LEAR CAPITALThe Precious Metal Leaders
“Gold is Money”There was a time when Americans bought and owned gold … a lot of it. They saved it, collected it, and hande...
“Nixon Shock” and the Dawn of the Soft DollarAs Richard Nixon took office back in 1969, America was a war-weary nation. Th...
Central Banks and Collapsing CurrenciesWith the stroke of Nixon’s pen on that day inAugust over 40 years ago, the gold sta...
And, this recent gold buying frenzy is not reserved for the world’s wealthiest nations. As a matter of fact, some of the m...
The International Gold GrabThe central banks of emerging nations in Asia, Africa, the Middle East and South America are th...
Chinese citizens are also on a gold buying binge. The Chinese bought                                                      ...
REFERENCES:Bordo, Michael D. [2008] “The Concise Encyclopedia of Economics: Gold Standard.” Library of Economics and Liber...
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Lear us debt_caseforgold

  1. 1. LEAR CAPITALThe Precious Metal Leaders
  2. 2. “Gold is Money”There was a time when Americans bought and owned gold … a lot of it. They saved it, collected it, and handed it downgeneration after generation. The Commercial Union Insurance Company which officially owns the wreck of the Titanic and theLloyds Loss Book shows that millions of pounds of gold went down with the ship. Of course, that was in 1912 and America andthe world were still on the Gold Standard. That was the same year that J.P. Morgan, one of the most influential financiers inhistory told Congress; “Gold is money. Everything else is credit.”Today only about 4% of Americans own physical, investment gold. World banks; however, have been on a precious metalsspending spree acquiring an astonishing 1,290 tonnes of gold since the global financial crisis of 2007-2008. With the advent ofmassive government debt, the housing crisis, run away unemployment, terrorism, devalued currencies, and Europe in financialturmoil … gold is becoming an important investment item again in the United States as well as around the world.A quick review of recent history illustrates the tenacity, steadfastness and reliability of this very special metal … and why it ismore important to own it now than ever before. www.learcapital.com LEAR CAPITAL The Precious Metal Leaders 2
  3. 3. “Nixon Shock” and the Dawn of the Soft DollarAs Richard Nixon took office back in 1969, America was a war-weary nation. The costs of the Vietnam War started to hit homeand domestic spending surged. America ran deficits for the very first time in the 20th century, and there was tremendousdisparity in US trade including imports, exports, capital, and goods and services exchanged with other countries. In 1970, theUnited States slid into recession and unemployment rose to its highest level in a decade.Since the end of World War II, the Bretton Woods Economic system had ruled the day and mandated that the United Statesback every American dollar overseas with gold. But when the Fed started printing money to ease unemployment, goldcoverage of the dollar slipped and foreign nations came to collect gold on the US currency that they held. First Switzerland,then France, Italy, and Germany … further depleting US gold reserves. In short, the foreign banks had far more dollars than theUS had gold to cover them.In 1971, the dollar plunged in value against the currencies of Europe creating a full-blown exchange crisis as well as foreignprice gouging. In mid-August of that year, President Nixon issued executive order # 11615 or The Economic Stabilization Act of1970 that imposed a 90-Day wage freeze, a 10 percent import surcharge, and closed the gold window for good by announcingthat the US would no longer redeem currency for gold. “Nixon Shock” is the term used to describe this action which led to theend of the gold standard.Nixon Shock changed the global economic playing field and resulted in a tide of floating currencies. It unleashed a new worldof risk and speculation and a “soft dollar” that still impacts us today. With the end of the gold standard and no remaining linkbetween currency and commodity … the world entered a new era of monetary volatility. 1-800-957-4653 3
  4. 4. Central Banks and Collapsing CurrenciesWith the stroke of Nixon’s pen on that day inAugust over 40 years ago, the gold standarddisappeared from every major world economy.Our current monetary system features fiat moneyor inconvertible currency that is deemed legaltender by a given government. Since fiat moneyhas no intrinsic value and is not backed by reserves,governments can choose to print more or less, andthis directly impacts the rate of exchange. It alsoblurs the lines of monetary standards and creates acritical value void. We are seeing the ramifications ofthis in the sovereign debt crisis playing out in Europewhere there is a collective currency but no fiscalunion.In a quest for monetary balance and stability, theworld’s central banks have enacted a dramatic shift in policy since the financial crisis of 2008. Once the biggest sellers of gold tothe private marketplace, they are now among the biggest buyers of gold. Last year alone, the world’s central banks purchased over 455 tonnes of gold, the second increase since 1988 and the largest jump since 1964. World Central Banks Have Been Buying Gold Since the Financial Crisis Hit CASEY RESEARCH.COM Thousand Tonnes 31.4 31.2 31.0 30.8 30.6 30.4 30.2 30.0 29.8 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 © Casey Research 2012 Source: World Gold Council www.learcapital.com LEAR CAPITAL The Precious Metal Leaders 4
  5. 5. And, this recent gold buying frenzy is not reserved for the world’s wealthiest nations. As a matter of fact, some of the mostactive gold-buying countries include smaller or emerging nations with unstable, even unhealthy economies such as: Turkey – added over 123 tonnes to its reserves since October 2011 Mexico – purchased over 100 tonnes earlier this year The Philippines –added 32 tonnes in March, one of their largest monthly purchases ever Russia – purchased 15.5 tonnes in May bringing its reserves to their highest level since 1993 Thailand – has increased its holdings by over 80% since mid 2010 South Korea – has increased its supply of gold by 180% since 2009It is clear that gold remains the silent partner of international finance and functions as an unofficial standing reserve tohelp offset global risk. While the gold holdings of central banks around the world have risen dramatically, they have not yetapproached their 1980 levels, so further buying will fuel demand and could drive gold prices even higher. Central Bank Holdings Far Below 1980 Levels CASEY RESEARCH.COM Thousand Tonnes 37 36 35 Gold holdings up 4.3% since 2008 34 but 12.7% below 1980 peak 33 32 31 30 29 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 © Casey Research 2012 Source: World Gold CouncilBanks, like any investment body, are looking for a hedge against economic volatility. Theiracquisition of gold is a move toward enduring value and security.Gold has proven to be a constant through explosive world cycles and events. Central banksknow all too well that gold cannot be manipulated or devalued by any government, fund ormonetary body. The once gold-backed dollar which had been the world’s reserve currencysince WWII has seen its leadership role start to change. When America divorced itself from gold in 1971 and embarked on a monetary policy of an un-backed paper currency, the dollar lost its edge and the global movement to gold began. 1-800-957-4653 5
  6. 6. The International Gold GrabThe central banks of emerging nations in Asia, Africa, the Middle East and South America are the latest to embark on an“International Gold Grab.” Nations such as Bangladesh, Sri Lanka, Kazakhstan, Belarus, Venezuela, Columbia, Argentina,Mongolia, Malta, and Mauritius all consider gold to be a critical reserve asset. As a matter of fact, in the past ten years goldhas risen against all currencies including the Euro where it has increased over 161%! 10 Year Spot Gold US Dollars vs. Major Currencies (Change calculation is from the start of the chart) US Dollars +435.48% Canadian Dollars +239.69% Euros +323.44% % Swiss Franc +249.52% British Pounds +431.31% Japanese Yens +257.66% 600 500 400 300 200 100 0 www.kitco.com -100 3 04 05 06 07 8 8 9 0 1 2 0 n0 c0 v0 t1 t1 p1 ay r ar ar b Ap Oc Oc De No Ja Fe Se M M MThe global gold grab is not limited to foreign Above-ground stocks, end 2011 (total 171,300 tonnes)governments. There is increasing consumer demandfor gold around the world as well with East Asia, Indiaand the Middle East accounting for a 65% increasein consumption. Demand in these regions is as muchdriven by cultural attributes as it is by economic n Jewelery 84,300t 50%strategy. n Official sector 29,500t 17%Jewelry, for instance, represents the majority of n Investment 33,000t 19%current gold demand. It is being fueled by consumption n Technology 20,800t 12%in India where that country’s appetite for rings, n Unaccounted for 3,600t 2%necklaces, bracelets, earrings, charms and goldadorned jewelry is legendary. The role of gold in Indiais both highly social and deeply personal. It is not onlya sign of wealth and status but it is an integral part of Source: Thomson Reuters GFMStheir daily worship and marriage ceremonies. Note: Totals may not sum due to independent rounding www.learcapital.com LEAR CAPITAL The Precious Metal Leaders 6
  7. 7. Chinese citizens are also on a gold buying binge. The Chinese bought an estimated 490 tonnes of gol in 2011 which is double the amount they acquired in 2010. For Chinese consumers, gold ownership seems to be purely economically motivated. With the decline in their trade surplus, unstable world markets, weak property values at home, and the volatility of the European crisis … the Chinese are turning to gold for a monetary refuge and an inflation hedge. The last significant sector of the International Gold Grab is increasing worldwide use of gold in technology. In 2011 the technology sector consumed 20,800 tonnes of gold or 12% of total demand. Gold has electronic, industrial, dental, imaging, therapeutic, and medical applications. It is a highly conductive metal that resists corrosion, and it is currently being tested in new diagnostic applications, water purification systems, and clean air technologies across the globe. So, gold is not only a metal that is precious, rare, beautiful, valuable and durable … but also highly useful to mankind.The Eternal StandardIt is easy to forget that owning gold is not a privilege that we havealways had. Within three years of gold’s detachment from thedollar back in 1971, the inflation rate soared, markets fell 46%,and gold quadrupled in price. By 1975 President Ford had againlegalized private ownership (of more than $100 worth) of goldand American citizens were allowed to actively own and invest inthe coveted precious metal again.It’s quite astounding when one considers that this richcommodity that is so readily available to us today in all of itsvarious forms: coins, bars and ingots … has been restricted by theUS government twice in recent history. That is perhaps the besttestament of the power and enduring legacy of gold.Gold has served mankind from early civilization, through the Industrial Age, the Machine Age, the Atomic Age, theInformation Age, and into the Age of Big Data and Globalization. Through world wars, depressions, recessions, economiccontractions, financial expansions, fiscal cliffs and monetary mountains … gold has remained the world’s measure of wealth,worth and sound value. At Lear Capital we make owning gold as simple as a phone call. Our representatives are standing by help you diversify, protect, and secure your future with the enduring investment of gold. Give us a call: 1-800-957-4653 1-800-957-4653 7
  8. 8. REFERENCES:Bordo, Michael D. [2008] “The Concise Encyclopedia of Economics: Gold Standard.” Library of Economics and Liberty. Retrieved onOctober 23, 2012 from http://www.econlib.org/library/Enc/GoldStandard.htmlChang, Gordon. [January 29, 2012] “Why Are the Chinese Buying Record Quantities of Gold?” Forbes. Retrieved on October 25, 2012from http://www.forbes.com/sites/gordonchang/2012/01/29/why-are-the-chinese-buying-record-quantities-of-gold/Clark, Jeff. [July 13, 2012] “Does Central-Bank Gold –Buying Signal the Top is Near?” Financial Sense. Retrieved on October 24, 2012from http://www.financialsense.com/contributors/jeff-clark/does-central-bank-gold-buying-signal-the-top-is-nearCommodity Online. “Uses of Gold in Science and Technology,” 2012. Web 25 October 2012.http://www.commodityonline.com/news/uses-of-gold-in-science-and-technology-44928-3-44929.htmlEberhardt, Doug. [July 15, 2009] “Gold/Euro Connection: Another Nail in the USD Coffin?” Seeking Alpha. Retrieved on October 25,2012 from http://seekingalpha.com/article/148868-gold-euro-connection-another-nail-in-the-usd-coffinLowenstein, Roger. [August 04, 2011] “The Nixon Shock.” Bloomberg Businessweek. Retrieved on October 23, 2012 fromhttp://www.businessweek.com/magazine/the-nixon-shock-08042011.htmlPhillips, Julian. [September 5, 2012] “Is Central Bank Buying Just a Driving Force Behind Gold or Much More?” Financial Sense.Retrieved on October 25, 2012 from http://www.financialsense.com/contributors/julian-phillips/is-central-bank-buying-just-a-driving-force-behind-gold-or-much-moreRoseman, Eric. [March 11, 2011] “Chinese Gold Demand Could Double Your Profits.” The Sovereign Investor. Retrieved on October 23,2012 from http://sovereign-investor.com/2011/03/11/chinese-gold-demand-could-double-your-profits/World Gold Council. “Demand and Supply,” 2012. Web 23 October 2012. http://www.gold.org/investment/why_how_and_where/why_invest/demand_and_supply/PRIVILEGED AND CONFIDENTIALThis communication is covered by the Electronic Communications Privacy Act, 18 U.S.C. Sections 2510-2521 and contains information that is legallyprivileged, confidential and/or exempt from disclosure. This information is intended only for the use of the individual or entity named above. If the readerof this communication is not the intended recipient, you are hereby notified that any dissemination, distribution, use or copying of this communication orthe information contained herein, in whole or in part, is strictly prohibited. If you have received this communication in error, please immediately notify usand destroy all copies of this communication in your possession. Thank you. C.P.D.Reg. No “T.S.11-05715.” For those looking to diversify their portfolio, Lear Capital can provide the assistance you require. You may contact a representative at LearCapital.com anytime from 9:00am to 6:00pm PST at 1.800.576.9355 or by fax at 310.571.0194. We invite any suggestions and feedback on our products and services. CORPORATE ADDRESS Lear Capital, Inc 1990 S. Bundy Dr., Ste 600 LEAR CAPITAL Los Angeles, CA 90025 www.learcapital.com LEAR CAPITAL A Lear Capital Publication The Precious Metal Leaders 8

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