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Date: January 17, 2009
Subject: Will Gold Survive this Deflation?

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Will Gold Survive this Deflation?

Gold prices did not freely trade from 1871 through 1932. During that time, its price was fixed at $20.67 an ounce.

In 1933, Franklin Delano Roosevelt signed Executive Order 6102, forbidding the hoarding of gold coin, gold bullion and gold certificates. The price of gold was then revalued from $20.67 an ounce to $35 and stayed fixed at that level until Nixon broke the gold window in August 1971.

We can only speculate how gold prices would have performed amid these four deflationary periods. But the performance of silver gives us a clue. It declined during every economic deflation since 1871. We can assume that gold would have also.

History shows that in times like these, investors scramble for dollar liquidity, ultimately lunging after super-safe T-bonds and T-bills. This is exactly what has occurred since gold prices hit an all-time high in March 2008. Investors have driven U.S. Treasury bonds and bills to their lowest yields since the mid-1950s. Investors are now paying the government for the right to own their debt. Welcome to a world of negative interest rates.

There’s no doubt how gold has performed in the current deflationary environment. The yellow metal has declined 25% from its March peak of $1,033 an ounce. But overall, gold prices declined just 5% last year, versus big double-digit losses for other assets.

The truth is, every economic cycle is different.

No asset will necessarily repeat its performance under similar macroeconomic circumstances. Gold’s performance last year was the exception that proved the rule.

But there is another key difference for gold. Unlike the 1930s, when it was actual legal tender, today gold is viewed as a viable alternative to the dollar.

The global exchange-rate mechanism has been broken for more than 35 years with currencies devaluing against each other regularly, including spectacular declines lately.

Gold has historically provided stability to the global exchange-rate system and ultimately will play that role again when the world finally dismisses the dollar as its reserve currency. A direct consequence of this trend will be sharply higher inflation. Bottom line — gold prices are cheap today, compared to their ultimate destination.

Grab Hold of the World’s Only “Real” Currency

I recommend holding some physical gold and silver — time-tested “real” currencies that jingle in your pocket. It’s one thing to own shares of mining companies or paper gold certificates. It’s quite another to hold the actual metal. This past year I've seen the price of physical coins far outpace the price of paper-traded gold.

For more details on how to start purchasing physical Gold & Silver coins right away, click the link below or goto G&G Associates website and click on the "Precious Metals" tab to start purchasing "REAL" money now instead of paper promises back by nothing.

Gary Gray
Tax & Financial Consultant, RFC
G&G Associates
877-817-6031 toll-free
866-361-3872 toll free fax

"What we learn from history is that people don't learn from history."
Warren Buffet

LEGAL NOTICE: This work is based on SEC filings, current events, interviews, corporate press releases and what I've learned as a financial consultant. Nothing herein should be considered personalized investment advice. It may contain errors and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility. Also, please note that due to our commercial relationship with Publc Gold, G&G Associates may receive compensation from a membership purchased at


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