LIVE Gold Prices $  | E-Mail Subscriptions | Update GoldSeek | GoldSeek Radio 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

GoldSeek.com to Launch New Website
By: GoldSeek.com

Is Gold Price Action Warning Of Imminent Monetary Collapse Part 2?
By: Hubert Moolman

Gold and Silver Are Just Getting Started
By: Frank Holmes, US Funds

Silver Makes High Wave Candle at Target – Here’s What to Expect…
By: Clive Maund

Gold Blows Through Upside Resistance - The Chase Is On
By: Avi Gilburt

U.S. Mint To Reduce Gold & Silver Eagle Production Over The Next 12-18 Months
By: Steve St. Angelo, SRSrocco Report

Gold's sharp rise throws Financial Times into an erroneous sulk
By: Chris Powell, GATA

Precious Metals Update Video: Gold's unusual strength
By: Ira Epstein

Asian Metals Market Update: July-29-2020
By: Chintan Karnani, Insignia Consultants

Gold's rise is a 'mystery' because journalism always fails to pursue it
By: Chris Powell, GATA

 
Search

GoldSeek Web

 
When the United States Owned Most of the Gold on Earth


 -- Published: Wednesday, 6 September 2017 | Print  | Disqus 

By Michael J. Kosares
Author, The ABCs of Gold Investing: How To Protect and Build Your Wealth With Gold

Founder, USAGOLD

Few Americans know that, just after World War II, the United States owned most of the gold bullion on earth – about 22,000 metric tonnes. In fact by 1945, it owned over 80% of the gold held by nation-states and central banks – an impressive display of economic power. Now it owns just over 8000 metric tonnes, which represents about 42% of the total global reserve.

The lost 14,000 tonnes were expended in defense of the $35 per ounce gold benchmark price established under the 1944 Bretton Woods Agreement. In addition to the fixed price of gold, the U.S dollar came to represent a fixed weight of gold, i.e., 1/35th of a troy ounce, and the rest of the world’s currencies were then pegged to the dollar. The United States agreed under Bretton Woods to redeem gold from the other signatories at the rate of $35 per ounce should any of the participants determine that gold might be a better alternative for a portion of their reserves than U.S. dollars. “The dollar,” American policy makers were wont to say, “was as good as gold.”

Germany, France get the idea dollar not as good as gold

All proceeded in orderly fashion with little in the way of redemptions from the massive U.S. stockpile until the 1960s. Then a group of European nation-states, led by Germany and France, got the idea that U.S. inflationist economic policies had undermined the dollar, making gold a bargain at $35 per ounce. In other words, they came to the conclusion that the dollar was not as good as gold.  Steadily, over a decade long period, they exchanged dollars for gold at the U.S. Treasury’s gold window. By the early 1970s, 14,000 tonnes of gold – or 64% of the stockpile – had departed the U.S. Treasury for European shores never to return.

In 1971 President Richard Nixon finally decided enough was enough. He closed the so-called gold window, devalued the dollar against gold, and freed the greenback to trade at market prices against other currencies. Fully abrogating the Bretton Woods Agreement, Nixon declared, in one of the more famous quotes of his presidency, “we are all Keynsians now.” The era of global fiat money, with a fiat U.S. dollar as its centerpiece, had begun.

Had the United States refrained from its defense of the $35 benchmark, it would still own about 75% of the present 29,000 tonne global gold reserve. As it is, Nixon’s revocation of the Bretton Woods architecture set the stage for the modern gold market. You can see the result in the chart immediately below. From it, I can draw three conclusions:

–– First, we are now in the 46th year of a super-cycle, secular bull market in gold that began in 1971 – a bull market directly tied to the fate of the now fiat U.S. dollar.

–– Second, the very same conditions which created that bull market are still in place today – nothing has changed fundamentally.

–– Third, as long as the same cause and effect remain in place, we can assume gold will continue to make sense as a long-term portfolio hedge.

Some will agree with those conclusions. Some will not. Some are on the learning curve, and it is to that group this piece is largely addressed.

http://www.goldseek.com/news/2017/9-6mk/1.png

Chart courtesy of GoldChartsRUs/Nick Laird with thanks

In the end, it is the times that need to be hedged

Those who do not agree with those conclusions, it has been my experience, will continue to put their faith in the stock and bond markets and ignore the precious metals. There is no amount of persuasion that will convince them to do otherwise, and to try is pretty much a waste of time. Most importantly, whether they care to acknowledge it or not, they will put their faith ultimately in the federal government and the Federal Reserve.

Those who do agree will continue to hedge their portfolios with the precious metals, just in case the long history of economic breakdowns beginning with 1971 repeats itself yet again. To this group, the proper diversification is a small price to pay, a matter of practical financial planning that, in these times, provides some much-needed peace of mind. As for an end game to all this, they will keep in mind one of history’s immutable lessons – sometimes the problems become too large for the government and central bank to control.

For those on the learning curve, a post I made at the USAGOLD blog recently titled “Historical inevitability and gold and silver ownership – In the end it’s the times that need to be hedged” would be an informative follow-up to what you just read, another piece in the puzzle. It got significant play on the wider internet and speaks to the possibilities of an end game from the perspective of Strauss and Howe’s fourth turning.

One more chart for those who want the complete picture:

http://www.goldseek.com/news/2017/9-6mk/2.png

Chart courtesy of GoldChartsRUs/Nick Laird with thanks


| Digg This Article
 -- Published: Wednesday, 6 September 2017 | E-Mail  | Print  | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2019



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer


Map

The views contained here may not represent the views of GoldSeek.com, Gold Seek LLC, its affiliates or advertisers. GoldSeek.com, Gold Seek LLC makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, Gold Seek LLC, is strictly prohibited. In no event shall GoldSeek.com, Gold Seek LLC or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.