Investing in Gold as a Hedge in Uncertain Economic Times
One of the oldest known alternatives to cash or a currency is gold. In our modern age, ownership of gold has become complicated. It is extremely important to stay abreast of what's going on in India, monitoring how they have removed cash from their economy, and forced us all to seek alternatives to cash in order to purchase goods and services, and maintain the wealth one has accumulated in a lifetime.
"The Indian society relies on cash for more than 90% of transactions, and nearly every aspect of daily life has been effected. This was a bold action to force the economy into a fully taxed society all for the benefit of the government, of course. The gold ownership is allowed provided you PROVE you bought it with taxed money," reported by Armstrong economics.
Before I move further into the semantics of gold ownership we must recognize that India was not the first nation to remove cash from their economy. Sweden has made this transition already. What is interesting to note, is that India is the first nation in our modern age that was cash dependant to make this transition. Most people in India do not use credit cards or apps to purchase goods and services. The majority of Indians have a very strong mistrust of financial institutions like banks as well.
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In contrast to nations like Norway and Sweden where children have their allowances transferred into debit accounts, and are allowed to pay for school lunches and candy after school with a debit card. Sweden is also the first country where you can give to your church collection with a credit card. and every child is given a government-issued iPad the very first day of school. Maybe that's a good thing, an ipad at 5 years old. The world around me is moving so fast ….my first day at school I was given a notebook (with paper), crayons, two pencils, an eraser, and a sharpener. And we had to carry our books, no backpacks back then, in the snow, uphill, both ways! I dare not think about what my Dad went to school with on his first day. Just guessing feels ancient.
So let's propose this scenario you are a person of considerable wealth living in India. You have accumulated a substantial amount of wealth in cash and kept it under your bed, because you were taught not to trust the banks. You have gold but to avoid government taxes you buried it and can relocate it with your treasure map where 'X' marks the spot. You're afraid to retrieve your treasure because you don't have the receipts to show how you acquired your gold because you didn't know you needed that. You just increased your quantity of gold when you were able. Now you're in fear of losing all you have stored for yourself and your future generations because you didn't see this government action coming. So for all of us on the outside looking in, there has to be a better way.
Owning gold is an acceptable alternative to cash. The investor has to do this according to the new rules and be able to be above the scrutiny of being accused of any illegal financial gains. To define this even further before you buy gold you have to pay taxes on the money you earned that was used to make the purchase. And if you sell your gold you have to pay taxes on the profits from that transaction as well. That is what cash strapped governments today are aiming for.
How do we buy gold the 'right way,' in our modern world as an alternative to preserving or gaining wealth? That is the question that needs to be answered. There are two types of ways that gold can be owned by an individual,you can purchase the physical gold bullion or electronic certificates (ETCs & ETFs) that give you ownership of physical gold without the hassle of the actual storage of the precious metal. As the investor you will have to follow certain guidelines of the government that has granted you citizenship. It will also be prudent for you to research what your tax liabilities are for owning gold. You may also have to be willing to visit your gold if you decide to make your purchase of physical gold bullion offshore from your country of residence.
Bear in mind that in today's world if you want to own substantial quantities of gold, most governments want to know who you are and how much gold you have wherever it's located. The only true way to be an owner of gold bullion is to buy and exclusively own the physical asset. You will then be faced with the decision whether to store it on your property or to use the services of a secure vault.
Your next decision will be where your purchase will be made. There are gold brokers and storage companies in many countries. The most popular places to perform this type of transaction is Switzerland followed by Hong Kong and Singapore. The criteria you will want to use when making this decision will be how strong the sentiment between the the population and government regarding the ownership of precious metals is. The Swiss have been reported to have the highest sentiments about gold ownership, perhaps higher than any other Western nation. Making it unlikely to expect government confiscations of gold or the application excessive taxes to transactions involving gold. Another point of note is that Switzerland refines 70% of all the gold in the world which makes it an extremely vital industry for the Swiss.
When considering the purchase of gold as an alternative investment. The investor should store their precious metals in physical form outside the banking system and outside their country of residency. The investor must provide himself or herself a way to have personal access to their precious metal, and the storage of this metal, gold was our topic today, must be stored in a politically stable and democratic country.
When we revisit our opening scenario of a wealthy individual living in India. If he or she was armed with the information discussed here, the stress of maintaining that wealth may not be as intense as it is now, given the political and financial conditions surrounding the currency and gold assets.
Gold is currently trading at US $1,236.95 per ounce and still at a substantial discount from where it was trading many months ago. This may very well be a potential buying opportunity for investors who wish to diversify their investment portfolio at this time.