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The Banking Crisis – Why Gold?

The Banking Crisis – Why Gold?
Gold investment concept. Illustration of growing bar chart.

The History of banking in Germany is quite long and distinguished, with arguably its most important historical moment being the birth of Johann Fugger in 1367 in Augsburg.  This man was the founder of a family destined to shake up the banking industry in Europe at the time, and to depose the de Medici family from their undisputed rule of all things fiscal.

In that time, Germany has dealt with its share of banking and financial crises, and in each case of these it was the savvy merchants and cunning investors that came out on top.   Germany’s current banking crisis is no different, it’s making waves in everything from interest rates to gold prices, and once again it will be the prepared and canny trader that will spin wealth out of potential disaster.

The recent conversations taking place between the Deutsche Bank and Commerzbank are showing that the environment there is decidedly in flux, and that the existing banking troubles are anticipated to get only worse.  Take this in context of a global market and Italy’s flagging economic struggles, and it’s a time of great financial troubles on the horizon.  As always, the smart investors are turning their eyes to Gold.

Why Gold Is the Harbor in the Storm

Gold was the first currency to utterly shake the world and shape the way that economies that stretched across continents and ultimately oceans formed, flexed, and changed.   It built up nobility and brought down Kingdoms, all on the power of its lustrous yellow shine.  With world economies going into crisis, the value of gold isn’t just staying the same, it’s rising in value.  Like real estate, it’s the one of the few real forms of wealth.

The value of holding gold is a well-known, and the stability of those governments that use it as the basis of their economies have always remained stable until they stretched beyond their means and into the realm of ‘paper money’ and ‘promissory notes’.   But even as their economies collapse through overspending, the value of gold remains strong and immutable, even as the exchange rate fluxes.

This is why those in the know are making large investments in gold, even Jacob Rothschild is taking steps to protect himself.  He made a strong statement in a recent address to RIT Capital Partners, stating that “The six months under review have seen central bankers continuing what is surely the greatest experiment in monetary policy in the history of the world. We are therefore in uncharted waters and it is impossible to predict the unintended consequences of very low interest rates, with some 30% of global government debt at negative yields, combined with quantitative easing on a massive scale.”2

His response to this?  Increasing his investment in gold and preparing to weather the coming storm on the back of a golden float. It just makes sense that savvy investors follow his lead and start securing a chunk of the golden pie for themselves.  All the signs are there for gold’s current bull-market to continue for a goodly while.

With Things Coming Down, Why Is Gold Going Bull?

Demands are increasing, some of them fueled by situations like that mentioned above.  A need for security in the heart of global financial insecurity, but this isn’t the only factor keeping gold a strong foundation for secure finances.  The driving force behind the demands can be found in rising economies like India and China, where the wage increases are creating a lot more disposable income.  This means that money available for investment and for gold based products is becoming a lot more available.

How available?  China has shown a yearly increase of 10% in real wages each year over the past few years, and in the past year Indian civil servants alone saw an increase of 23% in their wages. These populations represent a large new influx into the economy, and a huge amount of money waiting to purchase gold products, including jewelry.3
Demand drives a bull market, and some experts anticipate seeing the price per ounce for gold rising higher than $2000 per ounce in a couple of years. Investing now will not only secure your funds against an insecure banking environment, but put your funds into a form due to rise in value as much as double if not more.  What stocks can provide the same security as buying real physical gold?

Are There Dangers To Investing In Gold?

There’s dangers in any investment, some of them predictable, others not quite so much.  One of the largest cautionary tales about investing in gold occurred recently in the news.   There have been instances of physical gold that was owed to investors not being released to them.  Paper gold is the term that is commonly used for this, essentially documents indicating that you have purchased a certain amount of gold and that it’s currently being held for you.

You know it’s time to get concerned when you approach your broker and ask how you should store your gold, and get a response that sounds like dubiousness wrapped in the veil of convenience. “That will all be handled by the fund, there’s no reason for you to deal with physical gold or store it anywhere, you just benefit as the price goes up!”  It sounds excellent, really.

This has been a rising trend in European Markets, with the delivery of physical gold being refused to those attempting to cash in their paper gold for actual bullion.  So when it comes to investing in the physical substance itself?  Absolutely not, that’s the best and most effective way to invest in gold.  Paper gold leaves a little more to chance, given recent events, but ultimately a little research will lead you to reputable dealers with strong reputations.

Between the German banking crisis and rising wages in developing countries, investing in gold now makes perfect sense.   The security of solid, tangible wealth that has stood the test of time is exactly what you need in the middle of today’s financial climate.


Kal Kotecha, PhD, is the editor and founder of the Junior Gold Report, a publication about small cap mining stocks that is read and enjoyed by thousands of investors. From 2003-2006, he was the editor and creator of the Moly/Gold Report, which focused on critical analyses and open journalism of companies profiting from the precious and base metals sector. He then subsequently changed his newsletter to Junior Gold Report. His reports and articles have been featured on sites such as Kitco321gold, Seeking Alpha, the Aureport,  Streetwise Report and Mining.com. Dr. Kotecha is a featured writer on Stockhouse as well as both the keynote speaker and investment panel member of ThinkingNorth – a premier organization which connects the brightest entrepreneurial talent with the financial community. The scope of his current activities include worldwide onsite analyses and reporting of developing companies. He has previously held leadership positions with many junior mining companies.

Dr. Kotecha holds a B.A. in Economics and Psychology, a Master of Education and after completing his Master of Business specializing in Finance in 2007, he completed his PhD in Business Administration in January 2016. His thesis was on the Affective Heuristics of the 2008 stock market crash. He also lectured Economics at the University of Waterloo and at Niagara College where he was voted by the students as Educator of the Year 2013/2014 as overseen by the College’s Student Administrative Council.

Article References:

  1. Mother of All Bull Markets – http://www.thegoldandoilguy.com/mother-bull-markets-just-begun/
  2. Rothschild Doubles Gold – http://thefreethoughtproject.com/rothschild-doubles-gold-banking-collapse-begins-germans-told-stockpile-foodwater/
  3. Why Gold Is In A Bull Market: http://www.forbes.com/sites/greatspeculations/2016/07/01/why-gold-is-now-in-a-new-bull-market/#4630b5107041
  4. The Dangers Of Paper Gold: http://www.internationalman.com/articles/the-danger-of-paper-gold
  5. Avoid Paper Gold: http://www.zerohedge.com/news/2016-09-01/avoid-paper-gold-%E2%80%9Cgold-delivery%E2%80%9D-refused-gold-exchange-traded-commodity



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