Gold's value

Gold’s Value Rise Cause Problems For Investors

Gold’s value has been on the rise this past few weeks and it is boosted by the dwindling world economy. With the new rise and the fact that Gold is seen as a safe refuge, investors still have their fears over market dilution or confiscation by the Central bank hence, they resort to Bitcoin.

Prior to Covid-19, central banks purchased massive amounts of gold and alongside this, a number of countries are having serious issues repatriating their gold reserves. This has caused investors worldwide to question gold over crypto assets.

There’s no doubt that gold’s value has been on a tear, but many people have concerns about the precious metal being a solid safe-haven due to a number of factors. In recent years, investors have found cryptocurrencies like bitcoin (BTC) have a number of benefits that gold cannot offer.

At the time of publication, one troy ounce of .999 fine gold is trading for $1,963 and many investors believe the price is headed higher. But some of the biggest issues with gold’s value, in comparison to crypto assets, is the problem with storage.

As Gold Touches New Highs Investors Face Storage Issues, Market Dilution, Threat of Seizures

According to FDR, the move to seize American gold stashes was meant to stimulate economic growth during the Great Depression. On April 5, 1933, FDR signed Executive order 6102, and citizens were mandated to take their bars, coins, and certificates to the Fed. They were paid $20.67 per ounce and after the Emergency Banking Act was lifted, FDR raised the price to $35 per ounce.

On July 30, 2020, the USD’s trade-weighted index dropped to a two-year low against a basket of other fiat currencies. The U.S. government could easily invoke another executive order against gold in order to keep the reserve currency of the world afloat. Furthermore, back in 1933, FDR had government entities conduct a nationwide search for gold coin, bullion, and certificates as part of the government’s “confiscation policy.”

There are a few high-profile U.S. gold confiscation enforcement that the American press covered at the time. For instance, the federal government seized double eagles worth $12.5 million at the time from an investor who was holding the coins for a Switzerland-based firm.

Another individual was charged when he tried to withdraw 5,000 ounces of gold worth $9.6 million today. Banks holding gold would notify government entities if someone was withdrawing gold and the man with the 5,000 ounces was greeted by federal agents that day. In addition to the U.S., other countries like China and Japan have had cases where gold smuggling is common and governments seize people’s gold.

Gold investors are also scared about the massive amounts of precious metal central banks have held in reserve and many suspect they could dilute the market. There are a number of central banks doing shady things with gold reserves and some of them are not allowing other countries to withdraw.

Many countries have tried to repatriate their gold, but have had significant issues from central banks. Venezuela, the Netherlands, Germany, Belgium, Switzerland, Austria, India, and Bangladesh all have had problems attempting to repatriate their gold. The countries holding these reserves could weaken the gold’s value, by simply selling off massive amounts during times of economic distress.

Statistics show that the U.S. is the largest holder of gold reserves and the country is followed by Germany, the International Monetary Fund, Italy, France, Russia, China, Switzerland, Japan, India, the Netherlands, and the European Union.

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