone be able to trace it? In addition, precious metals could melt if there was a severe fire on your property. It is unlikely insurance companies will insure it (remember telling the insurance company is like telling the government)

The wonderful thing about precious metals is their intrinsic value, which is easily identifiable and would even be exchangeable for goods and services in deeply troubling times and a couple of kilos of gold would not be difficult to take with you should you need to flee from political turmoil or natural disasters. Because precious metal (notably gold and silver) is a currency in its own right, it can also be easily exchanged with other currencies should you need to cross the border into a neighbouring country. A fairly grim picture has been painted here, but it may happen.

Larger quantities of high value should be stored in a secure vault and fully insured.

About buying and owning gold and silver

What's the best form of bullion to own ? In Australia, we like the gold nugget/kangaroo and silver kookaburra/koala from the Perth Mint. These are far and away the most popular bullion coin, and have the best resale value of any bullion coin traded in Austalia. They are recognised and purchased globally. In the long run, it probably doesn't matter which form of tradeable gold or silver you buy, but we give the edge to the Kangaroo and Kookaburra coins.

How should I decide which bullion is the best for me ?

Basically, this website presents the pros and cons of gold vs silver and coins vs bars, and we have tried to go into some detail about each one. Different buyers are attracted to different forms of bullion, and your decision will be based on what appeals to you. We would also recommend a portfolio approach with a mix different types of bullion coins and bars- there's no need to put all your eggs in one basket! However, if you have no strong preference, we recommend the kangaroo and kookaburra coins. They are beautiful coins with wide acceptance and a strong buy-back price.

Is one certain size better to own than others?

The most frequently traded size is the one or two ounce. Bullionmark strongly recommends the 1oz silver kookaburra and 2oz gold kangaroo. These coins are the same dimensions (gold is twice the weight) and are great for shipping registered post. Bullionmark also buys these coins in bulk so can offer you great prices especially for bulk orders over 1000 Kookaburras and 10 Kangaroos.

Can I buy gold and silver at spot ?

No, the spot price is an interbank price and is not available to the public. The price you will pay will derive from spot but have a series of additional charges from the refiner and then the Perth Mint such as margin over spot, mintage fees, dealer margin, transport and insurance. In times of great demand and or short supply some of these components may rise dramatically, after all gold and silver are scarce and the laws of supply and demand apply.

How should I store gold and silver coins ?

No special care is needed with gold or silver- they will not tarnish or corrode no matter how you store it. We do recommend keeping the coins in their original mint tubes or packaging just as you receive them from us. Gold and silver are soft, and your Mint-fresh coins can be scratched or marred by rough handling. This won't effect their gold value, of course, but bullion coins can lose some of their resale value if not kept in perfect Mint condition.

Where do other people store gold and silver coins ?

Traditionally, gold owners have used their bank safe deposit boxes for secure storage of gold. Although bank vaults offer virtually absolute protection, you can also buy insurance on their contents as a rider on your homeowners policy at a surprisingly low cost. Some people prefer to keep at least some of their gold closer to home, often protected in a floor safe, or kept well concealed. This is a matter of personal preference, and where you store your gold is a private decision. ONE WARNING: We feel strongly that ordinary, aboveground home safes are a big mistake. They advertise the presence of valuables, and the ones weighing a few hundred pounds can be taken out of your home as easily as your refrigerator was brought in.

Who buys gold, anyway ?

Investors, central banks, jewelry manufacturers and speculators are the largest buyers. But also individuals who just like gold in its different forms, and those who hold gold as an insurance policy. People with substantial assets to protect, and/or family obligations to consider, often own gold and silver as they are the ultimate form of protection for your wealth and family - under any circumstance, in any culture, at any time through thousands of years history gold and silver have been the ultimate money. The same cannot be said for paper money, which on average becomes worthless in 40 years due to government debasement and resultant inflation.

Does gold tarnish?

No, gold does not tarnish or corrode. Your gold coins will retain their color and brightness, literally forever.

Can I clean gold coins ?

It's not necessary, as gold doesn't tarnish, and cleaning or polishing them will take away their original Mint finish and hurt their resale value.

Is gold and silver easy to sell ?

Yes. Gold and silver are easy to sell anywhere in the world, at any time. The volume of world bullion trading runs into the Billions of dollars every day, in a 24-hour circle from London to New York to Chicago to Australia to Japan to India to Turkey to Paris and back to London.
If the price of gold rises substantially, where can I sell it ? Almost anywhere. Of course, we are in the business of buying and selling gold, and hope that you will allow us a chance to bid, should you or yours ever decide to sell some of your gold. But in fact, there are dozens of dealers in the Australia, and thousands in the world, who buy gold every day.

Why is there a face value on the coins ?

Most bullion coins have a nominal face value, which makes them legal tender in the country that they are struck. This status as legal tender, rather than mere bullion, makes them easier to carry across national borders with incurring tariffs and taxes. The face value on the coin is a 'nominal' face value, and the various mints do not issue them at that price, nor do they ever trade at that value. But that value does confer an important legal tender status to the coins.

Why are gold and silver precious?

Simply take a look at the following videos and you will realise how hard it is to extract gold from the earth and how much processing goes into getting to the final coin form. Silver as a bi product of lead, zinc and copper is even more difficult to extract from the ground. All the gold ever mined in the history of the world takes up only a cube smaller than a standard tennis court. Whats more we are running out of gold and silver in the ground. Peak gold and silver is likely with us right now. Versus the infinite supply of paper currency, gold and silver are finite and scarce.

The reasons to own gold and silver are many but at a high level involve currencies, banking, and monetary history. These are complex areas, unfamiliar to most. Everyone knows how money works on an everyday level, but most people are surprised at the way the money system works at the high-finance level. The current money system has some systematic problems which are only just beginning to surface and is likely to undergo significantly more stress in the next few years. These stresses will effect the financial lives of everyone—many will lose, some will profit.
I’ve tried to present the case as simply and briefly as possible. Due to the inherent complexity of the topic, it’s almost impossible to do it justice in a shorter piece. No special background or knowledge is required to understand what follows, just some time and an enquiring attitude.

Summary
Here are the fundamental reasons to invest in gold soon (in summary form):
1. Gold and silver are more than just commodities, they are currency. They are THE currency that evolved in the marketplace over the last 5,000 years.
2. Gold and silver are the only currencies not created and controlled by governments. All of today’s other currencies (dollars, euros, yen, pounds, renminbis, rupees, etc) are ‘fiat’ currencies, which means they do not represent anything tangible but are only worth something due to government decree (namely legal tender laws).
3. Governments always end up creating too much fiat currency out of thin air. All fiat currencies in the past have ended up worth very little, collapsing into hyperinflation or threatening to. All of today’s fiat currencies have been fiat currencies for less than 34 years (all government currencies were convertible to gold until 1971).
4. The rate of creation of fiat currency accelerated markedly in 1995-2007 leading to today’s worldwide bubble in asset prices. In September 2007 as bubbles in housing and stock markets began to collapse the printing has moved into hyperdrive. The quest to save the banking system will have a significant consequence of hyperinflation down the road.
5. In the pain of the post-bubble period, governments will come under pressure to return to backing their currencies with gold.
6. Returning to currencies backed by gold is practical. Even the possibility that it might happen will cause the value of gold to rise considerably.
7. Today’s fiat currencies are unfair. For example, because the US issues the world’s reserve currency, the rest of the world sends the US real goods and services and just receives bits of paper or electronic bookkeeping entries in return—many ships travel to the US full of goods, but return half empty.
8. Governments and central banks have been suppressing the price of gold since 1995 by lending and selling their gold. They won’t be able to keep it up forever. Then the price of gold and silver will soar.
9. The pressures of enormous debts will increasingly tempt the United States to inflate the US dollar so much that it will become almost worthless, in order that the debts can be easily repaid in near-worthless dollars. Gold will gain as the falling US dollar destroys trust in fiat currencies.
10. The finance industry and governments have promoted fiat currencies at the expense of gold in the public’s mind for decades. From here, the investing public’s attitude to gold can only become more positive.

Details
1. Gold is more than just another commodity, it’s a currency. It is THE currency that evolved in the marketplace over the last 5,000 years.

Gold was the main currency in most of Europe, Asia and the Americas for most of the last few thousand years, up until 1971. Silver was also widely used, though to a lesser extent.
Gold evolved independently as money in the world’s main civilizations, because it is:
1. Rare
About 5 parts per billion of the earth’s crust. Difficult and expensive to mine.
2. Indestructible
It does not tarnish or decay.
3. Compact
If all the gold ever mined were made into a solid block whose base was the size of a football field, then it would be about 1.5 meters (5 feet) high.
4. Malleable and divisible
You can easily reshape it, flatten it, and divide it into tiny pieces.
5. Hard to find
The amount of mined gold has increased only slowly, rarely more than 2% per year.

Until 1971, government currencies were backed by gold. You could, at any time, exchange a unit of any of the world’s main government currencies (such as a dollar, a yen, a pound, or a rupee) for a prescribed amount of gold. Currency notes were just certificates for various weights of gold. For example, from 1934 to 1971 you could exchange 35 US dollars for one ounce of gold.

Progressively from 1913 to 1971 governments withdrew the right to exchange government currency for gold. For example, from 1944 to 1971 a non-US currency unit (such as a yen or a pound) could only be exchanged for US dollars, and only national governments could go to the US government to exchange those US dollars for gold.

In 1971 President Nixon of the United States broke that nation’s promise to always exchange 35 US dollars for an ounce of gold. Since then the world’s government currencies have been ‘fiat’ currencies (see point 2 below)— they are not defined as a weight of gold, they have no connection to any commodity or anything tangible, and they are only worth what someone else is prepared to trade for them. The fiat currencies now ‘float’ against one another, with their relative values going up and down with economic trends or fashions.

The only significant use of gold today is for investment, that is, as a currency or a store of value. This includes jewelry—the fundamental purpose of gold jewelry is to store something valuable in your personal safekeeping. Gold has some non-investment uses such as in electronics, but the amount of gold used in these ways is relatively tiny. Almost all the gold ever mined is still in use today. Silver is different—the industrial uses of silver (photography, utensils, medicinal, electronics) outweigh its investment use, and much of the silver ever mined has been effectively lost because it is hard to recover.
2. Gold and silver are the only currencies not created and controlled by governments. All of today’s other currencies (dollars, euros, yen, pounds, renminbis, rupees, etc) are ‘fiat’ currencies, which means they do not represent anything tangible but are only worth something due to government decree (namely legal tender laws).


All today’s government currencies are ‘fiat’ currencies. A fiat currency is defined and created by a government. It is given meaning only by legal tender laws—national laws that say that the fiat currency has to be accepted as payment in that country, and thus force people to use the fiat currency.

The term ‘fiat currency’ came about because the legal tender laws that give it value are a ‘fiat’ (or authoritative pronouncement) of government. A fiat currency is a currency brought into existence by government decree (that is, by fiat).
The value of gold, on the other hand, is independent of any government laws. Unlike fiat currencies, gold is accepted as valuable without needing protection by laws.

3. Governments always end up creating too much fiat currency out of thin air. All fiat currencies in the past have ended up worth very little, collapsing into hyperinflation or threatening to. All of today’s fiat currencies have been fiat currencies for less than 34 years (all government currencies were convertible to gold until 1971).

Fiat currency is created at the whim of politicians and bureaucrats. History’s lesson on this point is clear: those in charge of a fiat currency always, eventually, due to some urgent government priority, create too much of the currency and it becomes worth less, and ultimately worthless.

As a government creates more of its fiat currency then there is an increasing amount of currency to pay for the same amount of goods and services, so the prices of the goods and services rises. The increase in the quantity of currency is called ‘inflation’, and the consequent rise in prices is measured to some degree by the CPI (consumer price index). The ‘value’ of a currency (how many goods and services a unit of the currency can buy) depends in the long run on how much the country’s government inflates its currency.

Gold, on the other hand, treats everyone equally. Unlike fiat currency, no one can conjure gold up out of thin air to spend for themselves and get others to do their bidding. Gold has to be mined, ounce by hard-won ounce. Because the supply of gold can only ever increase slowly, prices in terms of gold tend to stay roughly constant for centuries—changing mainly due to technological influences that make some goods relatively easier or harder to make.

There have been hundreds of fiat currencies in the past, in various countries at various times. In every single case, the currency eventually became worth much less and was abandoned because the people in charge of making it eventually succumbed to the temptation of making far too much of it.

Examples of fiat currencies include:
1. Chinese bark currency (notes printed on tree bark, as recorded by Marco Polo), 1260 – 1360. One of the earliest fiat currencies, ended in hyperinflation.
2. Banque Royale Notes in France, the ‘Mississippi system’ (designed by John Law). Issued in 1716. Collapsed worth nothing by 1720.
3. Continental bills, printed by the US Congress during the American Revolution. Began issue in 1775, shrank to 1/40 of their original value by 1780. Hence the saying ‘not worth a Continental’.
4. Assignats in France during the French Revolution. Issued 1790–1796, collapsed to 1/600 of their original value by 1797.
5. Marks in Weimar Germany, after WWI. Issued from 1919 to 1924, collapsed to three trillionths of their original value. This was the currency that was carried in wheelbarrows towards the end.

The only fiat currencies that have not collapsed are today’s fiat currencies (that is, none of the hundreds of previous fiat currencies ceased to be legal tender without first undergoing a massive loss of value). All of those currencies effectively became fiat currencies in 1971, when the United States abandoned its commitment to pay 35 US dollars for an ounce of gold (see reason 1, above). In the decades prior to 1971 there were no fiat currencies, because each currency unit was ultimately defined as a certain weight of gold.

In 1971 a US dollar was worth 1/35 of an ounce of gold. Today it is worth less than a tenth of that, about 1/400 of an ounce of gold (because gold is about US$400 per ounce). From an historical perspective, the only question is how quickly the US dollar loses value, not whether it will continue to lose value.

4. The rate of creation of fiat currency accelerated markedly in 1995-2007 leading to today’s worldwide bubble in asset prices. In September 2007 as bubbles in housing and stock markets began to collapse the printing has moved into hyperdrive. The quest to save the banking system will have a significant consequence of hyperinflation down the road.
The world’s main currency and the currency used for most international transactions is the US dollar. Vast amounts of US dollars are used outside the United States. All countries hold the US dollar as their main reserve currency. The health of the world’s economy depends on the US dollar.

In 1995 the number of US dollars started increasing quite markedly. The evidence is here in these monthly money supply statistics
http://www.economagic.com/em-cgi/data.exe/fedstl/m3ns+1
and graph
http://www.economagic.com/chartg/fedstl/m3ns.gif .
(‘M3 money supply’ is about the best measure of the number of US dollars, albeit imperfect. NSA means ‘non-seasonally adjusted’. It is the ‘hidden’ money supply increase, the M3 increase less the CPI, which is most relevant to bubble formation—because the extra money raises prices of items that are not well represented in the CPI, principally assets such as bonds, stocks, and housing. High M3 growth rates prior to 1990 were matched by similar CPI rates—they did not lead to bubbles because the rising prices were plainly visible in the CPI and monetary authorities were forced to take appropriate actions.)

In the early 1990’s the money supply increased at about the CPI, just a few percent per year at most. But from 1995 to September 2003 the number of US dollars increased at about 8% per year, far faster than the combined rates of increase of goods and services and of the CPI. This extra currency flowed into buying assets, thereby pushing up asset prices. In a bubble, the principle supply-or-demand factor is the oversupply of currency. Similar increases in the amount of currency occurred in most of the world’s fiat currencies, and a worldwide bubble in asset prices developed.

In a desperate attempt to keep the bubbles afloat and save the banking system all governments have now massively increased the supply of money, calling it bail out, liquidity injection, asset swap etc. It may or may not prop up the existing asset values and save the banking system, but one thing is certain the medium to longer term consequences is hyperinflation. The cost of food, energy and the things you need to live will rise to unimaginable levels.

5. In the pain of the post-bubble period, governments will come under pressure to return to backing their currencies with gold.


This requires some understanding of the current fiat currency systems, and how the current bubble came about.

How today’s fiat currency systems work
In all the world’s fiat currency systems, all currency is technically created by the act of borrowing. Currency is initially created by the government borrowing currency from its central bank (or ‘reserve’ bank), which the central bank creates out of thin air (the act of borrowing is inseparable from the act of creating the currency out of thin air, so we say the currency is ‘created by borrowing’). All other currency is created by someone borrowing from a bank:
• About 90% of deposits made to a bank can be lent out by the bank. This system is called ‘fractional reserve banking’, because the bank retains a fraction of deposits as a reserve then lends out the rest.
• The depositors effectively still have their currency in the bank, while borrowers also have currency to spend. Hence, borrowing creates new currency.
• The borrowed currency generally ends up as a deposit in a bank, where 90% of it can be lent out again. And so on. In this manner, for each dollar that is deposited, $10 of loans are eventually created by the banking system.
• The system is safe enough as long as not too many bank depositors withdraw their currency at once.

By the way, ‘printing’ only creates physical notes or coins to be substituted as required for the currency created by borrowing—printing does not actually create the currency. Most currency exists as numbers in bank accounts.
Thus:
• All fiat currency is someone’s debt. Someone out there is paying interest on every unit of fiat currency.
• A fiat currency is essentially a system of IOU’s, a system of credit.
• Lower interest rates encourage borrowing and thus increase the rate of growth in the amount of currency (which causes some prices to increase).
• Higher interest rates discourage borrowing and thus decrease the rate of growth in the amount of currency (which causes some prices to decrease).
• The amount of currency owing on loans (the amounts borrowed plus interest) is more than the total amount of the fiat currency in existence (the amounts borrowed). So either the amount of fiat currency must continually increase, or there will be many failures to repay loans. A fiat currency system must expand to survive.

Governments, via their central banks, set short term interest rates, essentially by decree. Due to fractional reserve banking, the amount of money expands or contracts in response. Consequently, we get the ‘business cycle’: More borrowing creates more currency, so prices start to rise, so the government increases interest rates, so borrowing decreases, which reduces the rate of growth in the amount of currency, so prices fall, so the government decreases interest rates, so more borrowing occurs, so more currency is created, … and so on. This is normal, but today’s bubble is not like this.

The current bubble
The current bubble started in 1995 when the government of the United States and then some other countries lowered their interest rates and left them low. The amount of US dollars increased by 8% per year over 1995–2003, and the amount of the goods and services increased by about 3% each year, implying about a 5% per year increase in prices due to the extra currency. However, US CPI only increased at about 1% per year over this period, because:
1. The CPI only measures a narrow range of goods and services, many of which became cheaper in 1995–2003 because (a) their manufacture switched, for example, from the US to China, and (b) because the retail chain became more efficient (for example, Walmart).
2. The US government changed the methods used to calculate the CPI in about 1996, so as to reduce CPI increases. The most significant of these is ‘hedonic’ calculations for computers, which alone reduced the US CPI increases by at least 20% during 1997–2003. (The justification for hedonic calculations is to correct for qualitative improvements. For example, a 1,000 MHz computer bought in 2001 for $1,000 is considered to be ten times as much computer as a 100 MHz computer bought in 1997 for $1,000, so the CPI component for computers shows prices plummeting by 90% over the period. Of course, to buy a computer to write articles like this with still cost me $1,000, so the computer part of my cost of living stayed the same.) Another significant change is a system of simply lowering the weighting in the CPI of items whose prices are going up the quickest.

So which prices went up? The extra newly created currency was used to bid up asset prices, first stocks and bonds then real estate. Rising asset prices encouraged people to borrow to buy more assets, and that newly created currency further increased asset prices. A bubble developed. However, the central banks, particularly the US Federal Reserve under Alan Greenspan, did not raise interest rates to slow the rate of currency production. On the contrary, in response to various problems such as the Asian Crisis or the stock market fall of 2000, Greenspan acted to increase the number of US dollars.

In 2006, we had the world’s biggest ever bubble. Biggest by amount of assets (measured in any sensible way you like), biggest in scope (worldwide), and one of the most extreme (measured in terms of ratios such as debt to GDP or stock PE’s).

The bubble is built on debt: The currency brought into existence to bid up the asset prices is all debt. There are record amounts of debt in every sector of Western societies today; the ratio of debt to GDP in the West is substantially higher than it was in 1929. There is now so much debt that the central banks can no longer raise interest rates substantially without bankrupting much of the population. We are past the point of no return: the central banks can longer stop the bubble, they have to let it run its course. When no one has enough confidence or collateral to borrow any more currency then the bubble has to end, because asset prices cannot rise any further.

The bubble burst in October 2007, and all asset prices have been falling since.Many people are finding that their assets sell for less currency than they borrowed to buy those assets, and they won’t be able to repay their debts. Fire sales of assets lower asset prices further, making the problem worse and more widespread.

Where we are now
Governments are currently attempting to reflate the bursting of the bubble by creating more fiat currency. To date they have not been successful: the bubble did not burst even in 2000 when stock markets fell severely, as evidenced by the growth rate of 9% that year in the number of US dollars (see the US money supply statistics in point 4). As the size and duration of the bubble grows, efforts to keep the bubble growing need to become more extreme—for example, worldwide interest rates are at record lows.

The problem for governments is to increase the amount of fiat currency fast enough to stop the bubble from busting, while maintaining people’s confidence in its value. The principal mean of creating more fiat currency is to keep (both short and long term) interest rates low. The principal means of maintaining confidence is to promote the CPI as a measure of fiat currency unit purchasing power, while altering the CPI calculations so as to disguise the loss of purchasing power. Until 1990 or so the CPI measured the growth of money supply, but after that they have increasing diverged—the CPI now greatly underestimates the growth in fiat currency and thus its loss in purchasing power.

In the short term as deleveraging of assets causes the money supply growth to go negative we will get the appearance of deflation. There won’t be enough currency in the economy to repay debts, and asset prices will fall. This is what happened in the Great Depression of the 1930’s. The real economy suffered and unemployment was very high.

However as governments have chosen to create more fiat currency to reflate the bubble people lose confidence in the continuing value of the fiat currency because the CPI increases significantly, then we will get hyperinflation—as ever-increasing amounts of fiat currency are required. Most fiat currencies in the past have ended in hyperinflation. Hyperinflation destroys savings and jobs.

If governments can create enough but not too much new fiat currency, while maintaining people’s belief in the continuing value of fiat currencies by increasing the CPI only slightly or slowly, then they will successfully have steered between deflation on one side and hyperinflation on the other. They have steered this course for the last few years, but it is becoming increasingly difficult. The bubble damages the real economy by misallocating resources, so unemployment creeps up. The CPI will creep up eventually due to the extra fiat currency and the dynamics of international trade. Simultaneous high unemployment and high CPI rises are a phenomenon known as ‘stagflation’, which we saw in the 1970’s and which was ultimately cured by raising interest rates to over 15%. However due to today’s high debt levels, such high interest rates are politically unacceptable.

Reforms to prevent a disastrous bubble from happening again
The economic pain, like the current bubble, will be huge. Many voters will have more debt than they can handle. This will lead to a huge political urge to do something.

Interest rates could be set by the market, not by bureaucrats. An historical lesson of the old Soviet Union is that its economy failed largely because bureaucrats could not set prices properly. In a market economy, a price is a mechanism that combines all the relevant information about the item into a single number. The price reflects all the factors of supply and demand, and rations the use of items to those willing to pay for them. The Soviet economy did not fail because its bureaucrats were stupid or lazy, but because it was just not humanly possible to know all the relevant information and to combine it properly to come up with a price that results in a good outcome for the economy. Without good pricing, people waste time and effort doing the wrong things. Markets, however, perform this function automatically and well, without bureaucratic interference, and have done for centuries.

The most important price in today’s economies is the price of currency—the interest rate. High interest rates are a high price for new currency, and low interest rates mean new currency is cheap. In today’s fiat currency systems, even in the western so-called ‘market’ economies, interest rates are decreed by a bureaucrat or politician. (Actually it is short term interest rates that are set by decree. Although long term interest rates are set by the bond market, they are heavily influenced by the central banks.) For example, in the United States the US Federal Reserve under Alan Greenspan sets interest rates. The current bubble developed because those in charge of setting interest rates set them too low for too long. The political advantages of low interest rates are compelling in the short term: an expanding economy, extra spending power for voters willing to borrow, and rising asset prices.

If we are going to persist with using fiat currencies, the most important and basic reform is to use a market mechanism to set interest rates. However, for various technical reasons (to do with synchronizing the interest rates charged by different banks and homogenizing the currencies issued by different banks into one currency) it is difficult to use a market mechanism to set interest rates in a fiat currency system.

Modern central banks have been around since before 1700, and virtually every type of fiat currency experiment has been tried and rejected before. For example, Andrew Jackson won the US presidential election in 1832 on a platform of eliminating the third central bank of the United States (today’s US Federal Reserve, which started in 1913, is the fourth central bank in the US—the previous three failed and were abandoned). There is nothing essentially new about today’s system, except its worldwide reach. So, perhaps we should consider a return to the centuries-old practice of backing our currencies with gold.

It will take something of a crisis before we return to gold-backed currencies, because the finance industry and governments will resist it mightily. But the aftermath of the current bubble may provide enough of a crisis.

6. Returning to currencies backed by gold is practical. Even the possibility that it might happen will cause the value of gold to rise considerably.


All the world’s government currencies were backed by gold in the decades to 1971: a unit of government currency theoretically represented a certain weight of gold, and under the right conditions could be exchanged on demand for that amount of gold.

We could return to that system. We would continue to use the current notes and coins, continue to use credit and debit cards, continue to order over the telephone or internet, and continue to use other electronic financial transactions. It is very unlikely we would ever use a gold coin for buying anything, just as we didn’t use gold coins for decades before 1971.

The only difference would be that the notes and coins and amounts of currency would represent gold—and could, on demand, be exchanged for gold by banks or government. This would have consequences:
• All the world would be on one currency, gold. Currencies would no longer float against one another, so foreign currency exchanges, currency risk, currency hedging, and currency speculation would disappear (except perhaps for changing notes and coins at borders). A nation’s industries would no longer risk losing their export markets because of fluctuations on the foreign exchange markets. The finance industry would lose a large source of easy income, but everyone else would benefit.
• Governments would not be able to create new currency at whim. They would have to repay their loans. Everyone else would benefit through lower inflation (inflation is a hidden tax that acts by eroding the value of any currency we have).
• The amount of currency could no longer expand faster than about 2% per year (see reason 1), so inflation would be very low, bubbles would be much less likely to occur, and economy-wide bubbles could not occur. Prices throughout the economy would be more stable than under the current system.
• Interest rates could be set by market forces, as they were until WWI. The financial history of the decades prior to WWI strongly suggests that interest rates would be more stable than the last few decades.

If the world returned to gold-backed currencies, the value of gold would rise. If the US were to back its current number of dollars (about US$9 trillion) with its current gold reserves (about 8,150 tonnes), the price of gold would be about US$34,000 per ounce! This figure is only a rough indication, because the US government might not fully back each dollar, or the amount of US dollars or US gold might change between now and a return to the gold standard.

Even if the world doesn’t return to gold-backed currencies, the possibility that some or all countries might return to the gold standard will send gold prices much higher as the bubble ends. In 1980 the slight prospect of a return to the gold standard (which did not eventuate then) caused the gold price to rise to about US$880 per ounce, which is equivalent to about US$3,400 per ounce in today’s dollars.

Don’t confuse value with price in US dollars. Today an ounce of gold buys about 150 Big Macs in the US. In the event that the price of gold goes to US$20,000 per ounce (a fifty-fold increase), it may be that an ounce of gold only buys 750 Big Macs (a five-fold increase).

7. Today’s fiat currencies are unfair. For example, because the US issues the world’s reserve currency, the rest of the world sends the US real goods and services and just receives bits of paper or electronic bookkeeping entries in return—many ships travel to the US full of goods, but return half empty.


Most of us have to exchange our labor to get currency, and gold miners have to go to a lot of effort to mine gold. But some people in the economy (namely the government and the central bank) have the privilege to create currency out of thin air, effortlessly, thereby acquiring much power. Is that fair or desirable?

Newly created money buys things at the price levels that exist when the money is created and spent. But that extra money raises the general price level, so the currency saved by others loses value—things are more expensive when they later go and spend their money. So fiat currencies favor borrowing at the expense of saving. It is no coincidence that every sector of western societies is at record debt levels as of early 2004. How fair or wise is a system that favors debt over saving?

The United States manufactures the world’s reserve currency, the US dollar. Governments of countries all around the world hold vast numbers of US dollars as currency reserves, needed for international trade. To get those US dollars, those countries had to send real goods and services to the United States, and the United States sent them US dollars in the form of electronic bookkeeping entries or bits of paper (notes and bonds). So the United States gets massive amounts of goods and services in return for a few pieces of paper or electronic bookkeeping entries—just because the US dollar is the world currency. Currently many ships are arriving at the US loaded full of goods, but return from the US half empty or with low-value back-fill loads. Is it a coincidence that the United States is the world’s richest country and can afford the world’s biggest military forces? Is that fair or right?

People or countries that feel these aspects of the fiat currency system are unfair will welcome (indeed, insist upon) a return to the gold standard. Moves in this direction have already been made recently by Malaysia.

8. Governments and central banks have been suppressing the price of gold since 1995 by lending and selling their gold. They won’t be able to keep it up forever. Then the price of gold and silver will soar.


Governments and central banks routinely intervene in currency markets. They generally don’t acknowledge that they are manipulating the market while they are doing it, because that would dilute the effect of the intervention. However they usually acknowledge their interventions after the fact—it’s not a secret, and is considered normal by everyone connected with currency markets. Gold and silver are currencies, albeit private currencies. Governments and central banks have routinely intervened in the gold and silver markets in the past, so it is reasonable to assume they might be doing so now. They don’t directly and comprehensively deny it.

Governments benefit from the use of their fiat currencies. All the government currencies are thus in competition with gold and silver. Governments have an interest in promoting fiat currencies against gold and silver—that is, an interest in lowering the prices of gold and silver. The competition between gold and the US dollar is particularly intense, because the United States gains great advantage by the use of the US dollar as the world’s reserve currency (see reason 7 above).

Thus governments, particularly the US Government, have the means, the motivation, and a track record of suppressing the price of gold and silver. It would be standard practice for them to suppress the price of gold and silver but not acknowledge it.

In 1995, governments, through their central banks, owned about 25% of the world’s mined gold, about 32,000 tonnes. There is a lot of evidence to suggest (for example, see http://gata.org/) that the central banks have been lending their gold to bullion banks on long-term leases, who then sold the gold on the open market, which lowered the price of gold. The IMF even changed its rules for reporting central bank gold holdings in about 1997 so that the central banks no longer had to distinguish between how much gold they physically have and how much they have lent out—they just report both categories combined as how much they ‘own’. This word game allows the central banks to hide the extent of their gold lending. For example Australia reports that it ‘owns’ about 79.9 tonnes of gold, but there are only a few bars of gold left in the Australian central bank because nearly all of it has been lent out.

The gold lent out by central banks has been sold at the retail level, largely in India. The bullion banks who owe the gold to the central banks will have to buy the gold on the open market when it comes time to repay the gold. Either this will force the price of gold up or, because they don’t want the price of gold to soar, the central banks will allow the lenders to repay in fiat currency rather than in gold. The lent gold will probably not be recovered from the individuals in India etc. who now wear it as jewelry. Thus much of the gold lent out by central banks will probably never be repaid as gold. Official sales of central bank gold nowadays are often just a matter of the bank receiving fiat currency for gold that they previously lent out.

The amount of gold lent out by the central banks since 1995 is hard to estimate without official figures (of which there are few), but is probably about 15,000 tonnes, or about half of the gold that the central banks say they now ‘own’. Spread over the nine years 1995–2004, that’s about 1,700 tonnes per year. Annual ‘consumption’ of gold per year is only about 4,700 tonnes per year (the gold is mainly used in jewelry, but very little of it is actually lost forever from circulation), and the annual production of gold from mining and scrap is about 3,400 tonnes per year. So the surreptitious sale of 1,700 tonnes per year due to central bank lending would have had a large downward effect on the price of gold in that period.

For various reasons nearly all the remaining gold in the central banks simply cannot be lent out. There are indications that the central banks are already scraping the bottom of the barrel. As the central banks run out of physical gold to sell, the market price of gold will rise. The gold price rises of the last year suggests that this has already started.

It appears that the Western governments have effectively being selling their gold reserves at artificially low prices to people in Asia, particularly India, in order to promote their fiat currencies at the expense of gold. If the West is forced by the failure of its fiat currencies to return to gold-backed currencies, it may have to offer a lot to the gold owners in Asia to get that gold back again—that is, the value of gold will rise considerably.

9. The pressures of enormous debts will increasingly tempt the United States to inflate the US dollar so much that it will become almost worthless, in order that the debts can be easily repaid in near-worthless dollars. Gold will gain as the falling US dollar destroys trust in fiat currencies.


Many people and organizations in the United States are deeply in debt.
The net present value of the unfunded liabilities of the US Government is US$44 trillion, which is the value of everything produced in the world for about a year and half, or about four times the yearly GDP of the United States. To pay these liabilities, the US government would have to raise income taxes by 69% indefinitely, or cut all Social Security and Medicare benefits by 56% indefinitely. In addition, the debt of the US Government is about US$7 trillion, increasing by about half a trillion each year. The current account deficit of the US is another half a trillion per year. Or, per person in the United States: US$150,000 of unfunded liabilities, $25,000 of federal debt, and $1,700 of extra federal debt and $1,700 of current account deficit per year. And there are state debts too. In addition, the ratio of private debt to GDP is at a record high, even higher than in 1929.

But the United States has an ace up its sleeve: nearly all that debt is denominated in US dollars. If the meaning of a ‘US dollar’ were to change to something worth very little, then most of that debt could be painlessly repaid (but not all of the debt—many of the unfunded liabilities of the US government are tied to the cost of living, so they not could be escaped so easily). That is, because much of those debts are in terms of nominal US dollars, if the US dollar became worth very little then much of the debts could be easily repaid. For example, if you borrow US$100,000 in 2003 when you are earning US$40,000 per year, you have a large debt. But if the US dollar inflates 100-fold by 2013 your income might be around US$4,000,000 per year, and repaying that US$100,000 will be easy. (However US$100,000 in 2003 would buy 37,000 Big Macs, but only 370 Big Macs in 2013.)

At the moment, the United States gains greatly by having a US dollar that is worth a lot and is used as the world’s reserve currency—because the United States exchanges a few bits of paper for massive amounts of real goods and services (reason 8). But the debt being incurred by US voters is huge and growing quickly. Eventually the gain from supplying the world’s reserve currency will be outweighed by the pain of the interest and repayments on the debts. At some point in the future, the only rational course for the United States will be to cause its dollar to be worth as little as possible.

The way for the United States to make its currency unit worth very little is to inflate it dramatically, that is, to increase the number of US dollars enormously. It would start down this path by reducing interest rates towards zero, to encourage as much borrowing and thus currency creation as possible. A next step would be for the government to create new money out of thin air to pay some of its bills. Both of these trends are already underway.

Repayment of those debts would be in name only, a technicality, because the value of the repayment as measured in say gold or Big Macs would be tiny compared to the original value of those debts. The lenders would feel ripped off. Only the United States has this option, because it provides the world’s reserve currency. If the US Government can bring this off, it will be the world’s biggest ever financial scam by several orders of magnitude. The next few years might be, as the Chinese say, ‘interesting’.

The effect on commerce of this maneuver would be to scare people off fiat currencies for decades. No one would write a future contract in terms of a fiat currency. Only tangibles would be accepted, preferably gold. The world would return to a full classical gold standard very quickly. The value of gold would rise as dramatically as the value of the US dollar would fall.

10. The finance industry and governments have promoted fiat currencies at the expense of gold in the public’s mind for decades. From here, the investing public’s attitude to gold can only become more positive.


Gold and silver have been in competition with the fiat currencies (especially the US dollar) since 1971, and to a lesser extent since 1913. There is a great deal of power at stake. They say that “all’s fair in love and war”, but perhaps they should amend that to “all’s fair in love, war, and high finance”.

The finance industry and, to a lesser extent, governments would be the losers in a return to gold-backed currencies. The rest of us would be winners. With some of their power at stake, you might suspect that those in the finance industry and government would exaggerate, obscure, or deceive when it comes to gold and currencies.

Last week we had two prospects tell us that they had silver stored with major New York brokerage firms. One man had 50,000 ounces he’d bought from them years ago. The other had 20,000 ounces with another well-known firm. They have both been paying storage fees. However, neither one had any kind of proof that they owned real silver. They could not get a storage receipt with the exact size and weight of the bars. Nor could they get serial numbers for the bars.

According to silver analyst, Ted Butler, if you can’t get proof that real silver is in your name, then the silver doesn’t exist. "Why wouldn’t they give you the serial numbers if they had the bars?" asks Ted. "It’s easy enough to do that and it’s something that silver buyers who store silver should insist on."

A few years ago Ted Butler addressed this very issue. "the same careful thinking and analysis that goes into the decision of whether to invest in silver, is often not present in the decision of where and how the silver will be stored. Here, I think many silver investors may be making a big mistake. That mistake is in assuming that just because you may have a piece of paper that reads that you own silver, that there is real silver backing that piece of paper. In fact, I would assert that the vast majority of silver pieces of paper, such as foreign bank silver certificates, pool accounts and all leveraged contracts have no real silver behind them. How could they? No one can provide evidence of more than 150 million ounces of verified silver bullion in the world, yet we have billions of ounces of silver promised by various pieces of paper…..


What they have been doing, issuing and letting their silver certificates remain unbacked by real silver, is an immensely profitable business. For twenty years, or more, by not having to go out and buy and store real silver whenever a customer buys a silver certificate, the foreign bankers have been printing profits for themselves. Their customers give them cash upfront, and not only do these banks have full use of that cash, they do not have to pay any interest on that cash, and get this - they charge storage fees, for silver that doesn't exist. It's better than stealing, because if you just stole the money from someone, you wouldn't get to charge additional storage fees. It's a racket.


Now, I have surmised that there may be a billion ounces of silver involved in these certificates, but I think the figure may be much, much more. Here's my reasoning - while a billion ounces of silver may be a lot of silver, it sure isn't a lot of money. Five billion dollars, over twenty years and all the banks that are doing this is peanuts. One man, Warren Buffett, bought almost a billion dollars worth of silver, by himself (of course, he couldn't get full delivery when it came down to it). I personally witnessed one transaction recently, where one entity bought 10 million (paper certificate) ounces from a major Swiss bank. You don't think, over the span of 20 years and the hundreds, or thousands, of banks involved in this silver certificate scam, that there hasn't been 100 others like this entity? What's five billion dollars, spread over hundreds, if not thousands of banks worldwide?


There are two things that should come to every silver investor's mind. One, is there silver behind my certificate? There most likely is, if you a have a certificate that spells out the serial numbers on the bars, or a specific description of the silver held (bags of coins for instance). There probably is, if the storage function is separate and distinct from the dealer selling you the silver. There probably is, if it's registered in your name and not the name of your dealer. If you have all three, no sweat. But, if you hold a certificate where the silver is not described specifically, or is unallocated form, or is in a pool account, or there are no storage charges, you would be wise to assume the silver doesn't exist. That doesn't mean you will automatically lose, when silver takes off, but it becomes a question then of the credit quality of the entity you are doing business with, which is a very different analysis than the merits of silver. You would then be betting upon the financial viability of a dealer whose books you have not analyzed. Appearances can be deceptive. Remember, a few years ago, the then largest silver refiner in the world, Handy and Harman Refining, suddenly went bankrupt and all silver pool owners and depositors were left in the cold. Also, there may be small print wording in these unbacked silver certificates that may prevent you from getting your silver in physical form, or that deny you the true world price at the time you may wish to sell.


The second thing, concerning silver certificates, that should come to every silver investor's mind, is the market implications that a silver price rise would have on those issuing non-silver backed certificates. This is what I was mainly referring to in my mention that these certificates are a separate and distinct short position. Even if you are not worried that your dealer may renege or go out of business (in the case of a large Swiss bank, for instance), in the event silver rises in price dramatically, the implications for the silver market will be profound. While those who have been issuing these non-backed silver certificates have profited immensely over the decades by having free use of their silver depositors' money, there is a cost to be paid for those profits in the event of a silver price spike. Even if the depositors don't demand their silver, many will want to cash out at high silver prices. The issuing banks will be liable for those profits, and the only way the banks can limit their liability is to offset their suddenly very naked silver exposure, is to buy silver in some form, paper or physical. At some price trigger point, $15, $30, $40, these banks will panic and buy en masse. Ask yourself this - if the silver short sellers that these banks have been for decades, suddenly turn collective buyers at any price, to the tune of hundreds of millions, or billions of ounces - who will be there to sell to them such quantities? Still think $100 or $1000 per ounce is unreasonable?


My advice here is not aimed at only new silver buyers, I am speaking to those who have bought silver already, over the years, with no input from me. My advice for those holding paper silver in questionable form is to get your silver into unquestionable form. Get out of pool accounts and unallocated silver, and into real and allocated silver. Hold your silver in hand or with someone you trust. The additional costs will prove well worth it. Make the switch now, while you can. Don't wait for the price to rise, it may be too late. I can't think of a worse outcome than for someone to have invested in silver for a long time, to be denied a profit when the price rises, because they held the wrong form of stored silver. Please don't let that happen to you."

- James R. Cook, Investment Rarities Inc.

Gold
•The chemical symbol for gold is Au.
•Gold’s atomic number is 79 and its atomic weight is 196.967.
•Gold melts at 1064.43° Centigrade
•The specific gravity of gold is 19.3, meaning gold weighs 19.3 times more than an equal volume of water.
••••••••••
WEIGHT EQUIVALENTS
1 troy ounce = 1,097 ordinary ounces
1 troy ounce = 480 grains
1 troy ounce = 31.1 grams
1000 troy ounces = 31.3 kilograms
1 gram = .03215 troy ounces
1 kilogram = 32.15 troy ounces
1 tonne = 32.150 troy ounces
1 ordinary ounce = .9115 troy ounces
1 ordinary pound = 14.58 troy ounces
••••••••••
Percent Gold = European System = Karat System
100 % = 1000 fine = 24 karat
91.7 % = 917 fine = 22 karat
75.0 % = 750 fine = 18 karat
58.5 % = 585 fine = 14 karat
41.6 % = 416 fine = 10 karat

4000 B.C. A culture, centered in what is today Eastern Europe,begins to use gold to fashion decorative objects. Thegold was probably mined in the Transylvanian Alps or
the Mount Pangaion area in Thrace.

3000 B.C. The Sumer civilization of southern Iraq uses gold to create a wide range of jewelry, often using sophisticated and varied styles still worn today.

2500 B.C. Gold jewelry is buried in the Tomb of Djer, king of the First Egyptian Dynasty, at Abydos, Egypt.

1500 B.C. The immense gold-bearing regions of Nubia make Egypt a wealthy nation, as gold becomes the recognized standard medium of exchange for
international trade. The Shekel, a coin originally weighing 11.3 grams of
gold, becomes a standard unit of measure in the Middle East. It contained a naturally occurring alloy called electrum that was approximately two-thirds
gold and one-third silver.

1350 B.C. The Babylonians begin to use fire assay to test the purity of gold.

1200 B.C. The Egyptians master the art of beating gold into leaf to extend its use, as well as alloying it with other metals for hardness and color variations. They also
start casting gold using the lost-wax technique that today is still at the heart of jewelry making. Unshorn sheepskin is used to recover gold dust from river sands on the eastern shores of the Black Sea. After slucing the sands through the sheepskins, they are dried and shaken out to dislodge the gold particles. The practice is most likely the inspiration for the “Golden Fleece”.

1091 B.C. Little squares of gold are legalized in China as a form of money.

560 B.C. The first coins made purely from gold are minted in Lydia, a kingdom of Asia Minor.

344 B.C. Alexander the Great crosses the Hellespont with 40,000 men, beginning one of the most extraordinary campaigns in military history and seizing vast quantities of gold from the Persian Empire.

300 B.C. Greeks and Jews of ancient Alexandria begin to practice alchemy, the quest of turning base metals into gold. The search reaches its pinnacle from the late Dark Ages through the Renaissance.

218 B.C. – 202 B.C. During the second Punic War with Carthage, the Romans gain access to the gold mining region of Spain and recover gold through stream gravels and
hardrock mining.

58 B.C. After a victorious campaign in Gaul, Julius Caesar brings back enough gold to give 200 coins to each of his soldiers and repay all of Rome’s debts.

50 B.C. Romans begin issuing a gold coin called the Aureus.

476 A.D. The Goths depose Emperor Romulas Augustus, marking the fall of the Roman Empire.

600 A.D. – 699 A.D. The Byzantine Empire resumes gold mining in central Europe and France, an area untouched since the fall of the Roman Empire.

742 A.D. – 814 A.D. Charlemagne overruns the Avars and plunders their vast quantities of gold, making it possible for him to take control over much of western Europe.

1066 A.D. With the Norman conquest, a metallic currency standard is finally re-established in Great Britain with the introduction of a system of pounds, shillings, and pence. The pound is literally a pound of sterling silver.

1250 A.D. –1299 A.D. Marco Polo writes of his travels to the Far East, where
the “gold wealth was almost unlimited.”

1284 A.D. Venice introduces the gold Ducat, which soon becomes the most popular coin in the world and remains so for more than five centuries.

1284 A.D. Great Britain issues its first major gold coin, the Florin. This is followed shortly by the Noble, and later by the Angel, Crown, and Guinea.

1377 A.D. Great Britain shifts to a monetary system based on gold and silver.

1511 A.D. King Ferdinand of Spain says to explorers, “Get gold, humanely if you can, but all hazards, get gold,” launching massive expeditions to the newly
discovered lands of the Western Hemisphere.

1556 A.D. Georgius Agricola publishes De re Metallica, which describes the fire assay of gold during the Middle Ages.

1700 A.D. Gold is discovered in Brazil, which becomes the largest producer of gold by 1720, with nearly twothirds of the world’s output. Isaac Newton, as Master of the Mint, fixes the price of gold in Great Britain at 84 shillings, 11 & ½ pence per troy ounce. The Royal Commission, composed of Newton, John Locke, and Lord Somers,
recommends a recall of all old currency, issuance of new specie with gold/silver ratio of 16-to-1. The gold price thus established in Great Britain lasted for
over 200 years.

1744 A.D. The resurgence of gold mining in Russia begins with the discovery of a quartz outcrop in Ekaterinburg.

1787 A.D. First U.S. gold coin is struck by Ephraim Brasher, a goldsmith.

1792 A.D. The Coinage Act places the United States on a bimetallic silver-gold standard, and defines the U.S. dollar as equivalent to 24.75 grains of fine gold and
371.25 grains of fine silver.

1799 A.D. A 17-pound gold nugget is found in Cabarrus County, North Carolina, the first documented gold discovery in the United States.

1803 A.D. Gold is discovered at Little Meadow Creek, North Carolina, sparking the first U.S. gold rush.

1804 A.D. –1828 A.D. North Carolina supplies all the domestic gold coined by the U.S. Mint in Philadelphia for currency.

1816 A.D. Great Britain officially ties the pound to a specific quantity of gold at which British currency is convertible.

1817 A.D. Britain introduces the Sovereign, a small gold coin valued at one pound sterling

1830 A.D. Heinrich G. Kuhn announces his discovery of the formula for fired-on Glanz (bright) Gold. It makes Meissen gold-decorated china world famous.

1837 A.D. The weight of gold in the U.S. dollar is lessened to 23.22 grains so that one fine troy ounce of gold is valued at $20.67.

1848 A.D. John Marshall finds flakes of gold while building a sawmill for John Sutter near Sacramento, California, triggering the California Gold Rush and hastening
the settlement of the American West.

1850 A.D. Edward Hammong Hargraves, returning to Australia from California, predicts he will find gold in his home country in one week. He discovered gold in New South Wales within one week of landing.

1859 A.D. Comstock lode of gold and silver is struck in Nevada.

1862 A.D. Latin Monetary Union is established setting fineness, weight, size, and denomination of silver and gold coins of France, Italy, Belgium and Switzerland (and
Greece in 1868) and obligating all to accept each other’s current gold and silver coins as full legal tender.

1868 A.D. George Harrison, while digging up stones to build a house, discovers gold in South Africa – since then, the source of nearly 40% of all gold ever mined.

1873 A.D. As a result of ongoing revisions to minting and coinage laws, silver is eliminated as a standard of value, and the United States goes on an unofficial
gold standard.

1887 A.D. A British patent is issued to John Steward MacArthur for the cyanidation process for recovering gold from ore. The process results in a doubling of world gold output over the next twenty years.

1896 A.D. William Jennings Bryan delivers his famous “Cross of Gold” speech at the Democratic national convention, urging a return to bimetallism. The speech gains him
the party’s presidential nomination, but he loses in the general election to William McKinley.

1898 A.D. Two prospectors discover gold while fishing in Klondike, Alaska, spawning the la st gold rush of the century.

1900 A.D. The Gold Standard Act places the United States officially on the gold standard, committing the United States to maintain a fixed exchange rate in relation to other countries on the gold standard.

1903 A.D. The Engelhard Corporation introduces an organic medium to print gold on surfaces. First used for decoration, the medium becomes the foundation for
microcircuit printing technology.

1913 A.D. Federal Reserve Act specifies that Federal Reserve Notes be backed 40% in gold.

1914 A.D. –1919 A.D. A strict gold standard is suspended by several countries, including United States and Great Britain , during World War I.

1925 A.D. Great Britain returns to a gold bullion standard, with currency redeemable for 400-ounce gold bullion bars but no circulation of gold coins.

1927 A.D. An extensive medical study conducted in France proves gold to be valuable in the treatment of rheumatoid arthritis.

1931 A.D. Great Britain abandons the gold bullion standard.

1933 A.D. To alleviate the banking panic, President Franklin D. Roosevelt prohibits private holdings of all gold coins, bullion, and certificates.

1934 A.D. The Gold Reserve Act of 1934 gives the government the permanent title to all monetary gold and halts the minting of gold coins. It also allows gold certificates to be held only by the Federal Reserve Banks, putting the U.S. on a limited gold bullion standard, under which redemption in gold is restricted to dollars held by foreign central banks and licensed private users. President Roosevelt reduces the dollar by increasing the price of gold to $35 per ounce.
1935 A.D. Western Electric Alloy #1 (69% gold, 25% silver, and 6% platinum) finds universal use in all switching contacts for AT&T telecommunications equipment.

1937 A.D. The bullion depository at Fort Knox, Kentucky, is opened.

1942 A.D. President Franklin D. Roosevelt issues a presidential edict closing all U.S. gold mines.

1944 A.D. The Bretton Woods agreement, ratified by the U.S. Congress in 1945, establishes a gold exchange standard and two new international organizations, the
International Monetary Fund (IMF) and the World Bank. The new standard involves setting par values for currencies in terms of gold and the obligation of
member countries to convert foreign official holdings of their currencies into gold at these par values.

1945 A.D. Gold-backing of Federal Reserve Notes is reduced by 25.5%

1947 A.D. The first transistor is assembled at AT&T Bell Laboratories. The device uses gold contacts pressed into a germanium surface.

1954 A.D. London gold market, closed early in World War II, reopens.

1960 A.D. AT&T Bell Laboratories is granted the first patent for the invention of the laser. The device uses carefully positioned gold-coated mirrors to maximize infrared reflection into the lasing crystal. The European Rheumatism Council confirms
intravenously administered gold is an effective treatment for rheumatoid arthritis.

1961 A.D. Americans are forbidden to own gold abroad as well as at home. The central banks of Belgium, France, Italy, the Netherlands, Switzerland, West Germany, the United Kingdom and the United States form the London Gold Pool and agree to buy and sell at $35.0875 per ounce.

1965 A.D. Col. Edward White makes the first space walk during the Gemini IV mission, using a gold-coated visor to protect his eyes from direct sunlight. Gold-coated
visors remain a standard safety feature for astronaut excursions.

1967 A.D. South Africa produces the first Krugerrand. This 1- ounce bullion coin becomes a favorite of individual investors around the world.

1968 A.D. London Gold Market closes for two weeks after a sudden surge in the demand for gold. The governors of the central banks in the gold pool announce they will no longer buy and sell gold in the private market. A two-tier pricing system emerges:
official transactions between monetary authorities are to be conducted at an unchanged price of $35 per fine troy ounce, and other transactions are to be
conducted at a fluctuating free-market price. U.S. Mint terminates policy of buying gold from and selling gold to those licensed by the U.S. Treasury to hold gold.
Gold-backing of Federal Reserve Notes is eliminated. Intel introduces a microchip with 1,024 transistors interconnected with invisibly small gold circuits.

1970 A.D. The charge-coupled device is invented at Bell Telephone Laboratories. First used to record the faint light from stars, the device, which uses gold to
collect the electrons generated by light,eventually is used in hundreds of civilian and military devices, including home video cameras.

1971 A.D. On August 15, U.S. terminates all gold sales or purchases, thereby ending conversion of foreign officially held dollars into gold; in December, under
the Smithsonian Agreement signed in Washington, U.S. devalues the dollar by raisin g the official dollar price of gold to $38 per fine troy ounce. The colloidal gold marker system is introduced by Amersham Corporation of Illinois. Tin y spheres of
gold are used in health research laboratories worldwide to mark or tag specific proteins to reveal their function in the human body for the treatment of disease.

1973 A.D. On February 13, U.S. devalues the dollar again and announces it will raise the official dollar price of gold to $42.22 per fine troy ounce. Dollar-selling
continues, and finally all currencies are allowed to “float” freely, without regard to the price of gold. By June, the market price in London has risen to more
than $120 per ounce. Japan lifts prohibition on imports of gold.

1974 A.D. Americans permitted to own gold, other than just jewelry, as of December 31.

1975 A.D. The U.S. Treasury holds a series of auctions at which is accepts bids for gold in the form of 400-ounce bars. In January, 754,000 troy ounces are sold and another 499,500 more in June.

1975 A.D. Trading in gold for future delivery begins on New York’s Commodity Exchange and on Chicago’s International Monetary Market and Board of Trade.
The Krugerrand is launched on to the U.S. Market.

1976 A.D. The Gold Institute is established to promote the common business interests of the gold industry by providing statistical data and other relevant information to its members, the media, and the public, while also acting as an industry spokesperson.

1976 A.D. – 1980 A.D. IMF sells one-third of its gold holdings, 25 million troy ounces to IMF members at SDR 35/ounce in proportion to members’ shares of quotas on August 31, 1975, and 25 million troy ounces at a series of public auctions for the benefit of developing member countries.

1977 A.D. A.D. U.S. Treasury sells 15.8 million troy ounces of gold to strengthen the U.S. trade balance.

1978 A.D. Amended IMF articles are adopted, abolishing the official IMF price of gold, gold convertibility and maintenance of gold value obligations; gold is
eliminated as a significant instrument in IMF transactions with members; and the IMF is empowered to dispose of its large gold holdings. By Act of Congress, the U.S. abolishes the official price of gold. Member governments are free to buy and
sell gold in private markets.

1978 A.D. A weak U.S. dollar propels interest in gold, aided by such events as the U.S. recognition of Communist China, events in Iran and Sino-Vietnamese border
disturbances. U.S. Congress passes the American Arts Gold Medallion Act, representing the first official issue of a gold piece for sale to individuals in almost half a century. Japan lifts ban on gold exports, touching off a “gold
rush” among investors who can sell as well as buy.

1979 A.D. The Canadian 1-ounce Maple Leaf is introduced.

1980 A.D. Gold reaches intra-day historic high of $870 on January 21 in New York and by year-end closes at $591.

1981 A.D. Treasury Secretary Donald Regan announces the formation of a Gold Commission “to assess and make recommendations with regard to the policy of the U.S.
government concerning the role of gold in domestic and international monetary systems.” The first space shuttle is launched, using gold-coated impellers in its liquid hydrogen fuel pump.

1982 A.D. Congress passes Olympic Commemorative Coin Act, which includes issuing the first legal tender U.S. gold coin since 1933.

1982 A.D. U.S. Gold Commission report recommends no new monetary role for gold, but supports a U.S. gold bullion coin. New gold deposits are discovered in North America
and Australia. Canada introduces the fractional Maple Leaf coins in sizes of 1/4 ounce and 1/10 ounce. China introduces the Panda bullion coin.

1986 A.D. The first new gold jewelry alloy this century, 990-Gold (1% titanium) is introduced to meet the need for an improved durability of 99% pure gold traditionally manufactured in Hong Kong. The very malleable alloy is easily worked into intricate design,but can be converted into a hard, durable alloy by
simply heating it in an oven. The American Eagle Gold Bullion Coin is
introduced by the U.S. Mint. Treasury resumes purchases of newly mined gold.
Goldcorp Australia issues the Nugget gold bullion coin. Gold-coated compact discs are introduced. The goldcoated discs provide perfection of reflective
surfaces, eliminate pinholes common to aluminum surfaces, and exclude any possibility of oxidative deterioration of the surfaces.

1987 A.D. British Royal Mint introduces the Britannia Gold Bullion Coin. World stock markets suffer sharp reversal on October 19; volatile investment markets increase gold trading activity. The World Gold Council is established to sustain and
develop demand for the end uses of gold.

1988 A.D. The international media report huge gold purchases by a “mystery” buyer, later reveled to be the Japanese government in preparation for the minting of a major
commemorative coin. This coin, honoring the sixtieth anniversary of Emperor Hirohito’s reign, is issued in November.

1989 A.D. Austria introduces the Philharmoniker bullion coin.

1990 A.D. United States becomes the world’s second largest gold producing nation.

1992 A.D. World Gold Council introduces the Gold Mark as an international identification mark for gold jewelry.

1993 A.D. Germany lifts its value added tax restrictions on financial gold, causing a resurgence of private demand of gold. India and Turkey liberalize their gold markets.

1994 A.D. Russia formally establishes a domestic gold market.

1996 A.D. The Mars Global Surveyor is launched with an onboard gold-coated parabolic telescope-mirror that will generate a detailed map of the entire Martian surface
over a two-year period.

1997 A.D. Congress passes Taxpayers Relief Act, allowing US Individual Retirement Account holders to buy gold bullion coins and bars for their accounts as long as
they are of a fineness equal to, or exceeding, 99.5% percent gold.

1999 A.D. The Euro, a pan-European currency, is introduced, backed by a new European Central Bank holding 15% of its reserves in gold.

2000 A.D. Astronomers at the Keck Observatory in Hawaii use the giant gold-coated mirrors of the most detailed images of Neptune and Uranus ever captured.

2002 A.D. The Gold Institute’s Board of Directors votes to dissolve the association and consolidate its activities within the National Mining Association, effective
January 1, 2003. The decision was made against the backdrop of consolidation in the gold sector and changes in the general business climate.

2003-2008 AD Gold enters new bull market spurred by Excessive government money printing, derivatives risks, and economic meltdown. Breaks through psychologically
important $1000 level. Significant speculation of a move back to a more stable gold backed currency system.........history repeats again?

Even though U.S. Treasury Secretary Henry Paulson was quoted yesterday, as in the Bloomberg News story appended below, as saying that the U.S. government would use "'all the tools at our disposal' to protect the financial markets". ...

And even though the U.S. government and most Western central banks are now desperately and openly rigging the currency markets with their swap agreements and the stock markets with short sales regulations and government-brokered mergers. ...

And even though Western central banks have been openly selling, leasing, and swapping gold for years now, often at strategic moments. ...

Please remember that we have the solemn assurances of Kitco Senior Analyst Jon Nadler, Resource Investor's Tim Wood, CPM Group Managing Director Jeff Christian, market analyst Paul van Eeden, and a few other worthies that government is not -- repeat, NOT -- intervening in the gold and silver markets in ANY way. Gold and silver are merely incidental commodities -- NOT what they used to be, money, and not even potentially money -- and their prices are of no more interest to governments than the price of seaweed.

That is, when Secretary Paulson said he would protect the financial markets with "all the tools at our disposal," he meant "ALMOST all tools at our disposal," and would have said so if only Nadler, Wood, Christian, or van Eeden had been present to remind him.

And exactly what does Secretary Paulson mean to protect the financial markets against?

Why, THEMSELVES, of course -- the threat that an actual market price, rather than a government-approved price, might develop somewhere in the fantastic, overarching illusion that crony capitalism and central banking have made of what used to be markets. These days, if you want a market, you're stuck with Ebay -- at least until that too is nationalized.

http://www.bloomberg.com/apps/news?pid=20601103&sid=av7npHxu6eN8&refer=us