Thursday, October 18, 2012
An Interview with Nick Barisheff
Since 2000, a fundamental shift away from paper assets and toward hard assets has been occurring. Part of the ongoing US dollar devaluation can be attributed to this trend. The market for financial assets is around $250 trillion (not including real estate or derivatives) versus the nominal value of the gold market at around $4 trillion.
About 50% of the gold market is in the hands of central banks; most of the remainder is privately owned. Much of the privately held gold belongs to a relatively small number of very wealthy families (who mostly hold it for generations). The net effect is that most bullion is not for sale at any price. This leaves only new mine supply available to meet investment demand.
As the driving forces of monetary debasement continue, there will an unavoidable shift from the $250 trillion paper market to the gold market, a process that is already under way. Any sort of economic or geopolitical crisis will only serve to speed up the process. Possible catalysts include the derivatives time bomb or an ETF event.
Another driver behind rising gold: The BIS has proposed that gold move from being a Tier 3 asset to being a Tier 1 asset, which means it would count as 100% collateral, a risk free asset like cash and Treasury bills.
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