If you pride yourself with your economic background, then the name of George Soros must ring a bell. He is “The Man Who Broke the Bank of England”, an American citizen born in Budapest. He managed to make his first $1 billion by betting that the pound sterling would go down during the 1992 UK currency crisis. So Soros borrowed 10 billion pounds which he later put on the market. After the pound was devalued he bought the amount back at a lower price, returned the 10 billion to their owner and made a return of 1 billion. Not bad for a single person! The transaction is called in technical terms short selling and has become famous throughout the world.
What not everybody knows is that at the time the UK was part of the European Exchange Mechanism and the pound was set at a value of DM 2.95. (the then German currency – Deutsche Mark). Once the British economic performance could no longer sustain the rate and since the Bank of England refused to let the pound float, the pound sterling collapsed. In other words it was a crisis that made Soros rich.
Lying in wait for a major downturn to occur in order to get your hands on big returns is not an answer though, due to their frequency (though many may beg to differ) and their transient nature. Businessmen need to look elsewhere for their fortune. And this is where GOLD comes in.
Investing in gold, be it jewlery, Krugerrands-gold coins from South Africa or gold bullion bars has always been preferred over just putting money into a bank. Under sound economic conditions, which unfortunately for some prevail, interest rates on bank deposits are low. This is a measure to encourage spending and deter savings. The interest rate will only rise if banks are thirsty enough to start attracting deposit money from their customers. But that again happens mainly during economic recessions.
In what gold is concerned, the good thing about this downturn was that it showed how safe of an investment the precious metal can be. In fact buying gold has increased during the past years. According to World Gold Council data, the retail demand for bullion in the 4th quarter of 2008 was around 5 times higher than during the same period in 2007. Let down by insignificant deposit rates and wobbly stock-markets, business people throughout the world decided to return to the oldest investment in the book: GOLD.