Owning
gold is life insurance and wealth preservation. Anyone who has lived through
hyperinflationary periods in the Weimar Republic, Zimbabwe, Argentina or
Venezuela understands the importance of gold. But it is not enough just to
own gold or silver. It is also extremely important how you hold it and where
you hold it. We have just seen another example how governments unilaterally
“confiscate” gold.
VENEZUELA CAN’T GET THEIR GOLD BACK
The
Venezuelan government gold held at the Bank of England (BoE) is just the
latest example of the importance of choosing the right jurisdiction and the
right vaults. Venezuela is holding 14 tonnes of gold with the BoE in London,
worth $545 million. This is a relatively small amount when it comes to
sovereign gold. Still, Venezuela has for some time asked to get it back but
the BoE has come up with all kinds of excuses like it is hard to get
insurance for such a big amount and this has allegedly delayed the release of
the gold by several weeks. This is of course a ridiculous excuse.
Our company ships large amounts of gold and silver from all over the world
to private vaults in Switzerland and Singapore. We have never had a problem
organising immediate shipment or getting insurance cover. So the reason for
the delay is clearly not insurance or transport. The UK, as still part of the
EU, is cooperating with the US in relation to the sanctions against
Venezuela. So the question is now if Venezuela will ever see their gold back.
It is reported that both Libya’s and Ukraine’s gold has been “taken care of”
by the US. Maybe Venezuela’s gold will end up in the same place.
MAJOR PHYSICAL GOLD SHORTAGE IN INTERBANK MARKET
Most central banks hold gold with the Bank of England as well as with the
Fed in New York. A major part of the central banks’ gold is either sold
covertly or leased to the market. When a central bank wants its gold
back, it doesn’t exist anymore in London or New York. A bullion bank has sold
the leased gold to China or India and all the central bank has is an IOU
stating that they are owed gold by the bullion bank. So there is no physical
gold available to deliver against the IOU.
At some point, the market will discover that there is a massive shortage
of physical gold in the interbank market. When this happens there will be
panic and the gold price will shoot up. At the same time the holders of paper
gold in the futures market will also ask for delivery. Since there are at
least 100 paper claims for every physical ounce available, there will be a
massive squeeze in that market too.
GERMAN INVESTORS WORRY ABOUT GOLD CONFISCATION
I was last week in Munich giving a speech at the International Precious
Metals & Commodities Show. The mood at the show obviously reflected the
depressed prices of the mining stocks and the metals. There were around 4,000
visitors this year against 14,000 when I spoke in 2012. After a six years
correction, precious metal investors are feeling quite bruised. Many of the
German investors own mining stocks where the losses are so much greater than
for the physical. Based on contrary opinion the cooler interest is a good
indication that we are getting to the end of the correction.
A clear concern among German investors in physical gold and silver is the
risk of confiscation within the EU. Germany has a history of banning
personal ownership of gold from the 1920s to the 1950s. We talked to
several investors who were worried about confiscation in Germany and the EU
and therefore interested in moving their gold and silver holdings to
Switzerland and also to Singapore.
SWITZERLAND HAS NEVER CONFISCATED GOLD
Switzerland
has never banned or confiscated gold. Gold ownership is a long established
tradition in Switzerland. Swiss gold refiners are world leaders in their
field and refine 70% of all the gold bars in the world.
In addition, gold represents 29% of Swiss exports, which makes it a
strategic industry. These factors combined make it very unlikely that
Switzerland will ever confiscate gold. It would be very foolish and
improbable that the Swiss government would kill the goose that lays the
golden egg.
PROTECT YOUR GOLD OWNERSHIP
The following guidelines are imperative for investors in gold (and
silver):
- Hold physical metals.
- Store gold in your name with direct access to the vault
- There must be no counterparty between the investor and
the vault
- The vault must be in a safe jurisdiction where there is
rule of law, like Switzerland
- The jurisdiction must have no history of gold
confiscation
- The vault must be private. Not a bank, financial
institution and not a state owned Mint
- The credentials of the vault operator must be of the
highest quality
- The gold must be insured by a first class international
insurer
- The service provider must offer instant liquidity
ARMISTICE DAY
One
hundred years have passed since the World War I Armistice Day on November the
11th 1918. That marked the end of one of the most horrible wars ever, when 17
million perished and 23 million were injured. Just in the battle of the
Somme, there were over one million casualties. Great Britain had 57,000 in
the first day. The totally devastating WWI ended after four years in 1918.
The ensuing peace only lasted to 1939 when World War II broke out.
The Versailles peace treaty in 1919 sowed the seeds for WWII. Germany was
punished by the Allies with major war reparations of 132 billion gold marks.
These were sums that a country which had been devastated by the four year war
had no chance of ever repaying. It was Germany’s inability to pay these war
debts that led to the hyperinflationary depression in the Weimar Republic
from 1919 to 1923. It also led to the rise of the National Socialistic Party
(Nazis), Hitler and WWII. Just 21 years after the Versailles peace treaty
WWII broke out with 60 to 80 million deaths.
GERMAN HYPERINFLATION 1919 TO 1923
MACRON UPSET TRUMP AND PUTIN
There has not been a major war in Europe since 1945 and there are
fortunately no sounds of war drums in that region currently. But President
Macron in France certainly didn’t make the Remembrance Day celebrations in
France for world leaders a tension free occasion. He has ambitions to be a
major international leader and Statesman – like de Gaulle – and is now
proposing a European Army as protection against the risks of China, Russia
and the USA attacking. Those proposals certainly didn’t go down well on
Armistice Day and it was very poor timing just before the visit of both Putin
and Trump. But Macron has illusions of a European Superstate. With the
weakening of Angela Merkel, Macron is now seizing the moment to head the
European Superstate with his own army and eventually creating the United
States of Europe. But since his popularity is waning also in France, he will
most probably not succeed.
Like a lot of leaders Macron is isolated from the feelings of real people.
He is insensitive to all the increasing uprising in many European countries
against the EU. In country after country the dissatisfaction with Brussels is
growing. It is not just due to the major migration problems but also to the
Brussels elite’s desire to meddle in the affairs of all EU countries.
There is a major risk that the ambitions of unelected elite in Brussels,
as well as Macron’s, of a European Superstate will instead lead to major
conflicts with civil wars and possibly hostilities between some European
nations.
BANK OF FRANCE AND JP MORGAN START GOLD MANIPULATION TRADING
Macron is now also trying to edge in on the gold trading market for
France. This has been the prerogative of London since 1750, but now JP Morgan
(who else) has joined up with Banque de France to offer gold swaps, leases
and gold deposits for central banks. Obviously the purpose is to attack the
UK further in relation to Brexit. If they succeed, there will be yet another
country that will manipulate the gold market with Morgan’s help. So more
paper gold and more manipulation of the gold market until the whole
artificial gold edifice collapses whilst the physical remains as the only
money which has ever survived.
“Plus ça change, plus c’est la même chose”!
(The more things change, the more they stay the same.)
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Egon von Greyerz
Founder and Managing Partner
Matterhorn Asset Management
Zurich, Switzerland
Phone: +41 44 213 62 45
Matterhorn Asset Management’s global client base strategically stores an
important part of their wealth in Switzerland in physical gold and silver
outside the banking system. Matterhorn Asset Management is pleased to deliver
a unique and exceptional service to our highly esteemed wealth preservation
clientele in over 55 countries.
GoldSwitzerland.com
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