In this article we will briefly discuss several important concepts related to precious metal bullion ownership:
- History of Gold, Silver and Platinum
- How do local currencies effect the price of precious metals
- How ownership of physical precious metals can be used to protect your family’s savings overtime against the risk of inflation
- Different types of bullion
- Where to buy precious metals
Gold and Silver Were Once Used to Back up Local Currencies
As early as the Byzantine Empire, gold was used to support national currencies, those considered legal tender in their nation of origin. Gold and Silver were used historically used as the major world reserve currencies up until and through most of the 20th century. The United States used the gold standard until 1971 when President Nixon discontinued it. Canada discontinued the use of Gold as a currency in 1914? And the use of silver was discontinued in 1967.
Until the gold standard was abandoned, countries could not simply print their fiat currencies ad infintum. Paper money had to be backed up by an equal amount of gold in their reserves (then, as now, countries’ central banks kept supplies of gold bullion on hand). Although the gold standard has long fallen out of favor in the developed world, a small group of economists think we should return to it due to the volatility of the Canadian dollar and other major world reserve currencies; meaning it would impose limits on the amount of money nations are allowed to print or issue as credit.
How The Price of Gold Affects Countries That Import and Export It
The value of a nation’s currency is strongly tied to the value of its imports and exports. When a country imports more than it exports, the value of its currency will decline. On the other hand, the value of its currency will increase when a country is a net exporter. Thus, a country that exports gold or has access to gold reserves will see an increase in the strength of its currency when gold prices increase, since this increases the value of the country’s total exports. In other words, an increase in the price of gold can create a trade surplus or help offset a trade deficit. When central banks purchase gold, it affects the supply and demand of the domestic currency and may result in inflation. This is largely due to the fact that banks rely on printing more money to buy gold, thereby creating an excess supply of fiat currency.
Gold Prices Are Often Used to Measure the Value of a Local Currency
Many people mistakenly use gold as a definitive proxy for valuing a country’s currency. Although there is undoubtedly a relationship between gold prices and the value of a fiat currency, it is not always an inverse relationship as many people assume. For example, if there is a high demand from an industry that requires gold for production, it will cause gold prices to rise. But this will say nothing about the local currency, which may very well be highly valued at the same time. Thus, while the price of gold can often be used as a reflection of the value of the Canadian dollar, or any currency, conditions need to be analyzed to determine if an inverse relationship is indeed appropriate.
The Bottom Line
Gold has a profound impact on the value of world currencies. Even though the gold standard has been abandoned, gold as a commodity can act as a substitute for fiat currencies and be used as an effective hedge against inflation. There is no doubt that gold will continue to play an integral role in the foreign exchange markets. Therefore, it is an important metal to follow and analyze for its unique ability to represent the health of both local and international economies.
Gold and Silver as a Hedge Against Debasement of Currency
The Classical Definition of Monetary Inflation: Safeguarding Wealth with Gold, Silver and Platinum
Monetary inflation is a complex economic concept that has far-reaching consequences for both a country and its citizens. Understanding the classical definition of monetary inflation, its causes, and its effects on individuals and nations is essential for financial stability and security. In this article, we will delve into the classical definition of monetary inflation, and explore how inflation affects a country and its citizens, by examining the role of gold, silver and platinum in protecting families and individuals from government abuses of monetary policy.
Defining Monetary Inflation
Monetary inflation, in its classical sense, refers to the increase in the money supply within an economy. It is often measured through the Consumer Price Index (CPI) or the Producer Price Index (PPI), both of which track the general price levels of goods and services in an economy. When the money supply increases at a faster rate than the growth of goods and services, it leads to an imbalance, resulting in higher prices for those goods and services. This rise in prices is what we commonly refer to as inflation.
Causes of Monetary Inflation
Excessive Money Supply Growth: A combination of factors can cause monetary inflation: when central banks or governments print more money or increase the money supply through various means such as quantitative easing, or over-issuance of easy access to corporate or consumer bank credits. This influx of new currency into the economy can lead to an oversupply of money chasing a limited supply of goods and services, driving up prices. When this becomes commonplace, consumer demand for goods and services begin to exceed their supply, resulting in higher prices without necessarily providing more value to the consumer. This type of inflation often occurs during periods of economic growth and increased consumer spending. As rising production costs, such as increased wages or the cost of raw materials, in turn lead to higher prices for finished goods. When businesses pass these
Effects of Inflation on a Country and its Citizens
- Eroding Purchasing Power: Inflation erodes the purchasing power of money. As prices rise, the same amount of money can buy fewer goods and services, reducing the standard of living for individuals and families.
- Uncertainty and Economic Distortions: High or unpredictable inflation rates can create uncertainty in the economy, making it challenging for businesses to plan for the future. This can lead to inefficiencies and distortions in resource allocation.
- Income Redistribution: Inflation redistributes wealth within a society. Debtors benefit from inflation as the real value of their debts decreases, while savers and creditors see the value of their savings diminish.
- Interest Rates and Investment: Central banks may raise interest rates to combat inflation, which can make borrowing more expensive and slows down economic growth. High inflation rates can also discourage and further complicate long-term investments.
WHY SHOULD YOU INCLUDE PRECIOUS METALS IN YOUR SAVINGS?
The Role of Gold, Silver and Platinum in Protecting Your Savings
Historically, gold has played a significant role in protecting individuals from the adverse effects of inflation and government abuse of monetary policy. Here’s how:
- Store of Value: Gold has been a reliable store of value for centuries. Unlike fiat currencies, which can lose value due to inflation, gold tends to maintain its purchasing power over time. During periods of high inflation, the real value of gold often rises, preserving wealth.
- Hedge Against Currency Devaluation: When governments engage in excessive money printing, the value of their currencies can decline rapidly. Gold serves as a hedge against such devaluation, as its intrinsic value is not tied to any single currency.
- Portfolio Diversification: Including gold in an investment portfolio can provide diversification benefits. It tends to have a low correlation with other assets like stocks and bonds, making it a valuable asset during economic downturns or periods of inflation.
In conclusion, understanding the classical definition of monetary inflation and its effects on a country and its citizens is crucial for financial well-being. Gold has historically served as a reliable hedge against inflation and government abuses of monetary policy. It provides individuals with a means to preserve their wealth and protect themselves from the erosion of purchasing power caused by excessive money supply growth. In today’s uncertain economic landscape, considering gold as a part of a diversified investment portfolio is a prudent step toward financial security during times of monetary inflation.
The demand for gold increases during inflationary times due to its inherent value and limited supply. As they cannot be diluted, gold silver and platinum are able to retain value much better than other forms of currency.
It is important to note that economists are split over whether gold has proved to be as good of an inflation hedge as its promoters claim, since the data can be inconsistent. Sometimes exceeding the inflation rate, and sometimes falling well short over periods of time. Precious Metals have been shown to be much more effective as a hedge against economic downturns.
Physical ownership
Toronto Metal Exchnge recommend placing your precious metals in a secure, insured depository versus, say, storing it in your basement. However, even when placed in a depository, you are the owner of physical gold that you can claim at any time. Toronto Metal Exchange encourages personal and private ownership of precious metal; thus, we do not offer any storage services at this time.
Purchasing an asset with intrinsic value
Unlike a piece of paper promising a share of a company or some amount of currency that is actually prone to fluctuation, gold is valued and in-demand for reasons beyond its investment potential with applications that include electronics through jewelry. It has intrinsic value.
Growth potential backed by historical performance
Although no investment can come with any certainty, the track record of precious metals has been steady or better—even when a currency has begun to depreciate.
Diversify your savings
Instead of limiting purchases to currency-based assets, buying gold gives you access to a market that operates following different performance trends. By diversifying your holdings, you reduce the overall negative impact to your portfolio that any one asset may have. Once you buy it, physical gold is yours to hold and store wherever you prefer. And while gold can be used as a currency, it also serves as an extremely liquid investment that is highly desired in all markets around the world. Best of all, gold’s historical performance has seen it persist and even grow in value during times of plunging dollar value and economic downturn. In fact, any breakdowns in the stock market or paper gold market may increase the value of your holdings of physical gold. Precious metals have been a proven store of wealth for thousands of years. In times of instability, they have been viewed by many as a safe haven, used to preserve wealth and add security to an otherwise uncertain financial future. Precious metals will always have inherent value because they are tangible and finite resources, uncontrolled by any single government or financial institution. As such, they cannot simply be printed on a government’s whim, like paper currency. This gives precious metals a unique advantage and results in numerous benefits for investors.
Security
Because precious metals are not subject to the same forces as stocks and other paper assets, diversifying your portfolio with gold and silver can add an additional level of security for your wealth – regardless of the blunders of Washington, Wall Street, and beyond.
Protection
Few assets offer you and your family protection from political and economic uncertainty like precious metals. Gold, silver, and other precious metals can help safeguard your wealth from a variety of threats, such as the decline of a Currency dollar or a wider stock market crash. Most investors primarily hold paper-backed assets – stocks, bonds, and mutual funds – which in today’s globalized world can fluctuate wildly with each crisis. This is why many people diversify their portfolios with precious metals – to remove the risk of putting all their eggs in one “paper” basket.
Hedge against inflation
As the dollar’s value continues to decline, many Americans use precious metals as a vital hedge against inflation, preserving their purchasing power for the future. In fact, as the Fed prints money in times of economic distress (for example, during the Covid-19 pandemic), the resulting loss in value suffered by the dollar tends to increase the value of metals like gold.
Privacy
Your investments are your business. Precious metals offer unique privacy not found in many other types of assets. When making a cash purchase, ownership of your precious metals is completely private. Because the metals are in your possession, your portfolio does not need to be accounted for by the government, bank, or financial institution.
Liquidity
Some forms of precious metals, such as gold bullion, are valued almost entirely by their metal content and weight, making them tangible, extremely liquid assets that are uninfluenced by the myriad of other factors that threaten other investment types. In fact, precious metals are among the most liquid assets possible to hold as an investment. And when you buy them for physical possession, you always have access to them.
Growth potential
As finite resources, precious metals have unique growth potential. Gold and silver have provided tremendous returns in the past, and many analysts believe today’s prices are a bargain. For some investors, this makes precious metals an attractive alternative to placing their money in low-yielding bonds or stagnant savings accounts.
Increasing demand
The demand for gold is everywhere – nowhere more so than from governments themselves. From 2010 to 2017, national central banks purchased an average of 459.6 tons per year. China’s central bank has recently increased its purchases of gold by a substantial amount — to hedge against the billions of dollars in paper assets it holds but no longer trusts. Even countries such as Russia, Turkey, and Ukraine are taking on more gold. The demand for precious metals will continue to rise, not only from nations and investors but also from the numerous industries that use the metals in their manufacturing every day.
Decreasing supply
While a mint could always print more dollars or a company could issue more stocks, there is a finite amount of gold in the world. Gold’s scarcity in the face of sustained demand across sectors that include medical and industrial means that there is potential for future gains for anyone holding gold. As the demand for precious metals is increasing, supply is decreasing, thus naturally pushing their value higher over time. Around the world, many large deposits and high-grade gold have been discovered – and yet these metals continue to be sought after for use in medicine, machinery, and a myriad of other applications.
Precious Metals
When people talk of precious metals as investments, they are generally referring to gold, silver, platinum, and palladium – each of which has its own unique benefits and can be purchased for physical possession. Here’s a quick background on each metal and its common uses.
Gold
Gold has been a highly sought-after symbol of wealth since the beginning of recorded history, often used in jewelry, art, coinage, and many other applications. Because it is malleable, resistant to corrosion, and electrically conductive, gold also has practical uses in numerous industries.
Silver
Like gold, silver has been used for generations in jewelry, tableware, coinage, and numerous other items. Its malleability, heat and electrical conductivity, and unique luster make it practical for a wide variety of industrial, electrical, and manufacturing applications.
Platinum and Palladium
Platinum and palladium, both recognized by their greyish-white luster, are rare precious metals used in many similar applications as gold and silver. Platinum and palladium are both known for their great catalytic properties and are thus used heavily for industrial processes, as well as the manufacturing of jewelry and numerous other items.
Bullion and Numismatic Coins – What’s the difference?
When investing in precious metal coins, you have two primary types to choose from bullion and numismatic to proof coins. There are unique benefits to both, depending on your goals, but there are some fundamental differences between them:
Bullion coins are valued solely by their precious metals content and weight, making them attractive to investors looking for liquidity.
Numismatic coins are those whose value is determined not only by their precious metals content but also by their rarity and condition. This makes them attractive to investors who are looking for added growth potential from those factors. Numismatic gold coins are defined as having been minted prior to 1933.
Proof coins are valued partly based on their precious metals content; buy they are also minted in limited quantities with higher production standards than their bullion counterparts. Therefore, their value is also influenced by their scarcity.
Why Shop at Toronto Metal Exchange?
We provide you with competitive, up-to-minute live pricing and we make sure your precious metals are delivered to your door discreetly and fully insured.
Our commitment to you, whether you are an investor or collector, is to provide extraordinary service throughout your bullion buying experience. Our in-house customer service representatives will work to assure your satisfaction in a timely, friendly, and professional manner. Never hesitate to get in touch – building relationships with our clients is our number one priority. If you would like to learn more about what our customers are saying about our service, please view our customer reviews.
When you buy from us you can be confident that you are getting a product that we receive directly from reputable mints and storied suppliers, including the Royal Canadian Mint. You can rest assured knowing that your order will undergo careful audits and a chain of custody logistics that will certify its authenticity. We pride ourselves in providing a convenient and easy way for you to invest in physical precious metals. Your security and protecting your privacy are an integral part of everything we do. We respect your data – from our sales team to our system administrators, we follow strict protocols to keep your information secure.
You can place an order online or give us a call to lock in your price. Whether you are new to precious metals or an experienced investor, we are dedicated to providing the best customer experience. Order today! If you have any questions or would like to speak with a representative or make an appointment for a in person consultation, please Email us at Customer.support@torontometalexchange.com or call us at 416-817-2126 for assistance.