Gold's Historic Rise: Enduring Prominence in Preserving Wealth

SPECIAL GOLD EDITION

In this special Coastal Journal edition, we acknowledge the world record high gold price of $2,151, a historic milestone capturing global attention and stirring public curiosity about the precious metal's surge, boasting a remarkable 646% increase since 2000, outperforming the SP 500 and Nasdaq since. As we dive into the reasons for owning gold, understanding its historical roots, and recognizing the opportune moment to possess this extraordinary asset, we embark on an insightful exploration.

Gold Through the Sands of Time: A Historical Odyssey

Embarking on this odyssey, we traverse the sands of time, witnessing gold's enduring allure since the days preceding Christ's advent and the birth of the Roman Empire. Gold, a precious metal, has weathered the storms of shifting empires, economic doctrines, and monetary experiments.

Gold Beginnings: Egypt, Rome, Britain, Venice, and America

Egypt: Gold first known records dates back to about 4000 BC when Egyptian royalty, used gold primarily for jewelry and decor, later becoming the world's inaugural coin and uses of money, the Shekel, weighing about 11 grams (equivalent to approximately $1,100 today at $100 per gram).

Rome: Rome conquered Egypt in 30 BC, then creating the Aureus gold coin, derived from the Latin word Aurum, which forms the symbol 'Au' on our elemental periodic table. Rome's fiscal mismanagement over time, replacing gold and silver with tin in coins, led to the first recorded hyperinflation as the money supply surged, contributing to the empire's fall.

Britain: Sterling Gold Sovereignty - Britain's monetary history intertwines with gold, from the 14th-century noble to the iconic sovereign. The term "pound" originates from the Roman libra, denoting a pound of sterling silver, and "sterling" from Old Norman French, symbolizing little star marks on early silver pennies. Their Gold standard lasted till the first World War.

Venice: Golden Ducats and the Renaissance

Venice a forgotten Empire, was a Renaissance economic powerhouse, thrived with its golden ducat coin, approximately 3.5 grams ($350 USD), symbolizing prosperity and remains one of the most fame gold coins even today. As a maritime force, the city dominated Mediterranean trade, accumulating immense wealth and experiencing a great period of innovation before facing challenges due to funding wars and economic downturns.

America's Gold and Its History:

After the U.S. broke away from and defeated King George III, the founding fathers, keen scholars of history's cyclical nature, enshrined in the constitution that "nothing but gold and silver coin can be legal tender," unfortunately applicable only to states not the Federal Government. The official endorsement came of the Gold Standard Act of 1900, equating one ounce of gold to $20, sadly President McKinley's assassination happen soon after he signed the act. The following key moments followed:

1913 - Federal Reserve Act: Departure from the gold standard began as federal reserve notes backed only 40% by gold, introducing central banking and fiat currency, loosening gold's grip on the nation's monetary system.

1933 - Executive Order 6102: Roosevelt's order prohibited private gold ownership and re valued gold from $20 to $35 an ounce giving the government 75% more dollars, causing a -45% loss in purchasing power during the Great Depression.

1944 - Bretton Woods Agreement: Major currencies pegged to the U.S. dollar which was backed by gold created a semblance of a gold standard post-World War II.

1971 - Nixon Shocks the World: Severing the dollar's ties to gold completely, initiating the first ever global fiat currency system.

1974 - Repeal of Gold Ownership Restrictions: President Ford's bill symbolized acknowledgment of gold's role as a store of value and gave power back to the people.

1980 To Present Day:

Today, the U.S. grapples with a towering national debt of $34 trillion and an annual deficit now about $2 trillion a year and rising, with debt to GDP at an alarming 122%. Alan Greenspan's assertion that "In the absence of the gold standard, there is no way to protect savings from confiscation through inflation" gains resonance.

Gold Vs Stocks Vs Real Estate vs Bonds

Gold, as the world's premier currency and asset, boasts intrinsic value that remains impervious to erosion over time. In a fiat currency-driven economy, owning assets like stocks, real estate, or bonds might seem lucrative, but each comes with its set of pitfalls.

Comparing gold to stocks, the risk of manipulation and corporate mismanagement makes gold a steadfast choice. Recent history, as seen as in the FTX scandal, warns of the fragility of individual companies and like Enron, once deem the most valuable and innovative company in the world can go to $0 in a very short time frame. Real estate, despite its allure, faces inflation-adjusted gains that may not meet expectations during economic downturns. Bonds, while offering yields, are subject to government intervention, lacking the potential for substantial returns that only gold provides.

Charlie Munger's recent stark warning, "Inflation is a very serious subject; you could argue it is the way democracies die," underscores the looming threat that inflation poses to the core of societies as history has shown. His investment thesis, a drastic continued decline in the value of the dollar, captures the essence of this concern. As the money supply expands and prices surge, there's a subtle erosion of citizens' purchasing power, posing a challenge to democratic ideals. In contrast, gold, with its limited supply and persistent demand for various purposes like wealth storage, jewelry, and electronic components like for AI chips (gold is used for bonding wire in chip and memory packages and gold plated in circuit boards) and even iPhones (about .5 grams), stands unrivaled as the world's premier precious metal and asset. Despite the fact that only about 15% of Americans own gold, its affordability persists, providing a potential safeguard against the unsustainable trends of debt and deficits. Former Fed Chair Alan Greenspan succinctly articulates the situation, stating, "The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare state. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process." Picture Below 1 Gram of Gold = $100 2023 was 1G =$60 in 2018.