Global Nuggets by Chris Howard

Is This the End of Cash? A Great Opportunity To Invest in Precious Metals

Global Nuggets

By Chris Howard

27/07/2022


Last week I visited the UK Royal Mint in Wales. I have links to this historic organisation and am a little biased as I was on the Executive Board until the end of 2019, running the Precious Metals business.

Whilst working there, I was at the centre of a very poignant debate at the Board level.

What Is the Future of Cash?

Is there one? And what do we do about it?

This is a big subject not only in New Zealand but globally. Plus, there are a lot of conspiracy theories thrown in.

Whatever the answer, the case for investing in gold and silver only increases.

Here are some facts:

  • The British Royal Mint is the largest exporting Mint in the world – in fact it has manufactured NZ currency for many years.
  • As cash usage has declined globally in recent years, accelerated by Covid, the financial viability of making currency coins has diminished to the point where the operation of making coinage is loss-making. It costs more to make a penny than it is worth.
  • The Royal Mint tracks cash usage in many countries globally and has seen a collapse in the use of both coins and notes. The exception is the US where cash still remains strong (but still declining).
  • Governments and mints ask themselves ‘do we continue to support a declining and loss-making activity when consumers are rapidly switching to cards and digital payments?’. If you ran a mint as your own business the answer would be ‘no’.
  • Although cash is still used in NZ, 80% of kiwi consumers use cards regularly to make payments.
    Sweden have decided to end the use of cash completely by 2023. Others will follow.

What Would You Do?

  • Consumers are concerned, particularly older people and those who rely on cash as a means to make payment. For example, in the UK, there are 3m people without a bank account.
  • Many consumers fear their governments are on a mission to remove cash from circulation.
  • Governments have an obligation to continue to offer cash as a payment option, but this obligation lessens as time goes by.
  • At MyGold, we have seen a substantial up-take of investors buying both gold and silver as a hedge against the end of cash. Many fear that without physical cash, it will become almost impossible to make physical transactions for payment. Both precious metals are a real store of value in a very uncertain world.

This Week’s News

And in the news this week, markets continue to be rattled, with a focus this time on Europe. Gold is still a strong investment option, with the price rising in the past few days as we continue to go through a rollercoaster. Plus, gold is performing better than other asset classes. I will build on this subject in next week’s newsletter.

The Italian government has collapsed and is likely to veer to the right. The Italian Prime Minister, Mario Draghi, has thrown in the towel, opening up the possibility of a closer alliance with Putin and debt arguments with Europe, particularly Germany. It may surprise some, but Italy is the 3rd largest European economy, so this news will resonate.

This, combined with jitters at the European Central Bank around the economy and inflation, gas shortages, plus an election for a new UK prime minister, have shaken markets once more, driving investment into safe-haven assets.

fear greed index

Fear Index

Many gold investors keep an eye on the Fear Index, which gives a snapshot of where market sentiment lies at a given moment. Find out more: https://edition.cnn.com/markets/fear-and-greed

Upbeat Thoughts on Gold From Kitco

https://www.kitco.com/news/2022-07-25/Gold-looks-good-as-the-Fed-will-Pivot-on-Interest-rates-after-the-summer-Sprott-s-John-Hathaway.html

Is There a Future for Cash? A Barclays Viewpoint

https://www.cib.barclays/our-insights/should-the-federal-reserve-create-fedcoin.html

Italy’s Debt Crisis Could Do Real Global Damage. New York Post

https://nypost.com/2022/07/21/italys-economic-crisis-could-do-real-damage-to-us-and-global-markets/

Zimbabwe Launches Gold Coins To Stem Inflation

https://www.aljazeera.com/news/2022/7/26/zimbabwe-launches-gold-coins-to-stem-inflation