The gold mining industry is awakening to the reality of new base of commodity pricing support. Gold is classified as a "precious metal" because of its inherent value monetarily. Historically, gold has been used as a medium of exchange because of its scarcity, it's treasure like aesthetic appeal, and its image biblically as a store of wealth as money is described in scripture. Gold mining has had a rough period over the past couple of decades but things are changing.
Prior to 1971, the Federal Reserve required Central Banks to maintain inventories of gold in proportion to the money supply. It was feared then that without a "gold standard", the whimsical printing of new money without an adequate reserve of gold bullion could create an unmanageable inflationary climate. In other words, a mechanism used to be in place to prevent U.S. politicians from digging the country into an insurmountable burden of debt from the uncontrolled printing of new money. The miners of gold are well aware of issues surrounding the fragility of a fiat based monetary system but is typically modest in its expression of these facts given that the financing of projects has everything to do with the paper money game. It is now debated that because of the removal of the gold standard, there appears to be a planetary shift in power resulting from the United States' exuberance in inflating the money supply at the expense of its citizens. The U.S government has now decided that it will cease releasing the statistic of M1 growth in the money supply. M1 refers to cash accounts and short term debt securities readily convertible to cash. However; Uncle Sam cannot refute the upward ascending spike in the chart of the U.S. National debt now pegged at over $15 trillion.
Americans have failed to save and in fact tapped into credit sources predicated on rising house values. Bankruptcies and foreclosures are reaching levels not seen since the early eighties and fear is beginning to grip the nation. Gold plays a role in every portfolio. First and foremost, gold protects.
Are consumers and governments living in a state of denial with respect to debt management? Is the Greek fiscal crisis only the beginning of a domino like debt tide coming to a shore near you?
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