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… AND THE ONE ALTERNATIVE PRACTICALLY NOBODY CONSIDERS.

At some point between 1483 and 1485, a businessman from Genoa named Cristoforo Colombo had the opportunity to present his idea to King John II of Portugal.

Cristoforo Colombo

This time period is known to historians as the "Age of Discovery." A time in which European sailors explored the world to find new sea routes.

These people were the equivalent of today's internet and tech entrepreneurs, notorious for their courageous, absurdly expensive, and extremely risky ideas, which often ended catastrophically (and at that time fatally).

Due to the enormous risk of the undertakings, these medieval “venture capitalists” were usually sponsored by royal families.

In the 15th century a race developed between European kingdoms: which country could claim the most overseas territories for itself first.

Portugal was in the lead at the time – it was the Silicon Valley of the time. Prince Heinrich the Sailor had already explored parts of the Atlantic and west Africa since 1430.

Colombo knew this and therefore took his proposal to the king of Portugal first: his idea was a 12-month voyage across the Atlantic in order to reach Asia, then to return again to Portugal. 

The king liked the idea, but his advisors rejected it in the end, because they believed that the projections by Colombo were too far off, and that the entire undertaking was too expensive and too risky.

(The advisors were right also, in fact. Colombo had actually miscalculated, and underestimated the distance almost fourfold. What nobody anticipated, however, was that an entire continent was between them.)

Thus Colombo went to the United Kingdom of Castile and Aragon in current-day Spain.

At that time Spain was what China is today: it was rising rapidly, and everyone knew that Spain would eventually rise to be the dominant superpower.

It took some years. But finally, in the year 1492, the monarch Ferdinand and his wife Isabella paid for the undertaking by Cristoforo Colombo, whom we know today as Christopher Columbus.

The flagship of Christopher Columbus: Santa Maria

Although the voyage originally planned, or at least hoped for, by the "investors" was a failure, Columbus was at least able to demonstrate that there was enormous potential on the other side of the Atlantic.

Spain thus sent additional ships and financed new expeditions. Within 50 years they controlled nearly all of present-day Latin America.

The biggest prize that Spain won as a result were the new regions with gold and silver mines.

The Spanish government recorded its haul from the South American gold mines precisely, and today's historians estimate that dozens of millions of kilos of gold and silver were mined–the equivalent of several trillion euros in current values.

Thanks to this gold Spain rose to become the dominant power in Europe by following the age-old rule: "Whoever has the gold, makes the rules."

Our current system is completely different. We have transferred the control over our money to a committee of unelected bureaucrats who make up trillions of euros, dollars, yen, etc. out of thin air.

European Central Bank

From 2015 to 2018 the European Central Bank bought securities valued at a whopping total of over 2.6 trillion euros, including around 2.1 trillion euros in government bonds from eurozone member countries. With money that it printed "just because." The American Federal Reserve has recently announced that it plans to lend 60 billion dollars per month to the US government.

What value can money have if it can be created free of charge, more or less out of nothing, and lent by a government or a bank? 

If you or I did that, we would be tossed in prison for counterfeiting. If a central bank does it, it is called "quantitative easing.”

Consider the following:

2018 WAS A GOOD YEAR FOR THE GERMAN ECONOMY.

From 2015 to 2018 the European Central Bank bought securities valued at a whopping total of over 2.6 trillion euros, including around 2.1 trillion euros in government bonds from eurozone member countries. With money that it printed "just because." The American Federal Reserve has recently announced that it plans to lend 60 billion dollars per month to the US government.

What value can money have if it can be created free of charge, more or less out of nothing, and lent by a government or a bank? 

If you or I did that, we would be tossed in prison for counterfeiting. If a central bank does it, it is called "quantitative easing.”

The German economy produced rising values. The stock market reached very good values. There were no major natural catastrophes, crises, or wars.

At the end of 2018, the federal deficit in Germany, despite repayments, still amounted to around 1.92 trillion euros.

Nevertheless, there will be no increase in key interest rates, because the government debt would suddenly have to be paid back. Europe and Japan have already introduced negative interest rates.

In the end, experts know that our currencies do not have a strong long-term foundation. At the current rate, repayment would take several hundred years. And that is true even in light of the fact that new debt fell last year for the first time in many years.

In the US it is even worse: In 2018 the US had one of its strongest financial years with the highest economic output and the highest tax receipts of the last 20 years.

Nevertheless US debt rose by around 1.2 billion dollars that year. The US Treasury expects similar increases in the next fiscal year, and in the future, too.

The US-Dollar

Currencies (= paper money) are now really just zeros and ones in a computer. They don't have any real value anymore.

That is the reason that so many governments and central banks (Russia and China, in particular) are buying gold by the ton. In the truest sense of the word. There is a highly appealing form of investment for smaller investors, which we will get to momentarily.

All these factors–the debts, the deficit, the constant printing of money, low and/or negative interest rates–all of them weaken the euro and US dollar. And it will not stop.

Governments and central banks understand this. Therefore they are diversifying a part of their reserves by shifting away from currencies to gold–an investment class with a 5000-year history of value preservation.

One can assume in good conscience that the demand for gold will continue to exist. Something with far greater potential is being missed, however.

But what is really interesting is the SUPPLY for gold.

Because gold mines are exhausted over time, companies constantly look for new gold deposits… or buy up other companies that have found new gold deposits.

BUT THERE ARE PRACTICALLY NONE LEFT.

Over the last six years the average worldwide mine production has fallen by over 30%.

The total volume of acquisitions in the sector fell from last year to today by 67.5%.

This shows that there are simply not enough gold deposits being found to cover existing production.

A current report by S&P projects continued declines in the production of gold mines in the coming two years.

(Industry service provider SNL Metals & Mining projected that "Peak Gold" would be reached at the end of 2019. Through 2025 the annual volume of mined gold is expected to fall by one third.)

Consider that the current production of gold mines is sinking in a time when more and more governments, central banks, and other rational investors are looking for ways to diversify away from paper currencies.

This will certainly have a major influence on gold prices in the future.

BUT WHAT ALTERNATIVES ARE THERE?

An alternative that is absolutely underestimated and hardly considered, with a history of value retention that is almost as long: colored gemstones.

Colored gemstones (not to be confused with diamonds), like rubies, emeralds, or sapphires, are a highly appealing investment thanks to their beauty, rarity, and purity.

Scarceness and rarity are factors that give natural resources (like gold) their real value. Normal stones are not valuable because there are simply so many of them.

By comparing the annual production volumes it becomes clear how rare colored gemstones, like emeralds, really are.

Worldwide gold production amounted to 3,332.2 tons in 2018. 

In the same year about 29.6 tons of diamonds were mined. That is just shy of 148 million carats (1 carat = 0.2 grams).

Global production of raw diamonds in the years from 2004 to 2018
(in millions of carats)

AND COLORED GEMSTONES?

In 2018 about 5,000 carats of top-quality emeralds came onto the market. That is just a kilo. One single kilo.

The value? For an end consumer the price of a carat of emerald in top quality over 5 carats is €40,000.

In other words, this single kilo of emeralds in top quality would cost nearly 200,000 million euros in the market.

Emeralds are not the only gemstones that are suited as investment gemstones, however. There are, besides rubies and sapphires, over 20 various colored gemstones that are potential long-term investments.

“Colored gemstones are absolutely undervalued today and have huge upside potential," notes Alexander Streeb of the German Gemstone House. "Everyone who invests in gold should definitely diversify and direct a part of the investment portfolio into gemstones. We help our customers with the selection and purchase of high-quality investment gemstones."

Colored gemstones in investment quality are far rarer than gold or diamonds. They offer an enormous concentration of value and can be readily transported across national borders in an emergency.

Investment gemstones have limited appeal for governments and banks due to the complicated appraisal and purchase process, and thus they will continue to stay with gold. An enormous chance for long-term investors who want to protect their assets against devaluation, deflation, or even possible currency crashes.

While currencies are devalued, lose value each year (inflation and deflation), or disappear completely, gold and gemstones have outlived every currency of the last centuries. And they will also outlive every current currency. The only question is which side the investor will be on when that time comes.

And it is not a question of WHETHER currency problems will happen. The question is only… WHEN.

Deutsches Edelsteinhaus DEH GmbH
Chief Executive Officers: Alexander Streeb, Oliver Kleimaier

Commercial Register Number: HRB 737047