By MoneyMorning.com.au
A few days ago, it was rumoured India and Iran agreed to trade in hard assets… India will give Iran gold. In exchange, Iran will give India oil.
This is a huge trade. India imports about US$12 billion of Iranian oil each year. To give you an idea, $12 billion dollars of oil equals about 6.87 million ounces of gold!
In one transaction both countries have ignored the value of paper dollars. Instead, they’ve bartered one commodity for the other.
The thing is, the Indian-Iranian deal isn’t the first to use bullion as payment. But it may be the first on billion-dollar scale.
But one thing’s for sure. It’s further evidence that the way we value paper money is changing.
In fact, paying with bullion is happening more than you may think. It’s not just gold either. Consumers are using silver for smaller transactions…
Take the case of a US blogger. He recently revealed that two different people bought guns from him on eBay with silver coins.
Then there’s the Backwoods Home magazine in the US. If you don’t want to pay in cash, you can pay your subscription in silver coins.
Or the Oregon Service station that’ll reduce the cost of petrol to 20 cents a gallon if you pay using old coins…
At the time this photo was taken in May last year, two pre-1964 silver dimes were worth $5 based on their 90% silver content. Gas prices in America were nearing $4 a gallon at the time.
And there’s even a mini mart in Los Angeles that prefers junk silver instead of greenbacks as payment for your groceries….
(NB: Junk silver simply refers to American coins pre-1965, which have 40% to 90% silver content. See this video to find out more.)
It’s clear there’s a growing number of people and businesses who are ditching paper money for real assets.
Smart Knowledge is an investment newsletter service that firmly supports the gold standard. To the extent that they only offer memberships priced in ounces of gold….If you’re after their premium membership service, that’ll be 5.75 ounces, thank you.
And in September last year, Donald Trump accepted a $176,000 deposit for a commercial lease in one of his skyscrapers. But not in cash or a cheque. The company taking the lease (APMEX a precious metals investment firm) paid the deposit using three 32-ounce gold bullion bars.
It might look like a marketing stunt. But Trump’s not alone to wanting to do business with the shiny yellow metal.
In November 2010, the ICE Europe futures exchange started accepting gold bullion as a margin deposit for its crude oil and natural gas futures. Less than two months later, JP Morgan announced it would accept physical gold as collateral for some trades.
According to a Casey Research report from March last year…
‘The World Gold Council is gaining traction in its push to have the Basel Committee on Banking Supervision accept the precious metals as a Tier-1 asset for banks, along with government bonds and currencies.’
It’s surprising that precious metals aren’t already considered a top notch asset for a bank.
But maybe these few transactions are just a sign of things to come.
Because using real assets, like gold, as payment could continue to happen on a billion-dollar scale. And the more it occurs, the more it shows that people are losing faith in the US currency and paper money in general.
The world’s reserve currency is losing partners willing to trade in it. Iran has managed to completely avoid getting stuck with potentially worthless US dollars by snapping up a tangible asset.
Ironically, that puts Iran in the same camp as Donald Trump. Both are buying gold!
Now, this doesn’t mean we’ve returned to the gold standard… yet. But consumer and business trading in gold is a sign some people value precious metals more than cash.
As more and more merchants open up to the possibility of trading with bullion, maybe it won’t be long until gold is used as money for every day transactions… whether governments like it or not.
Shae Smith
Editor, Money Weekend
Ed Note: Gold and silver will be two of the big themes at the first ever Port Phillip Publishing investing conference. Held in Sydney next month, attendees will hear firsthand from Kris Sayce and Dr. Alex Cowie on where the markets are headed this year and which assets you should buy to profit. It’s not too late to book your seat for this exclusive event. Click here for details…
Dr. Alex Cowie is the editor of our resource newsletter Diggers & Drillers. He also has to sleep somewhere at night. We all do – hence the constant debate over real estate in Australia. Last year Alex sold his property in Melbourne and parked the proceeds elsewhere. In this article, he breaks down why he is bearish on Aussie property. It’s a calculated approach we all should be considering.
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