What Sparked Your Interest In Gold?

Following our successful first poll last month we decided to set up a new poll for our clients and readers to participate in once again. Last month you indicated a clear preference for keeping your gold bullion investments outside of the banking system, this month you told us your lack of trust in central banks drove you to gold investment when we asked "What sparked your interest in gold?"

We had an unprecedented level of responses, from 29 different countries. As with our last poll, the bulk of responses came from the USA, UK and Canada.

Here’s what you told us.

Untrustworthy central bankers
The survey provided 6 answers for respondents to choose, when asked, "What sparked your interest in gold?":

- External reading/advice
- Diversification
- Lost faith in central bankers
- Creeping inflation
- Rising gold prices
- Cultural influences

The majority of respondents, 34.8%, told us that they became interested in gold thanks to a lost faith in central bankers.

We suspect this reason for choosing to gold bullion investment will continue to lead the pack as central banks continue down the route of easy monetary policy and quantitative easing. This week alone we expect to see the FOMC implement a third round of quantitative easing.

On Thursday Bernanke and the rest of the FOMC are highly suspected to be on the verge implementing QE3. Whilst asset purchases are pretty good for the gold price, it does nothing compared to what QE does. QE is also an absolute winner when it comes to a useful tool for devaluing your wealth.

Good news for those who have chosen gold bullion investment is that central bankers do not seem to be anywhere close to even trying to regain our trust.

The markets spent most of August hanging on the every word of central bankers as the "will they, won’t they debate" continued. Draghi eventually answered with the words "unlimited support" whilst trying appease everyone and Bernanke once again agreed to look further into QE3 as a result of poor jobs data.

Gold bibles
The second most popular reason for sparking interest in gold was "External reading/advice." This was encouraging to see. Hopefully this is something which becomes a more common reason as more people discuss amongst themselves the goings on in the monetary system and start sharing their knowledge about gold and the monetary system.

Personally this was how I, and the rest of The Real Asset Company research desk, came to be interested in gold; I was given Gold Wars by someone, whilst Will Bancroft was given a copy of Dr. Ron Paul’s End the Fed. Both of us have viewed the world through a different, clearer lens ever since.

The two most common answers were not that surprising. I would estimate that 2 in 3 people I meet in this space have come into it thanks to an introduction from an acquaintance or an article somewhere. Others have been more inquisitive and have started asking questions on their own thereby leading them to realise the mess central bankers have dug for themselves.

Creeping inflation

Is inflation rising?
If you read government statistics on both sides of the Atlantic, apparently not. However if you talk to the housewife doing the weekly shop in the supermarket, the daily commuter, or the keen saver, inflation is most definitely creeping up, and it’s punishing our wealth as it does so.

Gold is often cited as a hedge against inflation and so this is not a surprising reason to invest in gold, yet only 15.2% of pollsters selected this option. I had thought a greater majority would select this reason given since 1967, the value of the pound has lost over 90% of its value, the US dollar has fared no better. However I believe it links to "lost faith in central bankers" who not only create inflation, but encourage it as well. Central banks and their monetary policies have an inflationary remit.

Rising gold price
The fourth most popular reason for choosing gold was the increase in the gold price. Considering the majority of participants answered the poll prior to gold breaking through $1,700 we wonder if the answer would be different should we re-run the survey. However it may well also indicate that the majority of those who have invested in gold through The Real Asset Company and read our content are invested in gold bullion as a safe haven against central bankers’ decisions and inflation rather than short-term investment on which you hope to see great returns.

Diversification via gold investment
For many mainstream investors and IFAs, "diversification" is often the given reason for choosing gold investment. We also recently looked at how gold bullion has continued to effectively diversify portfolios – once again gold had proven to be the best diversifier available to investors.

However, on our poll only the fifth popular option with just over 9% of pollsters selecting this option, whilst we suspect that this is still a significant reason to invest in gold, it seems it is not the primary reason for people turning their interest to gold investment.

Lessons from childhood
Cultural influences gained just 2.03% of the votes. Considering most of the votes cast came from Western countries I wondered if this would have been a different outcome had more respondents come from Eastern countries. However, the few which voted from this area did not vote for "cultural influences."

This may well be to do with the reach and audience which we attract here at The Real Asset Co. Cultural influences should not be underestimated. This month we have seen reports of record of gold buying from China, via Hong Kong, and the Indian government working hard to dissuade the public to stop saving in gold.