Aerdt Houben: Gold as a Backstop in a Financial Collapse Scenario
Aerdt Houben, the Director of Financial Markets for the Dutch Central Bank (DNB), has recently discussed the significance of gold in the event of a financial collapse. He highlighted the bank's increasing gold holdings and emphasized how gold can serve as a valuable hedge in a worldwide economic disaster.
In a recent interview, Houben acknowledged the rise in gold holdings not only by the Netherlands but also by other European central banks. Currently, the DNB holds 612 tonnes of gold, equivalent to approximately 35 billion euros ($38.2 billion). These holdings are diversified and stored in various locations, including the Federal Reserve, London, Canada, and the Netherlands. As a percentage of the Netherlands' Gross Domestic Product (GDP), the gold holdings represent 4%, placing the country seventh among the top ten central banks in terms of gold holdings relative to GDP, along with France, Germany, and Italy.
When asked about the necessity for the Netherlands to possess more gold as a form of insurance, Houben expressed that the current amount is more than sufficient. He explained that in the event of a collapse, the value of these gold reserves would skyrocket, making additional coverage unnecessary.
Houben justified his belief in gold by highlighting its stability, utility, and intrinsic value. He described gold as a fungible and liquid product that can be easily bought and sold worldwide, making it an exceptional commodity for establishing an exchange rate system.
The Implications of European Banks Accumulating Gold
Gold market analyst Jan Nieuwenhuijs interprets the accumulation of gold by European banks as an indication of the lack of absolute confidence in the euro. He suggests that these banks may be preparing for a potential return to a gold standard. China has also been increasing its gold holdings consistently, with reserves exceeding 2,113 tonnes as of July, and the government continuing to make purchases for the past 11 months.
Nieuwenhuijs concludes that the actions of the DNB indirectly encourage individuals to own gold as a means of protecting themselves from financial shocks, thereby increasing the likelihood of transitioning towards a gold-based monetary system.
Is a Return to a Gold Standard Feasible?
Given the growing interest in gold as a hedge and the accumulation of gold by central banks, the possibility of a return to a gold standard becomes a topic of discussion. Feel free to share your thoughts on whether you think a return to a gold standard is possible in the comments section below.
Frequently Asked Questions
What are the pros & cons of a Gold IRA?
An Individual Retirement account (IRA) is a better option than regular savings accounts in that interest earned is exempted from tax. An IRA is a great option for those who want to save money, but don't want tax on any interest earned. There are some disadvantages to this investment.
You may lose all your accumulated savings if you take too much out of your IRA. Also, the IRS may not allow you to make withdrawals from your IRA until you're 59 1/2 years old. A penalty fee will be charged if you decide to withdraw funds.
You will also need to pay fees for managing your IRA. Many banks charge between 0.5%-2.0% per year. Other providers charge monthly management fees ranging from $10 to $50.
Insurance will be required if you would like to keep your cash out of banks. Insurance companies will usually require that you have at least $500,000. You may be required by some insurers to purchase insurance that covers losses as high as $500,000.
If you decide to open a gold IRA, it is important to know how much you can use. Some providers restrict the amount you can own in gold. Others allow you the freedom to choose your own weight.
It is also up to you to decide whether you want to purchase physical gold or futures. Physical gold is more costly than gold futures. Futures contracts allow you to buy gold with more flexibility. You can set up futures contracts with a fixed expiration date.
You will also have to decide which type of insurance coverage is best for you. Standard policies don't cover theft protection, loss due to fire, flood or earthquake. It does provide coverage for damage from natural disasters, however. Additional coverage may be necessary if you reside in high-risk areas.
Insurance is not enough. You also need to think about the cost of gold storage. Storage costs are not covered by insurance. In addition, most banks charge around $25-$40 per month for safekeeping.
You must first contact a qualified custodian before you open a gold IRA. A custodian helps you keep track of your investments, and ensures compliance with federal regulations. Custodians cannot sell your assets. Instead, they must retain them for as long and as you require.
After you have decided on the type of IRA that best suits you, you will need to complete paperwork detailing your goals. Information about your investments such as stocks and bonds, mutual fund, or real property should be included in your plan. Your monthly investment goal should be stated.
You will need to fill out the forms and send them to your chosen provider together with a check for small deposits. The company will then review your application and mail you a letter of confirmation.
Consider consulting a financial advisor when opening a golden IRA. Financial planners are experts at investing and can help you determine which type of IRA is best for you. They can help you find cheaper insurance options to lower your costs.
Can I hold physical gold in my IRA?
Gold is money, not just paper currency or coinage. Gold is an asset people have used for thousands years as a place to store value and protect their wealth from economic uncertainty and inflation. Investors use gold today as part of their diversified portfolio, because it tends to perform better in times of financial turmoil.
Today, Americans prefer precious metals like silver and gold to stocks and bonds. Even though owning gold is not a guarantee of making money, there are many reasons why you might want to add gold to your retirement savings portfolio.
One reason is that gold has historically performed better than other assets during periods of financial panic. Between August 2011 and early 2013 gold prices soared nearly 100 percent, while the S&P 500 plunged 21 percent. Gold was one asset that outperformed stocks in turbulent market conditions.
Gold is one of the few assets that has virtually no counterparty risks. Even if your stock portfolio is down, your shares are still yours. However, if you have gold, your value will rise even if the company that you invested in defaults on its loans.
Finally, gold offers liquidity. This means that, unlike most other investments, you can sell your gold anytime without worrying about finding another buyer. The liquidity of gold makes it a good investment. This allows for you to benefit from the short-term fluctuations of the gold market.
How is gold taxed in an IRA?
The fair market value of gold sold is the basis for tax. If you buy gold, there are no taxes. It's not considered income. If you sell it later, you'll have a taxable gain if the price goes up.
Gold can be used as collateral for loans. When you borrow against your assets, lenders try to find the highest return possible. Selling gold is usually the best option. There's no guarantee that the lender will do this. They may keep it. Or, they may decide to resell the item themselves. Either way you will lose potential profit.
In order to avoid losing your money, only lend against your precious metal if you plan to use it to secure other collateral. You should leave it alone if you don't intend to lend against it.
Statistics
- Indeed, several financial advisers interviewed for this article suggest you invest 5 to 15 percent of your portfolio in gold, just in case. (aarp.org)
- You can only purchase gold bars at least 99.5% purity. (forbes.com)
- Contribution limits$6,000 (49 and under) $7,000 (50 and up)$6,000 (49 and under) $7,000 (50 and up)$58,000 or 25% of your annual compensation (whichever is smaller) (lendedu.com)
- Instead, the economy improved, stocks rebounded, and gold plunged, losing 28 percent of its value in 2013. (aarp.org)
- This is a 15% margin that has shown no stable direction of growth but fluctuates seemingly at random. (smartasset.com)
External Links
bbb.org
forbes.com
investopedia.com
wsj.com
- Saddam Hussein's Invasion Helped Uncage a Bear In 1990 – WSJ
- Want to Keep Gold in Your IRA at Home? It's Not Exactly Legal – WSJ
How To
How to hold physical gold in an IRA
The most obvious way to invest in gold is by buying shares from companies producing gold. But this investment method has many risks as there is no guarantee of survival. Even if they do survive, there is still the possibility of losing money to fluctuating gold prices.
Another option is to purchase physical gold. This means that you will need to open an account at a bank, bullion seller online, or purchase gold from a trusted seller. This option offers the advantages of being able to purchase gold at low prices and easy access (you don’t need to deal directly with stock exchanges). It's also easier to see how much gold you've got stored. You'll get a receipt showing exactly what you paid, so you'll know if any taxes were missed. You also have a lower chance of theft than stocks.
However, there can be some downsides. You won't be able to benefit from investment funds or interest rates offered by banks. You can't diversify your holdings, and you are stuck with the items you have bought. The taxman might also ask you questions about where your gold is located.
BullionVault.com offers more information on buying gold for an IRA.
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