My Two Cents on Yahoo News Reporting that "Global gold demand falls in 2012"

Yahoo News reported that global gold demand has fallen significantly (see http://ph.news.yahoo.com/global-gold-demand-falls-2012-wgc-report-174344473--finance.html). Here's my response:

Is this bad news for those who believe in investing in gold?

Actually, depends how you interpret it. When demand decreases and supply remains unchanged then price will go down (I took microeconomics in college several times so I'm pretty sure this is correct). That means now is the time to buy because price is low. 

The basis for this is that the trend of the price of gold, although momentarily goes down several times in the short term, has always stored value or increased in price in the long term. For instance here in the one year trend:

it is unstable (goes up and down)

In the 5 years trend, it is generally increasing:

Furthermore, in the 10 year trend, in just a decade it went from 400 dollars an ounce to now almost 2,000 dollars an ounce!

*That's like 40% interest rate per year*.
(pardon my mathematics if it's wrong but still pretty high give or take)

It only took one abrupt dip in the whole of its historical trends during Nixon's time when he abolished the Bretton-woods system that dictates that money be backed by a commodity like, but not limited to, gold or silver.

And yet people still believe in investing in paper money that is continuously debased by the central bank and dictating artificially low interest rates (this creates a false boom in the economy thus creating a "bubble" that inevitably bursts. The Euro is the best example of how this is such a failed and immoral policy (and perhaps next could be the Dollar and some speculators even say the Yen and Japan will be in recession).

Continuously debasing currency and making it lose its purchasing power is theft making this more than just an economic or finance issue but also an ethical and moral issue. Here's a super interesting video of Ron Paul arguing against Bernanke, head of Federal Reserve (US central bank), using a silver coin as an example:

This is not, of course, a mainstream position in economics or finance or government monetary policy, but we see how the side of libertarians who believe in a commodity backed currency (or at least investing in gold) have very sound arguments against monopolized fiat currency.

In the end, as I always say, it's not even about earning money or investing (that's just a bonus!), the real point is to protect your money against inflation and the discretion of appointed bureaucrats in the central bank.

---

See Also:
1. Investing in Gold in the Philippines — Protect Your Money from the Discretion of Central Bankers
2. Eurozone, Gold, and Monetary Policy 
3. In Gold We Trust — Doug Casey, Hyperinflation vs Deflation, Investments, and the Post-Apocalypse Economy
4. Sari-Sari Store Economics — Margaret Thatcher and Inflation in the Philippine Market