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Gold in the 1970s: A Decade of Unprecedented Performance

The 1970s marked a pivotal decade for gold, characterized by extreme volatility and exceptional gains. This period was defined by a series of economic events that dramatically influenced the global financial landscape. Here, we explore how gold performed during the 1970s and the official explanations for its behavior.

The End of the Bretton Woods System

The decade began with a critical shift in the global financial system: the end of the Bretton Woods Agreement in 1971. Established post-World War II, the Bretton Woods system had fixed exchange rates with the US dollar pegged to gold at $35 per ounce. However, due to mounting inflationary pressures and excessive US dollar printing to fund government spending (notably the Vietnam War), President Richard Nixon announced the suspension of the dollar’s convertibility into gold. This decision effectively ended the Bretton Woods system and led to the free-floating of currency exchange rates. The uncertainty and resultant instability in the forex markets drove investors towards gold as a safe haven asset.

Inflation and Economic Uncertainty

The 1970s were marked by high inflation, triggered by several factors including the oil crises of 1973 and 1979. The OPEC oil embargo led to skyrocketing oil prices and severe inflation across economies, severely eroding the purchasing power of fiat currencies. Gold, traditionally viewed as a hedge against inflation, saw increased demand. As consumer prices rose, so did the allure of gold as a store of value.

Investment Demand

With the collapse of the fixed currency exchange system and rising inflation, investors increasingly turned to gold. The decade also saw the legalization of gold ownership for US citizens in 1974, further boosting demand. Prior to this, gold ownership had been restricted to certificates and limited forms of bullion. The legislative change allowed private ownership of gold bars and coins, increasing the accessibility of gold to the general public and sparking a surge in investment demand.

Global Political Instability

The 1970s were rife with geopolitical tensions and conflicts, including the continuation of the Cold War, the Vietnam War, and various Middle Eastern conflicts following the oil crisis. Such events added to the economic uncertainty and boosted gold’s role as a crisis commodity.

Performance Recap

The cumulative effect of these factors was profound. Gold prices skyrocketed from $35 per ounce at the beginning of the decade to approximately $850 per ounce by January 1980. This represented an extraordinary gain, reflecting gold’s status as a safe haven during times of economic turmoil.

Conclusion

The 1970s established gold as a powerhouse investment, influenced by a complex interplay of economic policies, market dynamics, and geopolitical tensions. The decade not only underscored gold’s crucial role in the financial system as a hedge against inflation and currency devaluation but also marked its resurgence as a key asset in investment portfolios worldwide.

This summary provides a concise overview of the major drivers behind gold’s performance in the 1970s, illustrating how it became a cornerstone asset for investors seeking stability in turbulent times.

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Gold, What is it Good for?

After a year of silence on here (14 months, actually..), let’s get with the times and let chatai have a go at explaining why you should invest in gold :-

“

Gold has several properties that make it useful for a variety of purposes:

  1. Jewelry: Gold is a popular choice for jewelry because it is malleable and ductile, meaning it can be easily shaped and formed into intricate designs.
  2. Investment: Gold has historically been used as a store of value and a hedge against inflation, making it a popular investment option.
  3. Electronics: Gold is an excellent conductor of electricity, making it a valuable component in electronic devices such as computers, cell phones, and televisions.
  4. Dentistry: Gold is also used in dentistry for its non-reactive nature and durability, making it a popular choice for fillings, crowns, and other dental work.
  5. Industrial Applications: Gold is also used in a variety of industrial applications, such as in the production of glass, electronics, and aerospace equipment.

Overall, gold is a versatile and valuable metal with a wide range of applications.”

Now, go and ask OpenAI the same question regarding paper money.

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Bitbubble

Last night was one of those nights where you wake up and things occur to you. I’ve had quite a few of those lately, but this one seemed especially illuminating. For a while now, we’ve had the word bubble planted in front of us by the media for quite a while to convince us stock markets, bond markets, commodity markets and biggest of all, cryptocurrencies are too high and may be about to crash.

Using reverse psychology, you should wonder if there really is a bubble. After all, a real bubble happens when everyone is too carried away by the emotion and success to recognise the bubble for what it is. In fact, bubbles don’t normally get identified until long after they pop. In hindsight, a graph usually makes it clear and everyone who once yelled loudly about their success now remains quiet and tries to forget the whole sorry episode.

Perhaps the one where you could say the graph seems to show a bubble, is Bitcoin. While I regret not being in on the Bitcoin boom, I’m still not convinced and find myself on the side of Peter Schiff and Jim Rogers, versus such other illuminaries as Doug Casey and Robert Kiyosaki. Yes, billions are being made and yes, we can agree fiat currencies are in massive decline. However, to me, the best medium to avoid that is the precious metals, with thousands of years of history to prove it, not electronic bits on a screen with no intrinsic value. Of course, the blockchain technology, decentralisation and ability to pay without banks are excellent, but it all runs on establishment hardware. Beginning with your smartphone, then the networks that pass your data across the world. As the establishment gets better at tracking, they will undoubtedly find ways to switch you off if they want to. There are certainly some fascinating debates out there to watch on the subject between these knowledgeable and successful people. Meanwhile, stories like this, about a German who won’t give the police his password and would rather sit in prison, remain amusing and stick two fingers up to the powers that be.

I am certainly an interested observer. Even the mysterious Satoshi Nakamoto, who supposed started up Bitcoin is an enigma. For some reason, his name reminds me of the government department, the NSA (National Security Agency) and it’s always seemed strange that organisations with a global reach and unlimited funds are unable to track down the person who started it all. As an adult, you know that sometimes the best way to keep a child or dog occupied is to throw them a ball and part of me has wondered lately if that’s exactly what’s happened here. Throwing a ball to keep people busy and distract them from the best investments, while you clean up on the cheap.

Take, for example, the recent purchase by Tesla of $1.5 Billion worth of Bitcoin. Why would they do that, you might wonder? Whatever reasons are given, I find myself doubting they are the full truth. Then, we hear that Apple may also buy Bitcoin. Both stories helpfully plugged on mainstream media, to ensure maximum public reach.

So why are they buying?

Last night was my own Eureka moment. On a yearly basis, there isn’t enough silver mined to meet demand. Only about 80%, with the rest met by recycling. Fair enough, excellent reuse, but for how long will there be enough scrap silver to go around, and, if a sniff of inflation came around, how many of those recyclers would be willing to sell their metal at the current prices? It led me to get thinking about the products of Tesla and Apple, and the amount of silver they consume yearly. In the case of Tesla, one electric car consumes 1 kilogram of silver. It doesn’t sound like a lot, but if they make one million cars a year, then they will consume 5% of world silver demand. To put that in perspective, Ford alone produced 4 million cars last year. When it comes to Apple, I am grateful to this excellent infographic for explaining it all very clearly, albeit it from 2013. I can only guess that bigger iphones means even more metal in there.

Here’s my view – the public has been thrown a ball to play with. Indeed, it may continue to shoot up and entertain us all, the same way the Dutch went wild for Tulip bulbs in Amsterdam in the 1600s, and for a while, we may all feel ourselves rich or stupid for not participating. Indeed, some will walk away with fortunes. The majority probably won’t, however.

Meanwhile, the elite can stock up on the proven store of value and have a good laugh as many lose everything and are forced to succumb to The Great Reset.

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Patent WO2020060606A1

The future may be about to change dramatically, with direct delivery of currency to the human body itself, via wifi and the new, much-heralded 5G mobile network. Time to introduce Patent WO2020060606A1, filed in June 2019 by Microsoft and published on 26 March 2020, while Corona events began to dominate the news. What follows is the official abstract from the google patents page.

“Human body activity associated with a task provided to a user may be used in a mining process of a cryptocurrency system. A server may provide a task to a device of a user which is communicatively coupled to the server. A sensor communicatively coupled to or comprised in the device of the user may sense body activity of the user. Body activity data may be generated based on the sensed body activity of the user. The cryptocurrency system communicatively coupled to the device of the user may verify if the body activity data satisfies one or more conditions set by the cryptocurrency system and award cryptocurrency to the user whose body activity data is verified.”

Now, as we’re moving into the future here, the conversation turns hypothetical – If the entities behind this Patent wished to wire up the human body to be able to function in this manner, how could they do it? How would they get people to agree to accept it?

It’s up to you to think about that but consider this. The person behind Microsoft, William Gates III, also runs a Bill and Melinda Gates Foundation (Melinda being his wife), that pays out billions to projects of their choosing. Wikipedia may have more up to date figures by the time you read this, but a flavour is as follows:-

The following table lists the top receiving organizations to which the Bill & Melinda Gates Foundation has committed funding, between 2009 and 2015. The table only includes grants recorded in the Gates Foundation’s IATI publications.

OrganizationAmount ($ millions)
GAVI Alliance3,152.8
World Health Organization1,535.1
The Global Fund to Fight AIDS, Tuberculosis and Malaria777.6
PATH635.2
United States Fund for UNICEF461.1
The Rotary Foundation of Rotary International400.1
International Bank for Reconstruction and Development340.0
Global Alliance for TB Drug Development338.4
Medicines for Malaria Venture334.1
PATH Vaccine Solutions333.4
UNICEF Headquarters277.6
Johns Hopkins University265.4
Aeras227.6
Clinton Health Access Initiative Inc199.5
International Development Association174.7
CARE166.2
World Health Organization Nigeria Country Office166.1
Agence française de développement165.0
Centro Internacional de Mejoramiento de Maíz y Trigo153.1
Cornell University146.7
Alliance for a Green Revolution in Africa146.4
United Nations Foundation143.0
University of Washington Foundation138.2
Foundation for the National Institutes of Health136.2
Emory University123.2
University of California San Francisco123.1
Population Services International122.5
University of Oxford117.8
International Food Policy Research Institute110.7
International Institute of Tropical Agriculture104.8
Source: Wikipedia, August 2020

You are invited to research for yourselves the organisations on this list. As a flavour, the single biggest contribution goes to GAVI – The Global Alliance for Vaccine and Immunization. The second-biggest contribution goes to the WHO – The World Health Organisation. The WHO is often presented as a league of nations-type organisation, but the second-biggest contributor behind the USA to the WHO is not a nation-state. It is the Bill and Melinda Gates Foundation.

That Nations are following World Health Organisation guidelines on Corona, including the push for vaccines, when it’s second-biggest contributor is linked to what would be a very, very profitable patent if the appropriate technology can be placed into the human body should be asked about by the government and media, on behalf of everyone. Wherever you live, you may have recently heard an interview with Bill Gates by your national media during these times. One day, a well-known BBC presenter conducted such an interview. Gates was presented as a Pandemic expert, despite having no formal qualifications of that kind. Then, GAVI was mentioned by the presenter, with no mention of how it is linked. Nor was there any mention of this cryptocurrency patent at all. In the USA, an interview between Ellen and Bill Gates on a similar vein was taken down from Facebook after receiving thousands of critical comments, many of them asking questions like those just mentioned. The internet was meant to lead to the sharing of more information and greater knowledge amongst the population, but it seems that investigative journalism is weakening. This is indeed not a criticism of Gates, nor Microsoft. Most of us use their products every single day. By choice. Gates himself would probably love to face genuine public inquisition to help prove that there is no conflict of interest.

It’s also impossible to ignore the biblical aspect of this patent number. WO2020 – New World Order 2020 and 060606 – 666. Either it’s a coincidence, someone is having a major joke, or a biblical prophecy is playing out in front of our eyes.

“And that no man might buy or sell, save he that had the mark, or the name of the beast, or the number of his name.” – Revelation 13:17

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BullionVault

Founded by Paul Tustain, BullionVault sits somewhere between Goldmoney, for safety and Gold storage, and more traditional trading services.  Bullionvault is UK-based, although an additionally interesting feature is the ability to store your gold in their New York, London or Zurich gold vaults.  Dependent on which country you are a citizen of, you will probably feel most comfortable placing your gold outside of that country so that is not subject to your local government jurisdiction, so top marks for considering that feature.

An interesting aspect of the three separate vaults is that these could be considered as separate currencies in their own right.  For example, if at some point in the future there was a repeat of the 1930s US Gold confiscation, gold stored in a New York Vault might become priced significantly lower than gold stored in a Zurich vault, as US holders try to sell and place their gold outside their own jurisdiction.

BullionVault allows you to buy and sell Gold on their impressive looking trading platform, where buyers and sellers of gold from each vault can meet and state their required selling/buying prices, so if you are more inclined to hold gold, occasionally sell on a dip, then buy in again later, then this could well be the best service for you.

Their fees for transactions and monthly storage are really low too, so they are very worthy of investigation.  The storage fee is currently $4 per month fixed, regardless of holding size, and only payable for the months in which you held Gold.

Again, Bullionvault has proved popular with Gold Bugs accumulating gold for the future financial crisis they believe is in the offing.

Payment into BullionVault is by bank transfer.  Payment out is by bank wire transfer to your chosen bank account.

In recent years, they introduced a silver option.  That they took so long may have been something to do with BullionVault being UK-based and the UK charging VAT on silver sales, which could, to many observers, seem to be another example of government getting in the way of free trade.

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GoldMoney

This was the brainchild of highly-respected gold watcher James Turk.  Goldmoney was structured with a cast iron guarantee that there will always be 100% gold backing of every unit of currency (called “goldgrams” in this case) in circulation, and they claim that some others do not have the same cast-iron guarantees in their small print.  Whether this is true or not is hard to say, as for an ordinary investor the small-print is difficult to understand, but the discussions and articles available make interesting reading when deciding on the safety of providers you are considering.

Goldmoney, like e-Gold did, also tries to offer the use of Goldmoney as a medium of payment.  This however is not very heavily used right now, and the majority of investors are gold bugs simply buying gold and silver and holding it.

What could appeal to British or EU citizens about Goldmoney is that it is Jersey-based.  You may trust and understand the rules of Jersey more than those of the Caribbean or Panama.  This is not to say that other organisations are unsafe.  A US-citizen may just as easily understand Panama and believe it to be much safer than Jersey.

As time went by, Goldmoney has opened a variety of vaults to cater for the requirements of international buyers, including London, New York, Zurich, Singapore and Hong Kong.

GoldMoney also has a Silver option, and this represents an excellent opportunity for European Union buyers to buy Silver bullion without legally paying any VAT.  More latterly they also introduced the ability to hold the national currencies of Dollars, Pounds or Euros in your Goldmoney account and receive interest on it.  You can then switch your holding between any of the five denominations (including the two metals), as you see fit.

Knowing that it’s the fees that make investors poor and brokers rich, you are probably best off not utilising this feature.  The fees will quickly eat into your returns, and a buy-and-hold strategy is probably best.

Payment into GoldMoney is by bank transfer.  Payment out can be made by direct bank transfer.

One other aspect of GoldMoney worthy of mention is that at one point the terms and conditions said that if your account is not logged into for 12 years the ownership of your gold reverted to Goldmoney.  Okay,  it sounds unlikely, but consider what would happen if you died and never told anybody about your holding or even if you were unable to use the internet for 12 years due to some kind of accident or national crisis.

Overall, a highly respected organisation with the reputation of a known “gold-watcher” behind it.  Even if you don’t buy Goldmoney then there are articles available for free on the website that make interesting reading.