Lessons from the War in Ukraine

10 Mar

Lessons from the War in Ukraine

It’s Not Really Gold Unless…

Financial events in the fallout of the Ukraine war are delivering a powerful message to investors.  It is a lesson we have written about before and one that deserves to be repeated again and again.  It can save investors looking for the safety and protection of gold a lot of loss and heartache.

Remember… it is not really gold unless you can hold it in your hands, take it with you, and access it when you need it most.

The London Metal Exchange is the leading trading center for industrial and strategic metals, including aluminum, copper, zinc, nickel, lead, tin.  Last year saw $15.6 trillion dollars of industrial metals traded on the LME.

This week saw a breakout in the world price of nickel, a consequence of the Russian-Ukraine war.  Nickel soared to $100,000 a ton.  Then the LME unilaterally canceled trades and stopped deliveries in nickel.  Transactions already legally processed were simply canceled.  According to one account, a major Chinese trading company facing $8 billion in losses, was bailed out by the move.  The losses will be shifted to others.

We have seen this before in the commodity exchanges when exchange cronies have been bailed out with unilateral exchange rules changes.

The fallout from the Ukraine war includes frozen payments and failure to settle financial obligations.  Without comment on whether any of these measures are wise or are applied fairly or even-handedly, we do not wish to see our friends and clients left holding the bag is such circumstances.  

Events like these highlight the importance of owning gold, especially in turbulent times.  A defining characteristic of gold that cannot be emphasized enough, is that it does not rely on someone else’s performance or promise.

It has no counterparty risk.  That is just one reason why gold is the world’s money of choice and has been for thousands of years.

The same is of course true of silver, which, like gold, has a long and shining monetary history.

What is counterparty risk?  

It is the risk of nonpayment, default, and bankruptcy by individuals, companies, financial exchanges, institutions, and banks – quite apart from the risk of the Fed’s fiat dollar. 

Gold (and silver) are the only monetary assets that are not someone else’s liability.  They are not dependent on someone else’s solvency, promises to perform, or honesty.  Their value does not depend on the endorsement or propriety of any state or state institution.

But this advantage is only true of real gold and silver. It only applies to physical precious metals, the gold and silver coins, and bullion that you own outright and have taken into your own possession.  It does not extend to paper gold, stocks, and other representations of gold ownership, commodity contracts, or ETFs.  It does not extend to promises of future delivery, title to gold held by others, or any form of unallocated gold.

At Republic Monetary Exchange we make immediate delivery to you, on the spot, of real gold.  Not paper, not some purported interest in or share of gold somewhere else that you cannot get when you need it, or an agreement that can be canceled by government or wars.  

Exchanges, funds, and banks can fail, leaving people holding the bag.  Someday, too, there will be a run on gold, just like a bank run.  “Paper” gold will fail.  People will be unable to get the gold they think they own.  

That is why you must protect yourself with real gold and real silver.

Remember… it is not really gold unless you can hold it in your hand, take it with you, and access it when you need it most.

And that is the way we do business at Republic Monetary Exchange.  Real gold.  Real silver.  Your gold.  Your silver.  Always best practices for the protection of our clients.