Possibly The Weakest Gold Hit Piece Ever: ‘Why Gold Is A Dead Investment’

This would be assassin couldn’t hit the broad side of a barn. Presenting what may be the worst anti-gold MSM propaganda article, ever…

While we are only halfway though January, we may have just seen our anti-gold propaganda article of the year.

Besides, with a title like “Why gold is a dead investment”, it seems like the author took a que from Kim Jong-Un’s death by anti-aircraft firing squad, only instead of blowing the condemned to smithereens, the firing squad missed, completely.

Let’s dig right into this months anti-gold propaganda winner straight from The Economic Times:

A recent newspaper report says higher crop prices have led to higher gold sales in rural India. Quoting people from the retail jewellery industry, it says gold sales in December 2017 were 15% higher than in the previous month. Of course, this can hardly be considered data because it does not provide comparisons with figures from matching periods in previous years. Even so, it may well be true. In any case the fact remains that gold is a major form of saving in rural and small town India. Increased prosperity, or even some spare cash, always leads to more gold being bought. Apart from a narrow set of people who have ‘financialised’ their savings, there remains a deep faith in gold that seems unshakeable at any scale less than that of decades, or even centuries. 

Why must one “shake-out” thousands of years of proven savings? What is wrong with individuals making rational choices as to how they would like to keep their stores of value, and hedge against uncertainty? Wasn’t it Modi who, on November 9th, 2016, the same night Candidate Trump as named President-Elect Trump, came out, without warning, and immediately demonetized the 500 and 1,000 rupee notes? What’s wrong with people choosing gold as proven hedges against inflation?

I digress. The author deems it a terrible quality to own gold, which we can assume is sort of like being possessed by a demon and subsequently needing the services of an exorcist (i.e. mainstream, anti-gold financial planner).

I don’t doubt that even among those reading this newspaper, there would be no paucity of people who have a deep belief in gold as an investment.

LOL. We don’t “believe” gold is an investment. Gold IS an investment.

Most Indians consider gold to be a good passive investment and an excellent and reliable store of value. It goes without saying that gold is an investment—anything that can be bought and then sold is an investment. Some years ago, the great investor Warren Buffett explained the gold problem very nicely in an article titled, Why stocks beat gold and bonds.

Uh, no. Not everything can be an investment. You see, an investment is something that is going to generate a return. My kid buys a lawnmower and then goes around the neighborhood asking to, and mowing lawns. That lawnmower was an investment. I buy a gold bar, for $450 and ten years later sell it for $1400, and i realized capital gains on an investment. I buy a raffle ticket to win a tacticool shotgun from the local VFW, and that was either a donation or a bet, but it was not an investment. Everything we can use our money for is not an investment, but one thing has been proven for thousands of years- gold is an investment (silver too).

Here’s the money quote from that article: Today the world’s gold stock is about 1,70,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. At $1,750 per ounce — gold’s price as I write this — its value would be about $9.6 trillion. Call this cube pile A. Let’s now create a pile B costing an equal amount. For that, we could buy all US cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over… Can you imagine an investor with $9.6 trillion selecting pile A over pile B? A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton and other crops — and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond. 

Um, they are called “asset classes”. Gold is not the same thing as land, or a stock in a company. They are different, and serve different purposes. Gold is a hedge against uncertainty. When the government of Zimbabwe shows up at your farm and tells you it is no longer yours, at that point all of the “corn, wheat, cotton and other crops” won’t matter. As for dividends on stocks, well, there is only one component to the original Dow that is still there today, and in case anybody has looked, just today it is struggling to tread water. You can’t compare one ounce of gold to a stock market that consists of constantly shifting companies that come into and go out of business. If you do want to make such comparisons, however, gold wins hand down by standing the test of time and retaining that purchasing power.

As Buffett points out, in gold’s case, there’s the additional problem of supply. At the (then) current prices, the world produces 168 billion US dollars of gold every year. Not just that, it is in the interest of the producers to dig up as much of the stuff as possible. It takes a lot of fresh inflows to sustain gold prices. 

Uh, no. That’s nonsense. Gold is scarce. It’s “precious”. There is a reason why only a few people can even own it, and there is never a question of supply, because if the supply is greater than zero, it is only a question of price.

At an individual or at the level of entire economies, gold is a dead investment that does not produce anything.

Need we get into the fact that gold is “stored” energy. It’s not a “debt instrument” like US fiat currency (nor the rupee for that matter since we’re talking about India). But what about all those cool new uses in bio-medical nano-tech, like producing results on medical tests in no time – oh wait, sorry, I was talking about intrinsic value and had gone astray to simply focusing on gold as an investment. But, yeah. Gold is just supposed to sit there. That’s what it does. You can put in on you in the form of jewelry and make it look pretty, or you can put it in the form of a coin or a bar and wallow it int’s beauty, but other than that, yeah. It just sits there.

In fact, for India, as has often been pointed out, our huge appetite for gold is especially harmful.

Saving is harmful? Granted, I understand that free markets are no longer taught, nor is any concept of sound money, prudence or pretty much anything other than mainstream central bank pushed crapola, but saving is in fact the basis of being able to do anything. From the time when the first hunter/gatherer saved a seed for another day, to by son saving up for that lawnmower, saving is the basis of all activity.

There are massive gold imports, as well as the use of gold effectively as a second currency for cheating on taxes.

We’ll not get into the whole “Taxation” can of worms, but that’s not really fair. What is tax from an out-of-control, corrupt and evil group of leaders anyway? Is is not the moral, ethical thing to do to try to not feed that beast? That’s why gold is private, and out of the hands and eyes of counter-parties.

Among a certain class of urban Indians, gold has lost a lot of its sheen.

According to who?

Whether it will ever do so in rural India is an unanswerable question. At a personal level, unless one is not educated or knowledgeable enough to figure it out, or one is cheating on taxes, there is no point in investing in gold.

Only the uneducated buy gold. Wow. Now the author is just slingin’ the doo-doo and hoping anything sticks. I’ve seen gorrillas sling doo-doo in the zoo, and if it wasn’t for the time I got hit on the side of the face one of the projectiles, it would almost be funny.

Any financial investment is better. Longterm equity investments are even tax-free. 

And since the author said earlier that “anything” is an investment, I guest we’re all better off spending our money on raffle tickets or ugly Christmas sweaters, or fidget spinners. I hear the market is over-saturated but the right one can be resold for like 10% of the initial purchase price!

And yeah, speaking of U.S. equities, good luck buying after 9 years of central bank money printing. If they only go up in price, know that our currency will have (if it’s not already) become worthless.

Stack accordingly…

– Half Dollar


About the Author

U.S. Army Iraq War Combat Veteran Paul “Half Dollar” Eberhart has an AS in Information Systems and Security from Western Technical College and a BA in Spanish from The University of North Carolina at Chapel Hill. Paul dived into gold & silver in 2009 as a natural progression from the prepper community. He is self-studied in the field of economics, an active amateur trader, and a Silver Bug at heart.

Paul’s free book Gold & Silver 2.0: Tales from the Crypto can be found in the usual places like Amazon, Apple iBooks & Google Play, or online at PaulEberhart.com. Paul’s Twitter is @Paul_Eberhart.