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Mining the Meaning of Gold



-- Posted Thursday, 20 September 2007 | Digg This ArticleDigg It!

Paul M. Airasian

Director, GoldInstitute.net

Remember Future Shock, the book by Alvin Toffler? It was published in 1984, which was ironic since George Orwell’s 1984 had been the classic vision of a scary future. In the rosy glow of the 1980s, the term “future shock” seemed like it must be referring to something in a distant future. Today, after years of global and domestic crisis, “future shock” is something that many people feel has already arrived.

Greed in the 1980s and 1990s has given way to fear and anxiety in the 2000s. And any realistic review of trends indicates that things will only get worse in the 2010s.

I am not a prophet of doom and gloom. As an advocate for investing in gold I try to shed light and offer factual advice to help people secure their future. But the key to avoiding future shock – economic calamity – is to be realistic about what we face and make the best of it.

I believe there are hopeful trends, just as there are alarming trends, but they are only hopeful if you recognize and invest in them.

Let’s consider some of the trends affecting gold by reviewing the four great realities: time, money, people, ideas.

TIME. The era of investment-as-greed is over.

People are now looking for safety, not get-rich-quick schemes through stock brokers.

In the last twenty years, we went from the adage “greed is good” to its corollary, “credit is great.” We saw the credit expansion, the corruption, the short term gain and the longer term pain. A lot of it is painful to recall – the desperation of individuals trying to endear themselves to stock brokers making commissions on their quick-buck gambling… Hedge fund managers treating companies like Monopoly properties… And, with the sub-prime mortgage crisis, people losing their houses, dreams and dignity.

International crises generate more fear: terrorism, nuclear proliferation, global warming, threats to the oil supply, increased conflicts of all kinds...

When greed ends and fear takes hold, people look for a safe haven to preserve their capital. Fearful investing is a totally different mindset. Many people basically freeze. They become suspicious of previously romanticized financial instruments that were promoted in the greed era, and skeptical of everything else.

MONEY. For safety, gold is the logical place to go.

When the public runs for safety, the knee-jerk reaction is to buy Treasury bills, since they are backed by the government. But then, as the crisis plays out, the investing public will start to question the dollar and other monetary currencies. After all, the dollar has been declining 80% through inflation over the last twenty years.

In past crises – and currently – the government tries to paper it over, usually printing more money. The Fed and the federal government – two very different entities, despite the impression left by the mainstream media – have been fairly successful in this game of containment. They have effectively postponed the day of reckoning when the economic malady requires a cure. The collapse of credit from the housing crisis is their toughest test.

When people realize that the US dollar is buying less, they will question the integrity and/or security of the T bills. If you want to get out of T bills, if inflation is eating up your 4% interest, there’s an obvious place to go – to real money, to the money that is been real for thousands of years. Got gold?

Foreigners understand the reality of gold more than most U.S. investors, which is why there has been an increased accumulation of gold, and reduced dollar holdings, in China , Russia , and other countries.

Money mavens won’t be saying “go to gold” because they don’t earn commissions from gold, but at some point, the investing public will catch on. Fear will drive them. Unfortunately, as in the dotcom mania, most will come too late to the party. The punch bowl will be empty. The huge profits will have been made by those who had the foresight to invest before the herd mentality took hold.

When people flee the refuge of T bills, hearing that “cash is king”, most will realize too late that “gold is queen.” As in chess, there are more options with a queen (coins, bullion, mining stocks) than with the cash king… And considering the potential profits, the gold queen is much more powerful.

PEOPLE. Today’s executives in gold mining companies are exceptional business leaders.

The old perception of gold mining executives as geologists, engineers and rugged pioneers is out of date. Today’s mining world runs on social engineering (management), financial engineering, political engineering, and to a lesser degree, the traditional mining engineering.

When gold mining companies are more professionally managed, promoted and audited, they are a much safer, more profitable investment.

Many mining CEOs had exceptional track records of success in other fields of endeavor. Here are just three examples of this new breed of CEO:

Frank Giustra (Endeavour Mining Capital, Clinton-Giustra Foundation) began his career as an investment banker. His strength lies in his reputation and relationships with the investment community, which includes investment banks, commercial banks, and the largest institutional equity investors in the world.

Frank Holmes (U.S. Global Investors) had investment banking experience in the international capital markets and the gold mining industry before purchasing controlling interest of U.S. Global in 1989. He had worked for a Canadian investment corporation where he was a research analyst and portfolio manager specializing in emerging growth companies.

Van Krikorian (Global Gold Corporation) began as an international attorney who did extensive work in strategic planning, structuring investments, negotiating agreements and resolving disputes for businesses operating overseas – projects in energy, transportation, agribusiness, banking, government regulation, trade, as well as mining.

IDEAS. In a world of debt, smart investors realize gold is safe because it is no one’s liability.

Fear is the most powerful emotion because it is triggered by the most basic instinct, survival.

And because fear is so powerful, clouding one’s judgment, fear becomes paralyzing. People are afraid to act. That is why bear markets last so long. People are slow to recover from their mistakes, not wanting to experience that fear again. They know they made irrational decisions that they regret, decisions caused by greed, and they would rather not think about the lesson than act on it.

Instead of coming to grips with their emotions, learning to reason wisely, they are all the more apt to succumb to that which fooled them in the first place: fear and the herd mentality. They are afraid to go against the mob. It’s sad but, the truth is, they’re afraid to think independently.

The term “golden opportunity” says it all. Gold is only an opportunity; it is only “good as gold” if you act and put some in your portfolio.

Gold is an investment. Gold is insurance. Gold is real money.

I will call gold one other thing, and I hope it doesn’t give you a shock. Gold is the future.

Paul M. Airasian is founder and editor of GoldInstitute.net -- http://www.goldinstitute.net. He has researched and evaluated gold exploration and mining companies as an investor and investment advisor for over twenty-five years. He is an independent consultant on precious metals investments.  


-- Posted Thursday, 20 September 2007 | Digg This Article




 



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