„Because gold is honest money it is disliked by dishonest men.“
Ron Paul
Despite fabulous returns, gold continues to be viewed skeptically by a majority of people in the West, both professional investors and the broader public. All too often, investments in gold are alleged as being shady, unsustainable, too risky, or too speculative. Increasingly, even political inferences are explicitly drawn. But why does a safe haven that has been so reliable for centuries, even millennia, suffer from such a bad reputation? Why is gold despised rather than eagerly sought after?
First of all, before diving into the question itself, it should be noted that this negative association with gold predominates across the Western hemisphere, whereas countries like Türkiye, Russia, China, India, and countries in the Middle East display a far more positive attitude towards precious metals.
And even in the West the dismissal of gold is not across the board; it is better described as a prevailing sentiment in the population, with private gold ownership in some countries continuing to be amongst the highest in the world. For example, German private households alone possess more than 4% of global gold volumes, amounting to approximately 9,098 metric tonnes. The media landscape, however, reflects a different picture, with headlines ranging from “Gold Fools” to “Even in a crisis: gold should be treated with caution” to “The ‘safe haven’ asset that cost investors 30pc of their money” to “50 kilos of gold and precious metals found in Reichsbürger raid”.
Most recently, the German state-TV satire show ZDF Magazin Royale, presented by Jan Böhmermann, dedicated a full episode to gold and its alleged linkages to the right-wing extremist scene. The culmination was Böhmermann’s statement that “If you like gold and own it, then you are a Nazi with substance”. One might wonder how satirical that was meant to be.
So why this contempt for gold, especially among opinion leaders? One answer can be found in the overall societal shift towards progressivism, the rapid emergence of “woke culture”, giving rise to the call for ever more rules and government controls of society. As the great socialist experiment of the 20th century had failed so badly, both in theory and practice, far-left academia’s strategy to deal with this defeat was to simply double down: Rather than acknowledging defeat and revising their deeply held convictions, they began to escape into skepticism, relativism, and de-constructive nihilism. When challenged with evidence of reality, they responded with “That is only logic and evidence; logic and evidence are subjective; you cannot really prove anything; feelings are deeper than logic; and our feelings say socialism.” [1]
But also in the broader population, a shift towards a more socialist stance was observed over the past decades, propelled by a widening of wealth distribution in society, while values and political gaps have also opened up. This is not an unusual trend in the later stages of the big economic cycles society undergoes.[2] Typically this leads to politically more extreme positions, which morphs into some form of populism. Those on the left tend to seek the redistribution of wealth, while those on the right seek to maintain the status quo.
As society is weakening amidst social and economic disintegration, people’s need for psychological safety increases. Thus, the socially fragmented society seeks unity in the group. They become more mimetic. The Overton window narrows. In other words, the “window of allowable opinion and discourse” shrinks. As a consequence, people become more cohesive with the group belief system, at the cost of their personal curiosity. Or as Mattias Desmet describes it, “The masses believe in the story not because it’s accurate but because it creates a new social bond.” [3]
Gold is a perfect example of this dynamic. Despite its legacy in history and outstanding financial performance over the past years, people are largely dismissive of it. Actually, most of them have only a very shallow understanding of what gold is. Nor do they really comprehend why they have such a dislike of it. Hence, their rejection is based more on emotional grounds than on rational arguments. And when their stance on gold is challenged, the reaction usually turns out somewhat exaggerated, compensating for the lack of valid arguments with ad hominem attacks.
In fact, the lack of comprehension of gold converges with the abovementioned Overton window. Gold is currently not considered to fall within the window of “allowable opinion”, in the sense that gold is not fashionable amongst those in the broad mainstream but is associated with negative connotations in the public sphere. This becomes visible in media like the above-mentioned show with Jan Böhmermann, which enhances the general perception of the topic.
So, who then shapes the direction and dynamic of allowable opinion? The answer is, thought leaders. They can be Hollywood stars, news outlet owners, politicians, think tanks, or even social media influencers. Ben Hunt famously coined the term the Narrative Machine to precisely describe this phenomenon. While a narrative generally describes the overarching ideas and stories that shape society’s framework used to understand and place new information, the Narrative Machine is an all-encompassing system of strategic communication and game playing that shapes the way we perceive the world.
In contrast to public opinion-making, the real thought leaders are those who advance their research independently of public approval, such as many representatives of the Austrian School of Economics. This pursuit of knowledge for the sake of knowledge, not for the sake of public approval, was and is often carried out against the fierce resistance of these opinion leaders, and even against the majority of the scientific community. The Austrian philosopher Konrad Paul Liessmann recently formulated a plea against the conformism and activism of science and in favor of scientific freedom in an essay worth reading with the telling title “Weg mit dem Bekenntniszwang!” (“Away with the pressure to pledge allegiance!”). Democratic-political categories such as the approval or rejection of a majority are not scientific criteria.
In the case of gold, politicians and political decision-makers certainly play an important role in shaping public opinion. With the challenging economic environment and the continuous debasement of the currency, they do have a vested interest to discourage gold as a monetary alternative to the fiat money system. A broad awareness of the contrasting juxtaposition of gold versus fiat money would highlight the inflationary decay of the latter to an uncomfortable level. In lieu thereof, restrictive policies and regulations are promoted to keep control over the narrative and maintain societal trust in the system.
While in the past the possession of gold has sometimes been fully prohibited by law,[4] today the most prevalent restrictions on gold come in the form of the abovedescribed societal defamations, somewhat similar to those currently experienced by the crypto community and Bitcoin as its most prominent member in particular. The most prevalent accusations being cryptocurrencies’ massive energy consumption and their allegedly causing environmental damage and facilitating illegal activities such as money laundering via their alleged anonymity. In parallel and far more subtly, the Western governments led by the US have already started their crackdown on the cryptocurrency industry.
Just to give a recent example, upon the failure of Signature Bank in March 2023, the third largest bank failure in US history, the Federal Deposit Insurance Corporation (FDIC) sold out the bank’s remaining assets and deposits – except for those of crypto companies – and according to news reports, any buyer of Signature was required to give up all crypto business, which amounted to over USD 4bn. This confirmed The Wall Street Journal’s suspicion that “Signature’s seizure was motivated by regulators’ hostility toward crypto”.
In an increasingly geopolitically divided world and with the weaponization of the global reserve currency, the US dollar, by the US government against its enemy nations, who subsequently resort to gold amongst other assets to circumvent the US dollar, a similar crackdown on gold owners no longer seems too outrageously farfetched. Doomberg recently imagined the dynamic of a propaganda campaign along these lines as follows:
− Gold owners are rich tax cheats.
− Gold owners are Putin sympathizers.
− Gold owners are unpatriotic.
− Gold owners are being well compensated for turning in their bullion.
− Gold owners represent a national security risk.
− Gold owners enable organized crime, like illegal drugs and sex trafficking.
In light of the workings of the greater Narrative Machine, a detailed and welldifferentiated analysis that looks deeper than just generalized allegations can reveal that many of those attacks on both precious metals and cryptocurrencies are actually unsubstantiated, and almost become meaningless.
Nevertheless, on a more practical level, increasingly cumbersome legal requirements are being introduced for both cryptocurrencies and precious metals, with cash payments being restricted first and foremost.
For example, currently in the US, all cash transactions exceeding USD 10,000 must be reported to the IRS via Form 8300. This comprises transactions in US dollar coins, bills, foreign currencies, and cash equivalents such as traveler’s checks, bank checks, and money orders. Both counterparties of the transaction are made aware of the filing. Form 8300 also allows for the reporting of suspicious cash transactions if they are deemed so by the receiving party, even though the payment sum may well be below the USD 10,000 threshold. In that case the payer remains unaware of the filing of the form.
Most recently, the US Treasury, jointly with the IRS, proposed lowering the reporting threshold for third-party payment platforms to USD 600, within the framework of the American Rescue Plan Act. This new monitoring requirement would require reporting for all in- and outflows to a bank account of USD 600 or more over the course of a year, with wages and salary payments exempt.
In the meantime, the IRS has announced a delay to the implementation of the new requirement in order to allow for a smoother transition period and ensure clarity for the public. A proposal for a higher threshold of USD 10,000 is also being discussed. The already existing threshold of USD 20,000 from over 200 transactions will remain in place and continue to require the filing of Form 1099-K. The stated purpose of the tightening of the monitoring requirements is to improve tax compliance while at the same time enhancing tax fairness and ending the two-tier tax system, under which “the wealthy” have better means to evade taxation.
In the European Union, until recently there was no regulation that sets a cash transaction limit across all member states. However, in early 2024 the European Parliament agreed with the European Council to introduce a maximum threshold EUR 10,000. The stated objective is to strengthen the fight against terrorism, money laundering, and sanctions evasion. This new regulation of cash payments is part of the Anti-Money Laundering and Financing of Terrorism (AML/CFT) package.
As a result of the AML/CFT negotiations, the European Parliament and Council have also agreed on the establishment of a new watchdog authority, the AntiMoney-Laundering Authority (AMLA). The AMLA, which will be based in Frankfurt, will not only be tasked with the supervision of the most-risky financial entities, but it will also bear supervisory responsibilities and function as a central hub of coordination across the EU member states.
EU member states with cash payment limitations below EUR 10,000 already in force on the national level may keep those in place. Currently, the lowest cash transaction thresholds are in place in France and Portugal in the amount of EUR 1,000 per transaction, and in Greece at EUR 500 per transaction. In Italy, the new government under Georgia Meloni raised the cash limit from EUR 2,000 to 5,000 at the start of 2023. In 2016 the production of the EUR 500 bill was discontinued, while the other bills remain in circulation. It should also be mentioned that the setting of an upper limit in a time of ongoing monetary devaluations means that the real limit continues to fall without any tightening of the law, i.e. it becomes more and more strict.
This effect of fiat money devaluation is also reflected in the price of gold. For example, the upper limit for the anonymous purchase of gold in Germany has only been EUR 2,000 for several years, which is why it is currently not possible to purchase even one ounce of gold anonymously, and probably never will be again. he upper limit for the anonymous purchase of gold in Germany, for example, is only EUR 2,000, which is why it is now no longer possible to purchase an ounce of gold anonymously. As Austria and Switzerland have higher limits, a few ounces can still be purchased anonymously in the Alpine region.
Source: Reuters Eikon, Incrementum AG
Despite policy makers’ focus on illicit funds, terrorism financing and the underground economy, the wide usage of cash in an economy is actually not a reliable indicator of a commensurate shadow economy, as Deutsche Bank confirms with their research. Physical gold and silver, with their physical features like recognizability and weight impeding transportation, are even less practical for those activities. Furthermore, the abolition of cash and transition to a purely digital money regime does not automatically provide for more transaction security for consumers but rather exposes them to different risks such as data leaks and data abuse. Given a more nuanced understanding of the advantages and disadvantages of the usage of cash, the question arises as to what extent these regulatory efforts are driven by a general suspiciousness and distrust by governments of the general population rather than being targeted specifically towards criminals.
In contrast to the broad public, Eastern central banks are aware of the advantages of gold and make use of them, as can be seen by the continuous gold purchases of central banks globally. Only in the past year, central banks around the world have increase their gold holdings by more than 1,000 tonnes, with a quarter of the banks intending to further grow their gold reserves over the coming 12 months, as per the 2023 Central Bank Gold Reserves Survey of the WGC.
In the meantime, foreign official purchases of US Treasuries – widely considered as the most trustworthy government bonds available – have plunged. This is in line with the results of the above-mentioned survey by the World Gold Council, in which a majority of central banks expressed the view that within 5 years reserves in USD will represent merely 40 to 50% of the total. The European Central Bank, for example, does not even hedge the commodity risks introduced into its asset portfolio via its gold holdings. Integration of new members into the European Currency Union still involves the transfer of physical gold to the ECB, as demonstrated most recently in the case of the admission of Croatia. Yet, the ECB has not renewed its signature to the Central Bank Gold Agreement (CBGA), even while simultaneously stating, “The signatories confirm that gold remains an important element of global monetary reserves, as it continues to provide asset diversification benefits and none of them currently has plans to sell significant amounts of gold.”
However, a new dynamic has emerged in light of the recent weaponization of the US-Dollar against Russia and the freezing of the Russian foreign assets, with ongoing discussions about a full confiscation thereof. As a result, trust in the international monetary system has been harmed, not only amongst individuals but also central banks. Tellingly, according to a 2023 Invesco survey, “a substantial percentage of central banks are concerned about the precedent set by the US freezing of Russian reserves”. This has certainly been a driver behind central banks´ increased demand for gold, as physical gold, when stored at home, is less vulnerable to sanctions than US dollars.
Complementing this dynamic is the decrease in foreign gold reserves stored in the vaults of the Bank of England, which have been decreasing over the past two years. Jerome Powell has lately also been very tight-lipped following an inquiry by Representative Alex Mooney regarding a repatriation of foreign gold holdings from the Federal Reserve to foreign nations. As of early 2024, the New York Federal Reserve vault housed approximately 507,000 gold bars, with a combined weight of 6,331 metric tonnes.
In light of the strong gold purchases of central banks themselves, the green argument that gold is an allegedly useless metal in comparison to copper, lithium, cobalt, and others that are more widely needed for the green energy transition, loses weight. In absolute quantities, gold might be less demanded for that particular purpose, but as an investment it is actually highly sustainable and far more green than most people might assume at first thought.
The golden metal is virtually indestructible, as it does not chemically react with air or any of its components such as oxygen, carbon dioxide and other gases; thus gold can be used but not consumed. In other words, all the gold ever mined is still in existence and can be recycled over and over again. As we have analyzed in detail in our In Gold We Trust report 2022[5], in terms of CO2 emissions generated, a widely used sustainability measure nowadays, gold actually scores excellently when compared with other metals such as platinum, iron ore, zinc or copper.
Furthermore, only a total of around 210,000 tonnes of gold have ever been mined–equivalent to the size of 3.5 Olympic swimming pools – with only 50% of that gold being mined since 1950. The social and ecological costs of gold mining can thus be spread over a very long period of time, making them converge to zero. In combination with its endless recyclability as well as the nonexistence of gold as “waste”, gold can therefore be considered the most sustainable of all metals.
Source: Metals Focus, S&P Global Market Intelligence, World Steel Association & EIU, World Gold Council, Incrementum AG
In comparison with fiat paper currencies, gold scores far better in terms of sustainability. The loss of value of gold – the “inflation rate” of gold – over time is minimal, as gold holdings do not need to be replenished in order to maintain their purchasing power, while paper currencies require perpetual reprinting and recoining. This actually results in a massive environmental impact. Worldwide there are approximately 1.5bn coins in circulation, with an estimated weight of 5.25mn metric tonnes, mostly consisting of nickel, copper and steel. In addition, the more than 200bn paper notes, which need repeated reprinting, require enormous amounts of cotton, wood, water, ink, polymers and energy, while resulting in waste at the end of their life cycle.[6] More research regarding the ecological footprint of fiat paper currencies should certainly be undertaken to raise public awareness of the impact of our monetary system.
Returning to the gold and mining industry, there are already many initiatives and certification efforts in place as to guarantee social, human rights, and environmental standards, such as for example the Initiative for Responsible Mining Assurance (IRMA), the Responsible Gold Mining Principles (RGMPs), and the Conflict-Free Gold Standard. Yet, a lot of education sector branding remains to be done as the mining sector continues to struggle with a bad reputation and prejudices.
As highlighted in a recent report by Ernst&Young, the public perception of the mining sector – despite its crucial role for the realization of the energy transition – ranks lowest of all sectors. This mostly stems from a deficit of understanding the importance of mining, such that even some universities in the UK have prohibited mining companies from recruiting on campus, when actually the opposite approach should be pursued in order to advance further change in the sector.
Beyond that, a very important driver for gold demand are economic conditions: If households are seriously struggling with their budgets, no money is left for investing in safe assets, not even gold. As Wolfgang Wrzesniok explained at the most recent LBMA conference, the recent price rally in gold has been accompanied by an increased consumer demand across all five major markets, i.e. China, India, Türkiye, USA, and EU, with all of them facing the challenges of globally subdued economic growth. Germany is an extreme outlier from this trend, with consumer demand plummeting by a whopping 75% in 2023. The picture is even worse for German consumer demand for silver bars and coins.
Looking at the typical gold buyer in Germany, this trend can be better understood. First of all, German private gold demand is not predominantly driven by high-networth individuals but rather by the average citizen – middle-aged, middle class but not overly wealthy by international standards, and oftentimes a property owner. It is these buyers who are suddenly turning away from purchasing gold. But why?
While gold has experienced price increases in the past, its prospect for further significant gains remains uncertain, while higher interest rates than in previous years mean more investment alternatives in other areas. In addition, the ongoing elevated-inflation environment diminishes purchasing power and leaves less surplus for savings and investments, despite inflation generally enhancing demand for safe assets including gold. However, the massive rise in the cost of both electricity and natural gas has presented many households with serious challenges. In addition, the current German “traffic-light government” (a coalition of the Socialist Party SPD (red) – Liberal Party FDP (yellow) – Green Party) has imposed strict conditions on private homeowners as part of the politically desired energytransition and climate protection initiatives.
At the same time in the US, one of the largest retailers, famous for its bulk household products, has begun to also offer gold bars to its members. Costco sold more than USD 100mn worth of gold in the last quarter of 2023. In the meantime, gold sales are said to already amount to USD 100 to 200mn per month. Most recently, Costco began selling silver coins, too, enhancing its treasure hunt brand image. Retail giant Walmart has followed suit and even opened its own precious metals online shop. Unsurprisingly, this immediately triggered doomsday prepper headlines in the mainstream media, such as this one published by CNBC: “How doomsday preppers made gold and silver precious endof-the-world assets”.
Such articles do not stint in referencing a potential economic catastrophe or other apocalypse fears, or in drawing climate-change-denial parallels. The CNBC article went so far as to liken people investing in gold with a turn towards authoritarianism, citing Yale professor William Berger: “The turn toward gold is like the turn toward authoritarian leaders, toward the ideal of someone who knows what is true and right and who has the courage to return a nation to its former truth and greatness”. Of course, Putin and Trump name-dropping was not missed, either.
So, the question arises, what can be done to improve gold’s appearance in the broader public? Above all, the headlines in the news paint a distorted picture of the attitude landscape. As we have seen, private gold ownership in Western society continues to be not insignificant and gold and silver bar sales like recently by Costco and Walmart have been success stories. At the same time, central banks have been increasing their purchases of physical gold – one big driver being the ongoing sanctions war between the US and Russia, and the resulting increased awareness about the vulnerability towards a freezing of assets and reserves. In other words, the advantages of physical gold once again are the convincing factor.
However, the news headlines also reveal the workings and objectives of the Narrative Machine, namely the defamation of gold. Whether practical impediments regarding the purchase of gold or the negative association of gold and gold ownership in general –“Nazi narrative”, “Gold is dirty” –, there is a force seeking to discourage the broader adoption of gold in society. Upon closer examination, it becomes evident that these allegations hold no merit. However, considering that a significant part of society lacks comprehensive knowledge about gold, reacting instead to emotional connotations, this insight presents an optimal starting point for enhancing gold’s reputation.
What does that mean? A broader discussion and education on the history of gold and its significance as a form of money – and thus also store of wealth! – is much needed. While an education campaign in schools might be an obvious suggestion, why not resort to more up-to-date marketing strategies such as thought leaders and influencers? How much greater would the brand impact for gold be, if suddenly Taylor Swift and Travis Kelce announced their gold savings?!
Furthermore, the mining sector should proactively position itself as a crucial contributor to the energy transition as well as highlighting its efforts towards sustainability and ESG. Similarly, investment funds and portfolio managers carry the task to better position gold as a superb diversifier in the portfolio that in addition is greener than assumed by many. Further points to highlight are golds differentiation from cryptocurrencies, its political neutrality as an asset, and its geopolitical and socioeconomic role in the international monetary landscape (central banks), as well as its sustainability and environmental aspects.
Already, gold is on a great track, achieving new heights, and proving itself to more and more people as an excellent asset. But there are many more great opportunities ahead to enthuse especially the younger generation for gold.
[1] Hicks, Stephen R. C.: “Explaining postmodernism”, 2004, p. 90
[2] See Ray Dalio, The Changing World Order, 2021; see also “Gold in the Age of Eroding Trust,” In Gold We Trust report 2019, “Populism and its True Cause,” In Gold We Trust report 2017
[3] Desmet, Mattias. The Psychology of Totalitarianism, 2022
[4] See “A Brief History of Gold Confiscations,” In Gold We Trust report 2021
[5] See “The New Low-Emissions Economy: Gold as a Savior,” In Gold We Trust report 2022
[6] Stöferle, Ronald-Peter: “Gold – The Green Investment Metal?”, Incrementum AG, October 2022
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