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Eat Gold

A popular phrase in segments of the mainstream financial media is that “You Can’t Eat Gold”. We don’t know who first uttered this comment, but it was more than likely a talking-head or Wall Street analyst on CNBC or Bloomberg.

The disparaging claim seems to be based on concluding that in a financial or monetary crisis, if you own gold, that “You Can’t Eat It”. And so, according to the logic of whoever came up with the phrase, this would make gold useless during a financial crisis.

In addition to the misleading and irrelevant nature of the comment, which we will discuss below, the claim that “you can’t eat gold” is actually factually wrong. And that is because you can eat gold. And also drink it.

Eating and Drinking Gold

While gold can be eaten, it cannot be digested. But it is non-toxic to the human body. And it does not react chemically in the human body. That is why gold can and does appear safely in a number of foods and drinks, not surprisingly foods and drinks which are predominantly at the luxury end of the market.

Some readers will have heard of Goldschläger, a Swiss/Italian liquor which has flakes gold suspended within it. On a similar note, a Swiss gin called ‘Studer Swiss Gold Gin’ also contains flakes of gold. Staying within Switzerland, you can also buy edible gold products including “Swiss chocolate truffles with gold flakes”. Not to be outdone by the Swiss, the Emirates Palace Hotel in Abu Dhabi (United Arab Emirates) offers a ‘Palace Cappucino” which is sprinkled with gold flakes.

In Selfridges department store in London, you can buy a “billionaires soft serve” ice cream cone topped with both sprinklings of gold leaf and a gold leaf covered flake. While in New York, in Manhattan’s Upper East Side, a high-end restaurant offers a "Golden Opulence Sundae” topped with gold leaf, for US$ 1000 a glass. Back in England, a specialist cheese producer in Leicestershire created Britain's most expensive cheese - "Clawson Stilton Gold", a stilton cheese interwoven with edible gold leaf and shot-through with gold liqueur. These uses of gold in food and beverages illustrate that gold is a sought after and prestigious substance, but also that gold is real, that gold is tangible and that gold is of value.

Wall Street's Selective Focus

The logic of the “you can’t eat gold” comment, as well as being wrong, is also flawed. Because by extension, you can’t eat any of Wall Street's favorite investment assets. Imagine chewing on financial securities or fiat currencies. But whoever coined the phrase “you can’t eat gold” conveniently failed to mention this on CNBC. We would challenge anyone, especially CNBC and MSNBC, to eat share certificates or bond certificates or the electronic equivalent thereof.

Nor can you eat the electronic coins of cryptocurrencies such as Bitcoin, Ethereum’s Ether or Litecoin. Real assets such as art, antiques, real estate, agricultural land, or vintage cars are also off the menu. A possible exception is that can drink an expensive investment wine collection, but would you really want to do this, as then you would be consuming your principal investment?

Wall Street analysts fail to mention that you can't eat stocks and ETFs

Gold's Many and Varied Benefits

But beyond the fact that you can in fact eat gold, and that Wall Street never points out the non-edibility of stocks and bonds, there are many beneficial reasons to buy and own investment grade physical gold of which we recently pointed out in 28 reasons to buy and own physical gold. What we are talking about is real physical gold in the form of gold bars and gold coins. This is true both during times of financial crisis, and also over the long-term as a form of investment and savings.

Gold is without doubt the ultimate safe haven asset. In times of financial crisis and turmoil, investors and savers flock to gold as a wealth preservation strategy. The reason for investing in gold during times of crisis is based on the fact that investors instinctively know that the gold price behaves differently to the prices of other assets, particularly during crises. This is because the gold price moves independently of economic and business cycles.

In times of war and social upheaval, physical gold's benefits also come to the fore. Since gold has a high value to weight ratio, significant personal wealth can discreetly be carried in the form of gold across borders and frontiers and within areas of conflict.

Since gold is a universal money supported by a highly liquid global market, it will always be accepted everywhere at the going gold price. Gold can easily be sold. Gold can easily be traded or even bartered with, especially in non-functioning economies where the local paper currency has collapsed or has become worthless. The fact that gold coins are regularly issued to elite military personnel in areas of conflict attests to gold's critical benefits in times of monetary crisis and localized economic collapse.

Gold as Store of Value

But gold is not just of use during financial crises. It is also an essential asset to own over the long-term as a strategic form of saving and investment. Physical gold retains its purchasing power over long periods of time. This is in contrast to fiat currencies issued by the world's central banks, which generally lose most of their purchasing power over time. In other words, gold is a great hedge against inflation, as the gold price adjusts upwards to offset inflation. The gold price even adjusts to inflation expectations, hence it is sometimes called an inflation barometer and is watched like a hawk by central bankers because the gold price signals future inflation.

Physical gold is also an asset without counterparty risk. This is because when you own physical gold in the form of gold bars or gold coins, there are no counterparties. In other words, the physical gold that you own outright is no one else's liability. Nor are there any governments or central banks involved in issuing gold, or in trying to increase and debase its supply. Gold also lacks default risk, because it cannot default.

Physical gold is also inherently valuable because it is a scarce precious metal that is difficult and costly to mine and refine. Gold's price will never go to zero because it has a finite and significant production cost. Physical gold is difficult to counterfeit, impossible to create artificially, and cannot be debased.

These are just some of the reasons for buying and owning physical gold. Please see BullionStar's recent article "28 Reasons to Buy Physical Gold" for a  list of reasons why you should consider buying physical gold.

Gold in Zimbabwe & Venezuela & South Korea

In the real world, owning physical gold can be of critical importance in scenarios where trust in a nation's money supply has evaporated, such as is currently the case in Venezuela or Zimbabwe.

Gold can also be of critical importance when entire nations suffer economic shocks.  A case in point is the interesting experience of South Korea during the Asian financial crisis that swept the region in the late 1990s. This crisis left the South Korean economy severely impaired, with it’s currency, the Won, collapsing against the US dollar.

In addition to a bailout by the International Monetary Fund, the South Korean government also launched a patriotic campaign in early 1998 to actually collect physical gold from the South Korean citizens which was then sold on the international market to raise much-needed foreign currency. This collective campaign was pursued precisely because the South Korean government understood that gold is a high-quality liquid asset that has substantial value.

National Mobilization of Gold

By mid-March 1998, the South Korean citizenry had donated more than 220 tonnes of gold, worth over US$2 billion, in the form of investment gold coins and bars, and other gold in the form of rings, jewelry, and gold medals. More than 3 million households were said to have contributed. This collective mobilization of gold to overcome a nation's economic adversity and raise financing is a great illustration of how gold comes to the fore in a time of crisis, due to its store of value, safe haven, and high liquidity characteristics.

In conclusion, knowing the many compelling reasons to buy and hold gold, and how gold can sometimes be a lifeline in a time of crisis, the claim that "you can't eat gold" is exposed for what it is, misguided and disingenuous, and shows either ignorance on the part of the people who use it, or more likely, a deliberate intention to mislead and deceive.

BullionStar Media

As well as offering a full transactional platform for buying gold and buying silver, the BullionStar website features a wide variety of original research, analysis and other content addressing the global precious metals markets. BullionStar's aim with this analysis and content is to provide readers and viewers with unique and up-to-date insights into the precious metals markets that are not available elsewhere.

A case in point is the BullionStar Perspectives video series which provides viewers with free access to leading independent views of the precious metals markets. In July, BullionStar had the privilege of hosting an exclusive interview in Singapore with legendary investor, author and financial commentator Jim Rogers, and this interview has now been published under the BullionStar Perspectives series.

Jim Rogers - Catastrophe and Opportunity

Rogers, who currently resides in Singapore, co-founded the famous Quantum Fund in 1973, and has written a number of best-selling investment and travel themed books.

The interview touches on potential crises that Rogers thinks could impact the global economy and the opportunities that such crisis may offer investors. Catastrophe and Opportunity can be viewed as the same phenomenon, and panic creates buying opportunities.

Ideally, Rogers thinks the Federal Reserve should stand aside since it has created many problems such as driving interest rates to zero and wiping out savers. Realistically, he doubts the Fed would be abolished, and in a future acute crisis, it will be pressured into generating ultimately futile financial market rallies.

Crucially, Rogers believes in the importance of acquiring physical gold and silver as an insurance policy, and in understanding what you are investing in. Everybody, he says, should have some gold and silver as an insurance policy if nothing else. “You hope you never need it”, but “its the best insurance policy in the world”.

Rogers owns physical gold and thinks that due to future financial market instabilities, gold could well turn into its own bubble. This is because, when financial crises hit, people go to gold and silver as a safe haven asset. "That’s what they do", he says.

Rogers appreciates that the gold market is a fractional-reserve market, with only partial backing by real physical metal. On the subject of paper gold versus physical gold, Rogers envisages that in a real crisis, there won’t be a paper gold market - the paper gold markets will close down due to widespread chaos. That is why there is a need for physical gold ownership, in your pocket or in a vault.

Jim, who has some gold stored in Singapore, thinks that Singapore is better than most as a gold storage jurisdiction, and an added attraction is that buying investment gold and silver in Singapore is tax free (GST free).

The interview with Jim Rogers is published as part of the BullionStar Perspectives series, a series which aims to provide viewers with free access to original and independent views and analysis of the precious metals markets.

The Jim Rogers Interview, which is just over 14 minutes long, can be viewed here

Other videos in the BullionStar Perspectives videos series include Marcus Grubb of the World Platinum Investment Council on the Case for Platinum. Bron Suchecki of Monetary Metals on the intricacies between the physical and paper gold markets, Chris Powell of GATA on price manipulation in the gold market,  analyst Jayant Bhandari on the Indian gold market, and Ronan Manly of BullionStar on Secrecy vs Transparency in the gold market.

The BullionStar website also features in-depth factual gold market information in BullionStar's Gold University portal, original research and analysis of the global precious metals markets by BullionStar analysts Koos Jansen and Ronan Manly, a unique monthly review of the world's most important physical gold markets in chart form in BullionStar's Gold Market Charts series, and a specific company-focused blog series known as BullionStar Blogs (also known as 'Inside BullionStar').

BullionStar's Gold University is a Wikipedia-style resource for use by the gold industry, by financial media and reporters and by general readers. It features contemporary factual information covering the world's gold markets, a selection of the world's largest gold vaults, profiles of the world's largest precious metals refineries and mints, and profiles gold industry associations. It also contains sections addressing the core concepts of the Chinese gold market, central bank policies on gold, and the mechanics of bullion banking and gold ETFs.

Articles and analysis by BullionStar analysts Koos Jansen and Ronan Manly, published in the form of blogs, keep readers up to date with developments in the precious metals markets. These blogs contain original research, such as on the Chinese and London gold markets, and are popular across the precious metals industry as well as being frequently featured across many other websites.

BullionStar's Gold Market Charts uses charts to capture current developments and demand and flow trends in the world’s most important physical gold markets including China, India, Russia and Switzerland.

The BullionStar Blog's series (Inside BullionStar) features posts relevant to the company BullionStar and its products, but also extends to hosting interesting articles on aspects of the gold market and BullionStar's unique Infographics on the gold market.

All of the above content can be found on the BullionStar site under the 'BullionStar Research' menu.

BullionStar in the Media

BullionStar and its team members are also frequently quoted in the wider financial media, and have appeared in coverage by well-known publications such as the Wall Street Journal, Bloomberg, Straits Times of Singapore, and CityWire Asia. Media Coverage of BullionStar is summaried in a Press Room page on BullionStar's website.