By Scott Carter, CEO of PM Capital
We talk a lot about the major superpowers of the world. The US. Canada. Russia. China. Germany. Japan. The UK. We watch what is happening in the EU—will it last or implode? We worry when stock trading in Japan goes awry, as it signals what the US stock market may do at the opening bell. But what about the nearly 200 other countries? Does what they do matter to the financial stability of the world? Is anyone watching?
Nestled in between China and Russia are several former nations that were part of the Soviet Union before it broke up. One of those is Kyrgyzstan, formerly known as the Kyrgyz Republic. This nation was part of the Silk Road and other trade routes, so it has played a part in economic history of the world.
So why the history and geography lesson about this small country of 6 million people? Because this year the country’s central bank (National Bank of the Kyrgyz Republic) announced that they want EVERY CITIZEN in the country to OWN GOLD! Tolkunbek Abdygulov, the chairman of the central bank, has a dream of every person owning at least 3.5 ounces of gold.
“Gold can be stored for a long time and, despite the price fluctuations on international markets, it doesn’t lose its value for the population as a means of savings,” he said in an interview. “I’ll try to turn the dream into reality faster.”
Abdygulov is a smart, highly educated leader who is encouraging what investors around the globe encourage–diversification. “We are hopeful that our country’s population will learn to diversify its savings into assets that are more liquid and — more importantly — capable of retaining their value,” he said. “With Kyrgyzstan enduring upheaval from economic crises in the early 1990s to bank failures during the last decade, gold is seen as a far safer bet than securities.”
So while the people of Kyrgyzstan are shifting their savings from cattle to gold, other emerging countries have also pushed for gold to be held by their citizens as a safe haven and liquid hard asset. Bloomberg notes that India is taking steps to curb imports of the precious metal by encouraging its citizens to deposit private gold holdings in banks and last year Turkey’s President Recep Tayyip Erdogan called on people to diversify their foreign-currency savings into liras and gold.
Abdygulov, who has master’s degrees from Nagoya University in Japan and the University of North Texas, touts a “rule of three” diversification strategy—splitting up savings between the Kyrgystani Som, foreign currency and gold. In other words—diversify your wealth so that you can ensure a safe haven and stability in times of upheaval and uncertainty.
If whole countries are moving in that direction, every investor should be taking note and considering a diversification strategy too that includes precious metals.