Political Impact Investing In Gold
Saturday, July 05, 2014
Gold Investment - political impact on gold investment means that the government can change the laws and regulations that could harm your investment in gold. Government intervention can occur in the investor country or in another country. Both will have an impact on gold prices.
First, Prohibition Gold Ownership
It makes sense that the government banned ownership of gold and gold holders need to sell their assets to the government at a fixed price. In 1934, U.S. President Franklin Delano Roosevelt passed legislation proscribing the possession of gold. Exceptions occur only when the ownership of gold is for industrial and artistic purposes. The price of gold at that time remains in the range of U.S. $ 20.67 for gold weighing one ounce. The U.S. Congress passed legislation to prevent private gold currency to be a contender. Gold holdings for ordinary citizens newly enacted 39 years later in 1973 by President Gerald Ford.
Secondly, Gold Mine Nationalization
Politicians can also nationalize gold mines or companies who pay big taxes that produce and trade the precious metal. In 2005 Chavez, president of Venezuela announced the seizure of property owned by Crystallex, a gold mining company based in Toronto. This edict led to a decrease in stock value by 50% in just one day, other than that imposed taxation on foreign companies.
Third, Fixed Price of Gold
- The government can restrict and control the gold trade by limiting the amount of gold to be sold or to determine a fixed price. Prior to 1972, gold prices either directly (classical gold standard) or indirectly (the Bretton Woods System) sets the value, and the average exchange rate of the currency most widely used western nations. Therefore, they determine the government fixed price of gold. During that period, the level of instability that resulted in gold trading and speculation in precious metals is an act wasted.
Although today's gold prices follow the laws of the market, the next government could use the system-level fixed price of gold so that the national currency could be pegged with this precious metal. Or the government may stipulate that the gold trade is to the average level is too high. U.S. Commodities Futures Commission had the authority to dictate what holds for the future trade will be stopped or continued. Which occurs in more or less the same Indonesiapun. This could apply to gold futures. How to anticipate and avoid the risk of this government?
- Might be wise to distribute personal gold reserves to some countries, in the case of foreclosure.
- Investors should always obtain the best information about the world news that can affect the price of gold.