Once again, gold is on the rise.
As predicted by precious metal enthusiasts and experts, the negative outlook on the global economy has led individuals and businesses – including investors – to, once again, buy physical precious metals, mostly gold as a method of asset protection.
The rise in demand, along with the Fed's misstep has led the rise in gold prices, 13.52 percent increase in the last 30 days, and 11.34 percent in the last 6 months (as of February 15, 2016). The prices strong resilience, seemingly unimpacted by the stock market movements.
It seems that the fiat money printing galore by the world's government – most notably by the US Fed – for the sake of economy “growth” will come to an end, eventually.
Not only driven by the global economic outlook, the bullish sentiment on gold is also driven by the not-so-obvious trends. This post explores several of many trends/indicators that the demand for gold will continue to rise – regardless of the spot prices.
Internationalization trends
The Internet has significantly lowered, if not eliminated, the geographical boundaries. It enables companies to do business with almost anyone in the world. On the individual level, the Internet enables people to communicate nearly instantly with anyone in the world, access information hosted anywhere, shopping with “overseas” retailers, and so on. Financially-speaking, individuals can now access investment vehicles and opportunities overseas; not only that, individuals can now secure and protect their assets in any part of the world – all made easier by the Internet.
One thing that the Internet has changed is the raised awareness of the global economic situation. Anyone can now learn what's happening with their country and future living in the country. Anyone can now learn the dark world of finance, due to the information leaks, insider information – anonymity is cherished online, for better or worse.
As the economic and political situations are increasingly uncertain, countries including your home country will try to strengthen the national stability. They want to have more control over everything. Ranging from taxation to regulations to keep everyone “safe” and “happy”, the governments are working hard to ensure the welfare of every citizen. This looks good on paper, but the major downside of it is the strangling of personal freedom.
For those who think that their governments are too limiting financially, they choose to take their assets offshore, to jurisdictions that are more stable, more financially sound, and fairer in their regulations. Some even take things further by renouncing their citizenship.
It wasn't practical before, though – you have to fly thousands of miles to open a bank account in an obscure financial center. Therefore, you have to be rich to do that. Not anymore. The Internet has changed the game forever. You can now bank with a financial institution in the UK, Switzerland, Puerto Rico or any other banks – online.
Internationalization is here today, and it'll only be prominent in the near future.
Precious-metal-backed account trends
As individuals' awareness of economic situation is raised, they will soon learn that “money” is not the money they used to know (or taught about.) The notes they have in their pocket are fiat money – mere “IOUs” that when redeemed won't give you the asset you want in exchange.
The US Dollar, as an international currency, went off the gold standard back in 1971. In other words, you can't demand an asset, like gold, from the US government in exchange for your bank note. Unfortunately, other currencies in the world follow the same policy. Well, perhaps all but one - or two.
As more people are aware of the direct implications of a lackluster economy, alternative methods of asset protection are becoming better accepted than ever.
More individuals will soon learn that precious metals, most notably gold and silver, are real money. They hold value really well, and tangible. Their values are constant – at least in the past 5,000 years. The ups and downs of gold prices in the market are mere illusion. It's not that the precious metals' prices that go up and down; it's the currencies that are fluctuating, depending on the market sentiments, policies, and of course, “money” printing endeavor that's done by almost all countries in the world.
Innovative financial institutions and entrepreneurs are aware of the fact that more people today understand that money and currency are not the same thing. To capitalize on a growing segment of the market, they introduce innovative financial products.
As an example, our partner bank in Puerto Rico, for example, offers an opportunity for clients to secure their assets offshore in the form of physical precious metals. Not only that, but the private offshore bank also offered gold and silver backed bank accounts – essentially means that your asset in the bank account guaranteed by the same value in gold and silver.
A rising Canadian startup, BitGold, is another example of how people are fully aware that gold is real money. BitGold lets customers save, send, receive and redeem gold bullion. The accounts are denominated in gold, and you can apply for a debit card that can be used just like your typical debit cards. As of 2015, there are more than 300,000 registered users, and growing rapidly.
Here's the last example: Silver Bullion, a Singaporean precious metal dealer, launched a peer-to-peer (P2P) lending platform, which allows customers to lend or borrow money that's backed by 200% of value in precious metals. For example, if your precious metal holding is $10,000 in total, you'll be able to borrow up to $5,000 in cash. A safer alternative to both borrowers and lenders compared to the traditional bank loans.
As governments are still eager to print money to keep the economy moving, there will be more financial products and services that are backed by precious metals.
Takeaway
Will gold return as a currency, only time will tell. In our opinion, it's about time; in fact, it's long overdue.
One thing for sure, internationalization is showing no sign of slowing down, and the role of offshore banks and other financial institutions in protecting individuals and businesses' assets will continue to rise in importance, regardless of the seemingly limiting new laws and regulations. As a result, newly introduced financial products, like gold (or silver) backed account, will continue to increase in popularity. This is great news for internationalized individuals and businesses alike.
FEB
2016
Table of Contents