Gold Does Not Pay Interest (Neither Do Dollars in Your Wallet); Questions On Swapping Gold For Silver; Gold and Gold Shares Bottoming?

Please consider an interview with Adam Fleming and James Turk on precious metals and mining. James Turk is founder of GoldMoney.

 

Interview Synopsis

Adam Fleming, Chairman of Wits Gold and Fleming Family & Partners, discusses the gold bull market with GoldMoney's Chairman James Turk. Topics include metal price action, the eurozone's debt crisis, and mining in South Africa.

Adam points out that gold bull markets usually result in a 1:1 Dow/Gold ratio, something that he expects to see happen in the coming years. In other words, it is still a great time to buy gold.

Adam is pessimistic about the eurozone, and thought plans for European Monetary Union were delusional, on account of the differences in culture and political economy between different European Union countries. He also discusses his mining experience in South Africa, and why – contrary to much negative press the country gets – it is actually still a great place to live and work. He expects companies to increase their mining investments in the Witwatersrand Basin, and thinks that this region will remain the world's premier gold mining location.

This video was recorded on May 18 2012 in Jersey, British Channel Islands.

Relationship With GoldMoney

Once again I need to point out I have a relationship with GoldMoney.

I have no comment on the relative value of South Africa miners or any set of miners from any country vs. another country. Instead, I suggest in general that miners and gold are undervalued here.

The interesting part of the interview is where James Turk and Adam Fleming discuss interest rates and currencies.

Gold Does Not Pay Interest (Neither Do Dollars in Your Wallet)

The knock on gold is that it does not pay interest. However, as Turk points out, the US dollar bears no interest either. Nor does the Australian dollar, the Loonie, the Euro, or any other currency.

Currencies only bear interest if you loan the money out, thereby converting the currency into a financial asset. Financial assets have risk as we have seen with corporate defaults, bankruptcies of GM, Lehman, Worldcom, and especially the collapse of the housing market in the US.

A collapse of the housing market in Australia and China is underway now as well. In short, the only way to collect interest is to take risk.

Please note that aFull-Fledged European Bank Run is underway now and the reason is fractional reserve lending.

In the above link I explain ....

• Why ECB Deposit Insurance is Not the Answer to a Run on the Bank
• How FDIC Played a Part in the US Real Estate Bust 
• That Monetarist Fools are Everywhere 
• Why People Believe in Gold

As noted previously: For the sake of full disclosure, my physical precious metals holdings are now entirely at GoldMoney and I have an affiliate relationship with them.

If anyone wants information about GoldMoney or investing in physical gold and silver in general, please Email Mish

Questions On Swapping Gold For Silver

Numerous people have asked about my post on May 1, I'm Swapping Some Gold for Silver.

There is little to tell. I decided for a portion of my assets I was willing to take the risk-reward setup of silver vs. gold.

While gold is money, I do not know if the free market would turn to silver as money or not.

Silver certainly has a major industrial component, while gold does not, and that makes silver more vulnerable than gold to a global slowdown.

After swapping all my silver for gold (See Taking Silver Profits - Swapping Silver for Gold April 27, 2011) I simply decided to take a little more risk in silver.

Clearly I was early. Should silver get to my original target of the low $20's I will swap more gold for silver. Perhaps silver gets to that price, perhaps not. I do not know, nor does anyone else. At least I do not pretend to.

 There is little more that I can add other than silver is more volatile than gold and I still believe overweighting gold vs. silver substantially is a good idea.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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