Partners

Posts Tagged ‘America’

Physically Backed Diamond Investment Site Picking Up Steam In Europe, Eyeing U.S. Market

Tuesday, August 19th, 2014

(Correction: Two 26-carat batches in circulation, not two 2-carat batches as previously stated)

By Alex Létourneau Kitco News
Tuesday August 12, 2014 11:50 AM

(Kitco News) – After finding a way to turn diamonds into an affordable investment option, InvestDiamond.com has seen a growing interest in Europe as the company looks to expand to North America.

Using a specific criteria for the diamonds included in their batches, InvestDiamond has managed to bypass the main issue with diamonds being turned into an investment product –which is no two diamonds are alike and therefore impossible to attribute a fixed price to a cluster of diamonds.

InvestDiamond’s physically-backed batches of similar stones are then fractioned as members place bids for as little as $15 or €11, while prices are based on real-time orders on the site and the Rapaport price.

The diamonds are kept in Swiss vaults in the Freeport zone, outside of the banking system.

Launched Nov. 30, InvestDiamond has “two 26-carat batches that are in circulation and we’re working on getting the third one ready,” said Linnea Bruce, project manager at InvestDiamond.

Based in France, InvestDiamond has been testing the waters locally before expanding its reach to other parts of the world, with the U.S. as its next main target.

“Our members are mostly in Europe – we wanted to get some feedback and stability in Europe first before we transitioned to the U.S. market,” Bruce said.

One way they’re looking into capturing the attention of the U.S. market is by introducing a physically backed gold, silver and investment diamond debit card.

InvestDiamond’s parent company, AuCOFFRE.com, already has a physically backed gold debit card, called the Vera Carte, that it has put into circulation and used in France over the last few years.  

The success of the card has led InvestDiamond to add silver and diamonds to the card as they are currently in the beta testing phase.

“By year-end it should be out of beta testing and available to the general public,” Bruce said. “You can credit your account with $1,000 and have 60% backed with gold, 20% with silver and 20% with diamonds, for example.”

Bruce said it can used as a regular debit card. It’s accompanied with a pin for usage and is recognized by Master Card.

She also added that they hired a new card distributor, allowing the debit cards to be available for usage worldwide.

“Once we get that launched in France, we’ll be looking for a partner with experience in that concept to bring it over to North America,” Bruce said.

The current outlook for supply and demand metrics in the diamond space has experts pointing to diminishing supply, with a lack of new discoveries and older operations reaching the end of their mine life.

On the other hand, demand is expected to continually expand as the middle classes in China and India are expected to grow rapidly over the next decade.

Why has the demand for Silver increased in Europe?

Monday, August 5th, 2013

Since the start of the crisis in 2007 which found its beginnings in the American sub-prime crisis, the worries of savers were never important.

On each side of the Atlantic, the households who thought with certainty that their national economy would always be robust and worth something must have rapidly been disenchanted.

Bank failures, payment default by sovereign states, all the risks which we thought were reserved only for under-developed countries appeared before our very eyes in the so-called rich countries.

To overcome the crisis, the monetary authorities told the central banks that to “stimulate” the economy, they must print money without the consideration of new wealth.

Faced with all these risks, investors have turned massively towards precious metals as the ultimate guarantee of their savings and equally allowing them to place their money outside of the banking system.

It is this general worry which fundamentally explains the rise in Gold these last years and now, of course, Silver.

Once upon a time, it was money

The principal point in common with Gold: Silver was once money! If it has been a long time since Gold could be used to buy bread; with Silver, it was permitted until 1980 when Silver coins were demonetised.

Silver has therefore remained legal tender longer than Gold, indeed it still persists in many countries, unlike Gold which is now usually reserved for the central banks and risk-averse individuals worried by the global economic system.

Historically (and this has been the case in Europe), the rule was “Bimetalism”. Gold and Silver formed the currency and if the rarity of one gave it great value (Gold), the abundance of the other (Silver) allowed free and easy circulation which permitted small commercial transactions.

This small piece of history allows us to understand why Silver is not unknown to the population of Europe.

A metal in demand

In addition to its past role as money, like Gold, Silver has an important place in industry. One of the primary reasons is that it is an excellent conductor. Unlike Gold, it is exists in huge quantities on the surface of the Earth. The quantity of Gold produced to date is estimated in the region of 155,000 tonnes – it would form a large cube where each side was 20m. It is estimated 100,000 tonnes remains in the ground of which about half will be able to be exploited. Each year, it is estimated 650 million ounces of Silver are extracted – that is 19 565 tonnes.

The massive demand from the industrial sector should not pose a problem. For sure, if Silver is used in large quantities, it can be recycled although this accounts for about one third of the amount used annually. As Jason Hommel said in his note on 24h Gold, “In all of history, about 45 billion ounces of Silver have been mined. Of this, nearly everything, between 90% and 95% was consumed and eventually buried with other waste. Why? Recycling is not profitable! It is cheaper to extract than recycle. There is not much interest about this incredible amount of Silver extracted since the dawn of time – just enough to make the money markets interested”. Translation – money is a metal which “consumes”.

And you guessed it – little by little, Silver is becoming scarce, slowly but surely…

The end of Silver by 2021 ?

This is now certainly one of the main factors behind the rise, and also speculation on Silver, by the investment banks and funds.

In fact, according to several credible geological studies, Silver reserves may become exhausted by 2021 in view of the proven reserves and the current industrial consumption.

This is not a firm date, more a pivotal date which the tensions in the Silver market will be tangible and measureable. It is not that there will be no more Silver at all overnight. More prosaically, it is said there will no longer be more for everyone at affordable prices.

The awareness of this scarcity of resources is an added factor in the search and diversification of products to protect against bank or state failure. The savvy saver will be aware of this – the funds invested in traditional financial instruments are those turning to Gold and Silver as a tangible asset but also because of the “end” of abundant Silver approaching. In fact, 2021 is tomorrow… almost.

The poisonous European atmosphere!

Finally, the climate in Europe is poisonous. More and more countries are sinking into recession. The ECB, under German pressure, still refuses to print money as is the case in the USA or Japan which leads more and more European countries into bankruptcy or at least a partial default. Unemployment is rising. Consumption is falling. In short, all indicators are red. The negative climate can only encourage investors to turn to tangible assets and diversify their investments. There is Gold of course, and Silver.

So the three-headed threat of bankruptcy, scarcity of Silver and poisonous European climate will push up demand and should we not see any change in European policy, it will continue. In North America, the demand is already high due to the fear of hyperinflation related to the Quantitative Easing (money printing) undertaken by the Governor of the Fed, Ben Bernanke. The risk of bank failure is an unfortunate reality for many United States citizens.

CHARLES SANNAT, translation David HODGE

Charles SANNAT is a graduate of the School of Foreign Trade and the Centre for Diplomatic and Strategic Studies. He began his career in 1997 in the technology sector as a consultant and manager with the IT division within the Altran Group. (Banking and Insurance). He joined BNP Paribas in 2006 as “Chargé d’Affaires”. He is currently the Director of Economic Studies for AuCOFFRE.com

THE GOLD SPOT: RICARDO ON GOLD AS VALUE

Sunday, June 2nd, 2013

The Gold Spot is a regular feature in which Mark Rogers excerpts a passage from his reading as the Text for the Day and then comments on it.

Extracts from ON THE PRINCIPLES OF POLITICAL ECONOMY AND TAXATION by David Ricardo, from the collected Works and Correspondence edited by Piero Sraffa with the collaboration of M.H. Dobb, published for The Economic Society by Cambridge University Press, Cambridge, 1951

Adam Smith, after most ably showing the insufficiency of a variable medium, such as gold and silver, for the purpose of determining the varying value of other things, has himself, by fixing on corn or labour, chosen a medium no less variable.

Gold and silver are no doubt subject to fluctuations, from the discovery of new and more abundant mines; but such discoveries are rare, and their effects, though powerful, are limited to periods of comparatively short duration. They are subject also to fluctuation, from improvements in the skill and machinery with which the mines may be worked; as in consequence of such improvements, a greater quantity may be obtained with the same labour. They are further subject to fluctuation from the decreasing produce of the mines, after they have yielded a supply to the world, for a succession of ages. But from which of these sources of fluctuation is corn exempted? [Chapter I On Value, Section I]

It has therefore been justly observed, that however honestly the coin of a country may conform to its standard, money made of gold and silver is still liable to fluctuations in value, not only accidental and temporary, but to permanent and natural variations, the same manner as other commodities.

By the discovery of America and the rich mines in which it abounds, a very great effect was produced on the natural price of the precious metals. This effect is by many supposed not yet to have terminated. It is probable, however, that all the effects on the value of the metals, resulting from the discovery of America, have long ceased; and if any fall has of late years taken place in their value, it is to be attributed to improvements in the mode of working the mines.

From whatever cause it may have proceeded, the effect has been so slow and gradual, that little practical inconvenience has been felt from gold and silver being the general medium in which the value of all other things is estimated. Though undoubtedly a variable measure of value, there is probably no commodity subject to fewer variations. This and the other advantages which these metals possess, such as their hardness, their malleability, their divisibility, and many more, have justly secured the preference every where given to them, as a standard for the money of civilized countries.

If equal quantities of labour, with equal quantities of fixed capital, could at all times obtain, from that mine which paid no rent, equal quantities of gold, gold would be as nearly an invariable measure of value, as we could in the nature of things possess. The quantity indeed would enlarge with the demand, but it value would be invariable, and it would be eminently well calculated to measure the varying value of all other things. I have already in a former part of this work considered gold as endowed with this uniformity […] In speaking therefore of varying price, the variation will be always considered as being in the commodity, and never in the medium in which it is estimated. [Chapter III On the Rent of Mines]

Comment: Apart from the importance Ricardo attached to machines cropping up in this discussion (his famous Chapter XXXI On Machinery), the interesting thing to note in these passages is that the argument with Adam Smith about sources of value devolves on gold as having the least variability when compared to other possible sources. Smith laid so much stress on corn, partly because it is a staple foodstuff and people must eat, and partly because the labour used to plant and harvest it was an easily quantifiable volume of work; Smith’s theory of value ultimately depended on labour, because the fact, the necessity of labour is an everyday constant.

Ricardo took exception to both corn and labour as measures of value, because the fact that both are necessary does not therefore bar them from continual accident and misfortune: exceptionally bad weather before a harvest destroys not only the crop but the need for labour at all, and has almost the same complete effect should bad weather occur during the harvest. The resulting famine may cause seed prices for next year’s crop to go up. That people must work for a living may be a constant, but their ability to work at any given time is contingent. Similarly, improvements in machinery may have a longer term effect on labour even as these improvements increase the harvest in a good year.

Therefore, these cannot be units of measurement of value: they fluctuate, or are capable of fluctuating too wildly.

The subject was to crop up again in Ricardo’s “Notes on Malthus”, where he takes issue with the gloomy Mr Malthus’s misreading of the points Ricardo makes above, in particular Malthus’s overlooking the qualifications about gold being “nearly an invariable measure of value” and his consequent assumption that Ricardo meant that as things stood, here and now, gold was such a measure. Indeed, Ricardo gets so hot under the collar in pointing out to Malthus that he had not been so simple as to claim this that he practically reverses himself as expressed above, almost implying that gold has no such intrinsic virtue! But indeed, he was quite cross with Mr Malthus all round; he did, in correspondence, express himself as being even less pleased with Malthus’s book on his second reading than he had been on first reading it, his further disgruntlement with Malthus leading to the “Notes”.

What is important about Ricardo’s quarrel with Adam Smith is that it is a very early rebuttal of the notion of labour as the source of value, and an equally important claim for precious metals as that source, as being the closest thing we are ever likely to possess for the purpose. That this claim is hedged with qualifications demonstrates two things: a prudent mind, and, secondly, that the major and long term experiments with paper money lay, of course, well in the future, i.e. the Twentieth Century. What Ricardo was doing was to estimate which of all possible sources of value, supposing such a measure to be desirable (and he concludes that it is), would best serve. There are obvious attractions in Adam Smith’s approach: it is practical, deals in vital constants of human action, and is empirical. But in the end it is insufficient. There is a discussion of paper currency in Ricardo’s book but it is fairly narrowly focused, as the experience of it in his day was narrowly focused, primarily on its promissory nature in terms of specie. Nothing like what we have experienced in the Twentieth Century was available to the political economists of the Eighteenth Century.

Nowadays, while accommodating the arguments to prudence as is always desirable, a stronger case for gold as “nearly an invariable measure of value” can and must be made because the realities foisted upon us by the advocates and practitioners of paper have been so dire.

For the raison d’être of these articles on goldcoin.org read: GOLDCOIN.ORG: MIXING POLITICS AND NUMISMATICS

For background on the writer: CONFESSIONS OF A LAW AND ORDER ANARCHIST

For a series of articles on the pernicious effects of progressive tax regimes: THE MORAL DILEMMA AT THE HEART OF TAXATION

For a review of one of the most important books on the financial crisis published last year: THE MESS WE’RE IN: WHY POLITICIANS CAN’T FIX FINANCIAL CRISES

FRANCAIS ESPANOL ITALIANO CHINESE

Search

Error: Feed has an error or is not valid


Thoughts
"For a mountaineer, the important things are the effort, the posture and the muscles. The rope that holds him serves no purpose when everything works but it gives him a sense of security. In the same way, all gold does is ensure confidence; it's a safe haven."