How can gold act as international money?

The war between Vietnam and America was never a good sight. The innocent people had no choice but to accept their fate and were forced to take action in such a short time. They could not control the war because it was a matter beyond their capacity, but they could indeed control their reaction. What did they do?

Their existing wealth (savings, land, etc.) was converted to gold known as Kim Thant. They appear in thin sheets, which allowed them to keep in-between clothes. From the third-person viewpoint, no one knew that these people carried gold with them. And these gold sheets were all they had to restart their life.

They had utilized these gold sheets to purchase their necessities and often had to cut the gold sheet into small pieces to facilitate transactions. Just imagine what would have happened if they had brought over their Vietnam currency instead. Most probably, their cash would not be accepted, considering the war taking place at that time. Hence, the lesson here is during uncertain times, the money that could save you is none other than gold. And having small pieces such as a 1-gram gold bar would be helpful as it is easier to carry around.

Gold to the rescue

Another real story that I would like to share is regarding a fugitive from Aceh, Indonesia. He left his hometown due to war taking place in the 1990s. He was part of the group fighting against the government known as the ‘Free Aceh Movement’.

When his name got black-listed by the Indonesian military, he had decided to leave his home country to Malaysia. Before doing so, his mother gave him jewellery items that were approximately 20g for his expenses. That was the only wealth he brought over to Malaysia.

He then pledged the jewelleries for a loan, which became his capital to start a business. The income from his business was eventually used to reclaim the jewelleries. At the same time, his business was growing well. He even got married to a local and continued improving his business.

Remember the 20g jewelleries that his mother passed down to him? Interestingly, he still has them under his care.

Alternative money for the overseas trip

We can understand from the two stories above that gold can potentially serve as international money. Apart from converting our money before our overseas trip, we can consider bringing gold too. The gold can be sold off should we encounter short of cash.

Our local currency might not be as acceptable when considering converting our money abroad. If you consider bringing US Dollars, that might still be OK, but it depends on the location. However, we can be sure that the acceptance is rather worldwide with gold.

Now, you must be thinking, is there a limit to carrying gold abroad? The short answer is no. Taking gold abroad either from Malaysia, Singapore, Brunei has no limitation. But it is always good to check the current local custom regulations regarding bringing gold abroad. With money/cash, however, do you think there is a limitation? The answer is yes. The limit is USD 10,000 for Malaysia, while for Singapore, it is S$ 20,000. And we have to declare this at the Customs.

Gold as International Money

There are numerous occasions where gold savers tried to sell their gold bars abroad. They were curious if the gold bars purchased from Malaysia could be accepted in another country. Though the goldsmith shop dictated the price, eventually, they were able to sell their gold bars (even at a better rate than in Malaysia).

The point here is, gold essentially is international money. This is not a recent discovery, as the same phenomenon has been seen throughout history for hundreds of years. We have heard many instances of gold coins in ancient sites, indicating that kingdoms were using gold as part of their currency. Hence, gold bars and coins are indeed a better alternative than bringing our fiat money abroad. When we no longer use our local currency for foreign exchange, we might save some costs (exchange rate, administration fee, etc.). This is useful, especially when our money is getting weaker.

Gold as a standalone entity

The most important thing that we need to understand is that gold is an acceptable asset anywhere in the world. We can buy gold items in one country and sell them without complications. This is not replicable with fiat money or even other investment assets. The unique feature of gold is that it is valuable on its own accord. Meaning the value is dictated by its weight and purity, not through guarantee by any authorities. Wherever we intend to sell, the only consideration from the buyer’s viewpoint is only two, namely the weight and purity.

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Your buddy on gold investing,

Naresh G