For decades we have been fed this story about gold…They keep saying, it is not a "productive asset", it has no utility, it just sits there doing nothing, what is the return you are earning on it, etc., etc.
Well, what is money then? It is just a promise that someone will pay you something of value. Correction, it used to be a promissory note to pay something of value, back in the days when money was backed by gold. After the US went off the gold standard in 1971 and the rest of the world followed, that is no longer the case. It is just a promissory note. Promising what? Read what is printed on your currency note, it says "I promise to pay the bearer the sum of rupees __". Huh? Promise on the currency note to pay me in currency? That is circular logic!
A currency note is a piece of paper that people are compelled to accept in return for their goods or services, that is enforced forcefully by law and held together by convention and faith.
Do you know that in international trade no one trusts each other's currency? All international trade is therefore denominated by, and translated through, US dollars. How foolish. The US dollar is nothing but a fiat currency and other countries have at last woken up. Alternate "currencies" or payment mechanisms are being discussed.
What will be the basis of these currencies, the hard bedrock on which they are anchored? You guessed it, gold! While they have been feeding you stories about gold not being valuable, etc, etc, they have been quietly buying gold themselves. Central Banks across the world are the largest buyers and hoarders of gold!
Why gold? Money serves as a medium of exchange and a unit of measure. But most important, for it to be trusted, it needs to be a store of value, that is, it must retain its value over time. Which element on the periodic table suits these purposes well? The element needs to be scarce, but not impossible to obtain; it needs to cost something to extract; it cannot dissolve or dissipate like all gases do; it cannot be poisonous; it should be easy to carry and store; it should be malleable and ductile, capable of being minted into coins; it should not react easily with other elements; it should be virtually indestructible; it needs to be culturally and socially acceptable to everyone around the world… Gold it is! Closely followed by silver!
Every year, about 3000 to 3600 tons of gold is mined. Roughly 216,000 tons of gold is the above ground stock. This stock when melted and cast into a cube will measure 17 metres long, 17 metres wide, and 17 metres deep. That's it! Les than your average office building! Most of this gold is in the form of jewelry, or stored as investment in the form of bullion bars.
In case of silver, roughly 30,000 tons is mined every year. Estimates of above ground stocks vary, it could be anywhere between 600,000 tons to 1.6 million tons. It is estimated that all the silver ever mined is about 1.7 million tons. However, there is one problem when it comes to silver. A lot of it is used up in industrial applications, and a lot of it, more than 60 percent for sure, is not recovered, and just goes into landfills. We can safely estimate that all the silver available above ground today, is say, about 1 million tons, or, five times the amount of gold.
The ratio of gold to silver in terms of annual production is about 8:1. The historical ratio used for currency purposes for much of human history is 15:1. Currently, silver is severely underpriced, the ratio is around 60:1.
If you want an enduring store of value, money that you can pass on to the next generation, and the next, and so on, look no further than gold or silver. When it comes to Indians, you don't need to work too hard to convince them on this point – Indians have historically been consumers of gold and silver for this very reason, that it is a store of value.
Remember you past, reclaim your legacy, protect your wealth, include gold and silver in your portfolio! How much, what percent? Well, the current global, economic and monetary situation in relation to these two metals and to alternate investment avenues, suggests going overweight on gold and silver.
Happy New Year folks, have a great 2026!
Dinesh Gopalan,
1 January, 2026.
Posted to my blog https:\\www.dineshgopalan.com
