The 30th richest person in America reveals what he believes are the only TWO reasons to not own gold. His answer may surprise you.
This week, Your News to Know returns with the latest news about gold and the state of the economy. Stories this week include: Billionaire Ray Dalio explains why you should own gold, the latest WGC analysis resurrects China as world’s top gold consumer, and Germany is experiencing a gold rush.
Ray Dalio explains why you should own gold
In a recent interview with the Council on Foreign Relations, Ray Dalio expressed his belief in gold’s role as a currency, and why everyone should own some of the precious metal. Considering Dalio’s long list of accomplishments in the business world – a self-made billionaire named the 30th richest person in America by Forbes – anything he has to say related to finance is worth listening to.
Dalio makes his stance quite clear: He doesn’t believe that there is a sensible reason to not own gold. In his mind, the only reason for someone to not include gold in their savings would be a lack of knowledge of history and its economics. He suggests that as much as 10% of a person’s assets should be in gold, to diversify as well as protect what they already have.
Dalio believes that gold will always be relevant, and could only possibly become an unsuitable alternative to cash if there are larger sums of money in play. Even then, he notes that gold can serve as a barometer. When asked whether he himself owns gold, Dalio showed that he backs his words with action, answering with a succint “Oh, yeah. I do.”
China is once more the world’s top gold consumer, WGC reports
Lawrence Williams of Mineweb reports that, in accordance with expectations, recent analysis by the World Gold Council (WGC) resurrected China as the world’s top consumer of gold. For a brief time, India topped this list – something Williams believes to be an error based on insufficient statistical analysis.
The report, called Gold Demand Trends, puts China “comfortably” ahead of India despite China’s demand falling by 7 percent in the first quarter of 2015, whereas Indian demand rose by 15 percent during that time. China and India have long had a rivalry for the top spot, with the two standing far ahead from the rest of the world in term of gold consumption.
Together, these countries make up for 54% of global consumer demand and 64% of new mined supply – the latter figure being at around 729 tonnes in the first quarter of this year. However, Williams believes that these demand figures “still substantially underestimate gold flows into the country”, as they don’t take into account Shanghai Gold Exchange withdrawals, which reached a new record of 623 tonnes in the first quarter of 2015.
Williams rounds up the article by noting that there has been little change in terms of supply and demand fundamentals in the latest WGC reports. He also touches upon the fluctuation of gold’s price in relation to the U.S. interest rates timetable increase – something he believes shouldn’t affect gold’s price, “as any likely level of interest rate increases would still leave them in effective negative territory.”
What’s behind Germany’s recent gold rush?
With a new report showing that Germany’s demand for gold rose by a very healthy 20% over the first quarter of 2014, CNN Money’s Matt Egan recently explored what might be behind Germany’s recent gold rush.
Egan notes that it’s not normal for a country with a strong economy to have as much gold demand, especially with Europe’s recent spurts of economic growth. So what is driving Germans to move their assets to gold?
One of the possible culprits could be the fear of inflation in light of the European Central Bank’s (ECB) money printing program. Van Simmons blames the hyperinflation experienced during the Weimar Republic for making Germans wary of money printing. “You’re talking about a group of people who have been burned before by governments overprinting currency. They’ve been through hyperinflation back in the 1920s,” said Simmons.
Another potential reason listed by Egan revolves around the crisis in Greece, which made a lot of Europeans question the stability of their assets. The ECB money printing program and the Greek crisis are both likely to have played a role in increasing European gold demand, with France, Switzerland and Austria all seeing double-digit percentage increases in the first quarter of 2015.
The report, issued by the World Gold Council, said that the last time European gold demand was so high was in 2011, when the eurozone was facing a severe debt crisis. During this time, gold reached a price of almost $1,900 an ounce as people rushed to transfer their savings. “It is only a matter of when, not if, the bull market resumes in light of the major instability that is being created by reckless global monetary policy, trillions of negative yielding paper and fiat currencies that continue to get abused,” said Peter Boockvar, Lindsey Group’s chief market analyst.
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