Gold & Silver “No One’s Liability”

Posted | 01/09/2016 / Views | 3812
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Something a little different today….Gold and silver have many unique virtues and one of those is liquidity, and specifically, liquidity in any event.  You will be hard pressed to name another asset that does not have counterparty risk, both in its very value and in its liquidity i.e. extracting that value when you need it.

Gold and silver’s value is in intrinsic, it is in and of itself by virtue of its rarity.  It is often (rightly) said that physical gold (and silver) is no one else’s liability.  By example comparison, a cash deposit in a bank is the bank’s liability (and you are an unsecured creditor) and you are also relying on the bank being ‘open’ (ask some Greeks and Cypriots about their recent experience); the underlying value of your share certificate depends on the management of that company (what if they go bankrupt, cease trading or have to dilute your shareholding in a capital raising?); a bond is an IOU from the issuer (what if the issuer goes bankrupt or freezes trading?); and finally property, whilst generally another good hard asset like gold and silver, is not quickly liquidated (and can take months in a bad market which is likely when you may most need it) and is one ‘thing’ not a number of smaller things you can liquidate as few or as many as you need.

Gold and silver have been a medium of immediate exchange for literally thousands of years.  That is not about to change.  It has 24/7 price discoverability, can be held in small fractions, is fungible, can easily be tested for purity and is understood worldwide.  No one can shut its front door, no one can make it go broke, no one can cease it trading, no one can hack it.