One comment you sometimes hear from skeptics or those who aren’t yet familiar with the case for gold is what on earth would you use it for. Why buy gold? You can’t use it as money anywhere, right? Well, maybe you can’t buy a Big Mac with gold yet, but there is a growing number of places where you can make purchases with gold.
Today John Kurgan, senior strategist at Lind-Waldock, reports on BNN that the Chicago Mercantile Exchange – the world’s largest futures and commodities exchange board – has begun taking gold for margin payments. Kurgan notes that this is a historically unprecedented move for a commodities exchange to make.
Forget the US Treasuries, Give Us Gold!
In the past, the CME would accept US Treasuries and bonds as payments, but now investors and traders can literally carry in the physical gold and trade it in exchange for futures and commodities contracts.
Developing Trends in Using Gold As Money
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I’m no market strategist, but it seems to me a very significant development when the heart of the US (and to some extent, the world’s) exchange-traded futures and commodities market starts accepting payment in gold in lieu of US Treasuries. It doesn’t mean they no longer accept US Treasuries, just that now traders have the option of switching to gold.
Call it a sign of the times, but this development merely builds on similar cases that have been snowballing over the past 8 or 9 years of the secular decline in the value of the US dollar. “Digital gold” broker GoldMoney, for example, has been successfully receiving and sending payments in gold as currency throughout this time. Through GoldMoney you can trade in paper currencies for gold, which is portioned in goldgrams, and then use these goldgrams to transact with a number of other merchants registered with GoldMoney.
GoldMoney: Another Way To Buy Gold Online
Buy Gold Online Through Scotiabank’s eStore
One advantage of using digital gold, (or investing in gold ETFs, or gold stocks) of course, is that you don’t have to worry about places to store your gold. No doubt the CME will probably move to digital gold, too, if this is a lasting development – I just can’t see it being that efficient to have traders lugging gold coins around and exchanging them in like Vegas chips with each trade.
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{ 3 comments… read them below or add one }
While I won’t attempt to take anything away from the historic precedent this sets — wow — you also must realize that the CME is probably the most savvy and sophisticated group of commodities traders in the world.
Not to mention, it’s a pretty savvy move to generate additional revenue by the CME management team. :)
@Matt – yes, sounds like it! This is where futures trading started, so perhaps this is just another innovation. Though I’m surprised they’re using bullion, not digital.
Interesting move by the CME, and kinda ballsy too. It’s not exactly a secret that the central bankers of the world, while they value gold, they don’t want it to be used as a medium of exchange by regular people.
Then again, not a whole lot of regular people are likely to walk into the CME with a sack full of gold bullion, and decide to purchase wheat contracts ( or whatever they trade there ).
Still, and interesting move, and finally a big name saying that they’ll accept gold. It’s a step in the right direction :)