Dying Venezuela Currency Shows Gold’s Allure

Venezuelan flag with gold bricks

The world was recently stunned to witness a terrifying drone attack on Venezuela’s president. Thankfully there were no casualties among those injured by this unconventional assassination attempt.

As chilling as this was, the media has seemingly missed a bigger story… Venezuela’s currency is currently collapsing. Fast.

Take the price of a cup of coffee. One year ago, it cost about 2,000 bolivars. Today, the cost is as much as 2 million bolivars for that same cup!

The daily pain for everyday citizens must be extreme. Prices are doubling every 18 days.

The government’s solution? Just knock 5 zeros off the currency. No joke.

Second, the central bank is using gold to pay the country’s bills. So much that Venezuela has been the world’s largest seller of gold for the past two years! Even in times of great distress, gold is, well… “as good as gold” no matter how bad your credit might be.

The country is so crippled that most flights in/out of Caracas have been canceled.

Now, you would say that Venezuela and America are very different, and I would totally agree. But we are all subject to the same economic realities: fiscal mismanagement and spiraling debt leads to meltdown eventually, without serious reform.

You and I both know that political will to conduct this kind of painful reform is almost impossible to rally.

Either way, any family that puts away gold and silver coins and bars in their safe or Gold IRA will very likely be in a better position in the future than those who hold cash. Certainly any Venezuelan family that holds gold is probably feeling very lucky at the moment.

Gold and silver have been valuable commodities for thousands of years. No paper currency can touch that record.

It isn’t just in Venezuela that future gold demand is looking promising. ICBC Standard Bank Plc. recently forecast gold prices above $1,300/oz by December 2018.

Why? Expected growth in physical gold demand and signs of credit stress that could break if interest rates go much higher.


Recent sharp comments and threatened sanctions on Iran by the Trump administration has resulted in a huge surge in gold hoarding in the country. A currency collapse is underway here as well.

We are not political analysts and have no desire to discuss Iran, but we are experts in gold and silver. It is worth pointing out that the pattern here is the same as we’ve seen throughout history! Average citizens tend to flock to gold and silver when serious political upheaval and market crashes threaten.

The Wall Street Journal says “Iranians are hoarding gold as a safeguard against a collapsing local currency and the soaring cost of living.”

The article continues: “Worried about a shaky economy and enticed by government sales of gold coins, Iranians have converted savings into gold.”

How much? A lot.

Demand in the country has tripled year-over-year in the second quarter of 2018. Iran’s central bank has had to crank up their Mint quickly to pump out 60 tons of new gold coins and try to keep up with the gold rush.

“People are changing their money into gold because it’s a reliable investment commodity,” said Mohammad Kashtiaray, head of the gold committee under Iran’s Chamber of Guilds.

I don’t foresee the U.S. dollar collapsing overnight, but if you’ve been reading my column for a while you’ll know why the U.S. dollar is under serious threat. Inflation is already up across the economy and starting to hurt.

These are times when gold starts to look very appealing.


Wharton Business School research has revealed a chilling shortfall in our nation’s pension system: one that all current and future retirees should follow closely.

Put simply, America’s pension system owes far more than it can possible deliver.

How much more?

Much, much more.

Wharton’s study says a minimum of $3.4 trillion is required to short up the difference! It must be done quickly. Every passing month means we are deeper in the hole.

That is a staggering amount, really.

If the government asked every American citizen to chip in today to cover the tab, we each would have to fork over $10,000. There aren’t many Americans that could quickly raise and cheerfully hand over such an onerous amount. Can you?

I know my family would feel that impact hard. What is worse, this deficit will inevitably double soon, as no meaningful progress is being made.

There are really only three possible roads forward from this point. None of them are appealing options:

1. Bailout by Uncle Sam (basically you and me)
The U.S. government has always shown its power in its unrivaled ability to raise capital and take on debt from foreign nations to fund almost anything. Amazing, but also deadly for us in the long run when used irresponsibly. The current run rate is over $1 trillion per year in new debt for us every year. Even if we were able to stop borrowing now, a $3 trillion bailout check is truly not possible today or ever. Any bailout would need to be paid for with sharply higher taxes or assessments on us all.

2. Cheating with Government Budgets
When the financial going gets tough, state and local officials have difficult political choices to make. Unfortunately, they are well aware that failing pension plans could be propped up for a few extra years by reducing spending on other items like healthcare, welfare and social programs. Short sided leadership like this might save an election or two, but it will lead to sharp controversy and political turmoil. Ultimately, the same result will happen: costs will inevitably outstrip any government’s ability to pay them.

3. Painful Cuts to Pension Benefits for Cash Strapped Retirees
The most obvious outcome is probably reduced benefits for our nation’s hard working seniors, just at a time when inflation is quickly driving costs up for everyday items. Anyone on a fixed income today or expecting to be soon should be prepared for some negative surprises in the future. The political fallout here is also scary to contemplate, and in fact, changing pension benefits retroactively is even illegal in some states like Illinois.

If one or more of the above scenarios becomes a reality, there is some serious uncertainty ahead for America’s seniors. The largest generation in history could be at risk when they in their most vulnerable years.

The implications for gold are clear: safe haven assets are sure to have strong appeal in the future. Investors typically run to safe havens like gold and silver when uncertainty appears in the markets.


Your own feelings about the health of our country’s financial bedrock and the future of our pension system may be far rosier than I describe above.

You may be right, and I hope you are. But isn’t there a little voice in your head saying that there is a chance things could go badly awry? I would never bet against America, but everyone can see that has some painful corrections to endure ahead for sure.

If you’ve built a level of security for your retirement that is strong, I congratulate you. Now is the time to consider how safe haven assets could help keep you that way as long as you live.

Have you thought about what gold and silver, in your home safe and/or in a Gold IRA, could do for your family’s security?

Any student of the market learns this rule first: what comes up, must come down. Balancing stocks and bonds with safe haven assets is something everyone should consider… right now.

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