Voting for Gold vs. Voting for Gordon

By: Adrian Ash | Mon, Apr 12, 2010
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Dave Cameron is no Margaret Thatcher, but Gordon Brown is very much a friend to gold...

SOCIALIST GOLD-OWNERS are rarer than Tory foxes. But should British gold investors, one month from now, vote against the man who ignored the Bank of England's best advice - and sold over half of the UK's gold reserves at the very lowest prices a decade ago?

Voting against Gordon Brown would seem to go against the gold investor's best interests. Because "Dear Prudence" has also presided over the greatest credit bubble and bust since the South Sea Company, flooding the world with both Sterling and gilts, while making record-low interest rates a key plank of policy.

Cheers, Gordon!

Gold in Sterling

Real rates of bank interest, after inflation, have now averaged zero since June 2007 - just before the crisis that Brown's grace-and-favouritism created blew up at home.

Unsurprisingly, the price of gold has more than doubled over that time - and fully 25% of that gain has come thanks to Sterling's drop on the currency market. So backing more of the same might seem sound tactics for the floating voter blessed with a position in gold.

Private gold owners might want to think twice, however, before endorsing Labour's next five-year attack on the constitution and civil liberties. Because gold may well prove necessary, even with a Conservative government.

Last time we got "the most important election for a generation", the price of gold in Sterling didn't peak for eight months after the Tory victory of May 1979. On its monthly average, the price of gold for British investors didn't peak until Feb. '83 - almost four years after Margaret Thatcher took power.

And let's face it, David Cameron is no Margaret Thatcher.

Real UK Interest Rates

It took bank-deposit rates approaching 15% to rescue the Pound after the last Labour administration was thrown out. But that was only after a decade and more of destructive inflation had made tight money politically possible.

Near-double digits on the real - not nominal - return-to-cash were needed to make gold redundant as an inflation hedge. Whereas today, and for the foreseeable future, sound money remains quite literally unthinkable, whoever wins No.10 in May.

 


 

Adrian Ash

Author: Adrian Ash

Adrian Ash
BullionVault.com

Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK's leading financial advisory for private investors, Adrian Ash is the head of research at BullionVault, where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

About BullionVault

BullionVault is the secure, low-cost gold and silver exchange for private investors. It enables you to buy and sell professional-grade bullion at live prices online, storing your physical property in market-accredited, non-bank vaults in London, New York and Zurich.

By February 2011, less than six years after launch, more than 21,000 people from 97 countries used BullionVault, owning well over 21 tonnes of physical gold (US$940m) and 140 tonnes of physical silver (US$129m) as their outright property. There is no minimum investment and users can deal as little as one gram at a time. Each user's unique holding is proven, each day, by the public reconciliation of client property with formal bullion-market bar lists.

BullionVault is a full member of professional trade body the London Bullion Market Association (LBMA). Its innovative online platform was recognized in 2009 by the UK's prestigious Queen's Awards for Enterprise. In June 2010, the gold industry's key market-development body the World Gold Council (www.gold.org) joined with the internet and technology fund Augmentum Capital, which is backed by the London listed Rothschild Investment Trust (RIT Capital Partners), in making an $18.8 million (£12.5m) investment in the business.

For more information, visit http://www.bullionvault.com

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Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events - and must be verified elsewhere - should you choose to act on it.

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