The 7 Deadly Myths of Gold Investing
And the 7 Empowering Signs That Now Is the Right Time to Invest in Gold
by Damon Geller
Copyright 2012 by Damon Geller
Published by Christopher Prince at Smashwords
Smashwords Edition, License Notes:
This ebook is licensed for your personal enjoyment only. This ebook may not be re-sold or given away to other people. If you would like to share this book with another person, please purchase an additional copy for each person you share it with. If you’re reading this book and did not purchase it, or it was not purchased for your use only, then you should return to Smashwords.com and purchase your own copy. Thank you for respecting the hard work of this author.
What You Will Gain from This Book
* Steadily grow your investments
* Smartly protect your retirement
* Significantly outperform the stock market
* Profit from economic uncertainty
* Achieve your investment goals
What You Will Learn from This Book
* Learn to discern fact from fiction in gold investing
* Learn to detect the important signs it’s time to invest in gold
* Learn why gold is an powerful hedge against the falling dollar
* Learn how gold profits from expanding national debts
* Learn to find the best investments in gold and silver
Who Else Will Benefit the Most from This Book
* Younger investors building toward their retirement
* Older investors seeking to protect their wealth
* Value investors seeking solid long-term performance
Table of Contents
The 7 Fundamental Reasons to Own Gold
Introduction: Gold Tells the Truth
The 7 Deadly Myths of Gold Investing
Gold Is Too Risky of an Investment
I Can Get Better Performance from Other Investments
Bullion is the Best Way to Invest in Gold
All Gold Can Be Confiscated During Crises
Gold Is for Collectors, Not Investors
The 7 Empowering Signs That Now Is the Right Time to Invest in Gold
The Stock Market Is Losing Value Even As It Rises
The Wealthiest People in the World Are Buying Gold
Retail Investors Are Just Now Discovering Gold
Gold Has Been A Durable Investment for 5,000 Years
Bonus: The 7 Best Gold & Silver Investments
Secure Your Retirement with a Gold IRA
Conclusion: Waiting Is the Hardest Part
Addendum: Gold & Silver Bullion Investing
After many years of advising clients on investing in gold and silver, I chose to write this book to address many of the common concerns and misconceptions about investing in gold and other precious metals that I hear regularly from my new clients. Naturally, I cannot address all your questions and concerns in a book, so I invite you to contact me directly with any of your gold investment questions during or after reading this book. You can access all my contact information on our company website, www.WholesaleDirectMetals.com.
I welcome the opportunity to assist you.
Damon Geller
President
Wholesale Direct Metals
The 7 Fundamental Reasons to Own Gold
* Gold has outperformed and outlasted every paper currency ever printed
* Gold remains the ultimate form of payment with no counterparty risk
* Gold acts as safe haven in times of rising geopolitical tensions
* Falling gold supply vs. increased investment demand means long-term gains
* Gold prices would need to exceed the $10,000 mark to counterbalance all US public debt held in foreign hands
* Half of all central bank’s gold has been leased into the market (about 15,000 tons), so that covering these short positions is not possible without catapulting gold prices to unimaginable highs
* Negative real interest rates plague other investments
Introduction: Gold Tells the Truth
What draws people to gold? You can’t eat it, live under it, or even buy things directly with it. Gold is an asset that is very expensive to mine, and once it has been dug up, people simply sit on it in hopes of maintaining or growing their wealth. So why is gold's value rising and how high will it ultimately go?
As the president of Wholesale Direct Metals, I answer these types of questions every day for our clients. And the truth is, they’re simpler to answer than most people think. Gold's value is increasing because the amount of printed fiat currency is also increasing. Simply put, the increase of fiat currency devalues fiat currency. As long as the Federal Reserve (a.k.a. “The Fed”) and the central banks around the world keep printing fiat currency, the price of gold will continue to rise.
Below are 6 graphs. They represent the printed money supply, called “M2,” for the US, China, the Eurozone, Japan’s central bank, the UK and India:
By laying a chart of Gold over any of the above M2 charts, one gets a very clear indication how the printing of fiat currency effects the price of gold. With regard to money printing, Gold Tells the Truth. Assuming the Fed keeps printing – and they have no other choice (but that's another discussion about interest rates and treasuries) – gold will continue to rise.
But how high will it go? That’s the billion dollar question, right? Or rather, “Trillion Dollar” question. And it’s the very question that is the inspiration for this book.
To get a sense of just how high gold can go, just take a look at recent history. In 2008, the US was $9 trillion in debt. The price of gold was $850/oz. Over less than two years, our debt level went from $9 Trillion to $15 Trillion, a 67% increase. The increase in gold during the same time period? From $850/oz. to $1425/oz. That’s right, also a 67% increase! To say, “Gold tells the truth,” couldn't be more truthful.
As we tell our clients at Wholesale Direct Metals, if you’re thinking about investing in gold but aren’t quite sure, ask yourself two simple questions:
1. Do I believe the US government and central banks around the world will continue to increase money supply? In other words, will they keep printing money?
2. Will we accumulate more debt over the next few years, or will we begin to reduce the debt?
Considering our government’s inability to be fiscally responsible, it's impossible to assume debt will not keep growing. After all, Congress did once again raise the debt ceiling, so they’re likely to keep adding to it. And it doesn’t matter which side of the political aisle you’re on; you just need to understand what happens to gold when the national debt rages out of control.
Today, central banks around the world are revaluing global currencies to keep the scheme moving along. This is revealed through the price of gold and silver, because they are the benchmark against which the revaluation is taking place.
Below is the actual supply of US Dollars from the St. Louis Fed, and I have included a graph of gold for the same time period. Look how closely the two graphs parallel each other.
Bottom line: gold is fiscal honesty. And as long as the Fed keeps printing money and the balance sheet keeps growing, there’s every reason to believe gold and silver will continue to rise.
Yet, somehow many people are still not convinced about gold. They find every reason in the world to talk themselves out of buying gold and keeping their money in cash or the stock market. Underpinning their fallacious beliefs about gold are what I call “The 7 Deadly Myths of Gold Investing.” So I wrote this book to counter these deadly myths and reveal the 7 empowering signs that now is, in fact, the absolute right time to invest in gold.
The 7 Deadly Myths of Gold Investing
Why do I call the fallacious beliefs that prevent people from investing in gold “The 7 Deadly Myths of Gold Investing”? Because quite honestly – as we tell our Wholesale Direct Metals clients – failing to balance your investment portfolio with gold and/or silver can literally be deadly to your savings and investments. Yet sadly, many of the concerns people have about gold are simply based on myths. And once you learn the truth about gold, you’ll realize why gold is absolutely fundamental to your overall investment strategy. So let’s examine the 7 deadly myths of gold investing.
Deadly Myth #1: The Gold Boom is Over
You’re no doubt aware of gold’s tremendous performance over the last several years, and maybe you’re a little nervous that it might be too late to get in on the gold boom. As a longtime gold dealer at Wholesale Direct Metals as well as an experienced gold investor, I am often asked about gold’s price action. These days the questions tend to have a bubble-ish tone to them. The “gold is in a bubble” debates are the easiest one’s to counter, albeit the most frustrating.
When someone asks me about gold prices being in a “bubble” or gold’s price action resembling the tech stock market of the late 90s or the real estate pandemonium of 2007, they’re forgetting a crucial fact about bubbles: For a true investment “bubble” to exist, you need penetration and participation on a massive scale. In the late 90s right before the NASDAQ blew up, everyone owned tech stocks. Tech stocks made up a large portion of people’s investment portfolios, and penetration and participation in them was deep and aggressive. Look also at the real estate bubble. Participation was so deep and combined with so much leverage, that in order to melt down, the market didn’t even need to fall; it simply needed to stop rising as fast. Lenders would loan money to anyone with a pulse.
By contrast, ask your friends how many of them have bought even a single ounce of real investment gold, let alone a significant portion of their savings or investment capital in real gold or even gold stocks. I can already tell you the answer: not much, if any. Gold makes up 1 to 1.5% of the average American’s portfolio today. It’s even less of a percentage in 401Ks, IRAs, pensions and other retirement accounts. Yet because of gold’s price, people want to talk bubble? Forget the price. The fundamentals that caused gold to double over a three-year period are not only still in place, they are accelerating. Debt, money printing, political indifference, global slowdown, lack of fiscal faith in policy makers, and global uncertainty all mean that now is still a great time to invest in gold.
The concern over gold being in a bubble also says something about the perception of today’s fiat currency, the US debt and other forms of paper or “debt-based” savings. Or it simply illustrates the very common lack of understanding in monetary policy or, and even more importantly, the history of money. People who worry that gold is in a bubble are typically comparing what gold is worth in terms of paper money. Their perception is that green paper is a viable benchmark for the cost of goods or assets to be priced in, and they couldn’t be more wrong.
By contrast, the central banks that control the world banking system use gold as their store of value and backing to their currencies, because gold has a real value that cannot be debased by monetary policy the way paper money can. Simply put, the more your paper gets diluted, the more your purchasing power is eroded, and the more you need to switch your faith out of paper money and into gold. I try my best to help my clients understand that there is an end-game to debt-based savings and living beyond our means in a debt-based economy. Gold’s upward limit can really only be calculated in terms of fiat currencies’ downside limit. Yet if a currency’s downside limit is zero, think how high can gold go, considering it has outlasted every fiat currency ever made. It’s clear that gold will keep rising as long as debt accumulation persists and fiat currencies continue to be debased.
Deadly Myth #2: Gold Is Too Risky of an Investment
We all worry about risky investments. Yet gold and silver often get lumped together erroneously with other paper-based “investments” in the risk basket. I would argue that they should not be, especially gold. As I tell my clients, gold is one of the least risky places you can store your wealth, and it has also been one of the least risky places to find yield. Investments that work are ones that go up and have intrinsic value. Dollars in the bank or government bonds are nothing more than debt-based savings, while gold is real savings. When you consider what the bank is paying, real negative interest rates, and current Fed policy, sitting with your money in a bank has proven to be much riskier than gold.
In addition, looking for wealth preservation or yield in the equities market certainly must be considered risky given it’s volatility and downswings, not to mention possible failure. When I hear people say they perceive hard gold ownership as “risky,” I can’t help but hope that they are capable of a change of perspective, because it’s their faith in paper that should be seen as risky and is misguided in our professional opinion. When paper provides no return, loses value, loses people’s faith, and is intrinsically worth zero, hard monetary-based assets like gold and silver are the least risky assets.
Deadly Myth #3: I Can Get Better Performance from Other Investments
It may very well be possible that you can think of an investment that has done better or “might” do better in the future, but with how much risk? Remember, we’re not here to hit home runs for people based on performance. Gold is not a purchase you make to get rich quick. Rather, it’s an asset you hold so that you don’t get poor quick. Its purpose is to protect against the kind of wealth destruction we saw in 2008 and have seen for 10 years while we’ve run massive deficits. Gold’s main purpose is to act as a wealth preserver and wealth protector. That said, gold has “performed” quite well also. 20% yearly growth on average every year for 11 years in a row is what I would call stellar performance.
Gold’s gains are largely due to the effect of the printing of fiat paper and accumulation of debt. It’s the indicator and yard-stick against which the debasement of fake (printed) money is valued against. If you’re looking for “performance,” you should look for it elsewhere in your portfolio, and remember that “performance” equals added risk by default. You buy gold to hedge the items of perceived performance in your portfolio, but don’t be surprised if gold continues to outperform most everything else if we keep printing currency, accumulating debt, and spending money we don’t have.
Deadly Myth #4: I’m Too Old to Buy Gold
We have a number of clients at Wholesale Direct Metals who are retired and elderly. As they get older, naturally they become more cautious about their investments, and that’s a good thing. Yet none of us would ever say, “I’m too old to protect my wealth,” or “I’m too old to grow my wealth,” or “I’m too old to take a defensive position and hedge the collapsing monetary world around me and protect myself from the madmen trying to centrally plan the global economy, and failing!” Okay, the last one might be a little dramatic, but the concept that, once you’re old your money belongs in a bank, is a very dangerous one. I would argue that with negative real interest rates (banks paying a lower interest rate than inflation), it is even more important for a retiree or someone on a fixed income to have a hedge against dollar debasement and inflation. The older you get (and no longer work), the more important safe yield becomes.
Once you become too old to work anymore, you have to look at the longevity of your wealth and invest it in such a way that it lasts longer than you. If or when all this money printing becomes real inflation and your expenses go up but your income doesn’t, you better have your savings in a safe place where it can get yield. If expenses are rising -- energy costs, water, food, gas, etc. -- gold will be rising too by its very nature as a dollar-denominated hard asset. So owning gold is even more important as you get into your “golden years.”
Deadly Myth #5: Bullion is the Best Way to Invest in Gold
If you watch any cable television these days, you’ve no doubt seen one gold advertisement after another. And all of them recommend buying gold bullion as the way to enter the gold market. Not surprisingly, a huge percentage of our clients at Wholesale Direct Metals call us initially looking to buy gold or silver bullion. It’s at that point we tell them, yes, we’d be more than happy to sell them bullion, “but are you aware of the other gold and silver investment products that offer many advantages over bullion?” Most of the time they are not aware, so we take the opportunity to do what we enjoy most: arm our clients with game-changing investment guidance.
The fact is, bullion is not the only way you can invest in gold and silver, and it’s very often not the best way to invest in gold and silver. You can often get the best out of gold and silver by investing in numismatic or semi-numismatic coins, sometimes referred to as certified coins.
It’s a good idea to understand numismatic coin investing before making a major investment in numismatic coins. The good news is, it really just comes down to a simple definition of each. “Bullion” refers to gold that trades solely for its weight, and “numismatic” refers to a coin that has a value premium in addition to its weight, usually because it is limited in population and has some privacy advantages. Bullion can be a bullion coin like a Canadian Maple Leaf or it can be a bar or ingot in various sizes. Bullion is worth nothing more than its weight when selling and, when buying, will be its weight plus a mintage fee. Mintage fees are larger on coins and fractional coins than larger bars, but all bullion has a mintage fee to buy it.
Numismatic coins, by contrast, maintain a premium to their weight and can be sold for their weight plus whatever the current premium is. Numismatic coins also tend to be more stable than bullion as they do not have a paper-traded component. While gold bullion has had an impressive record of profitability since the mid-1970's, there really is no comparison with pre-1933 numismatic gold coins. A $1,000 basket of pre-1933 numismatic gold coins in 1970 was worth a stunning $57,977 in 2007, and it’s worth even more today.
Numismatic coins also offer more privacy than bullion as they are non-reportable and less visible to the government. With some forms of gold bullion, a 1099 form must be completed. This is not the case for pre-1933 numismatic gold coins, for which there are no reporting requirements whatsoever. Pre-1933 numismatic gold coins are one of the few remaining investments today that can be accumulated privately and confidentially. They are the least visible form of wealth. By investing in them, you are not revealing a single thing to the world at large. While banks and brokerages require the extensive disclosure of client information to governmental agencies, pre-1933 numismatic gold coins are absolutely free from this kind of intrusiveness.
As a rule of thumb, if you are trading in and out of gold several times a year, bullion might be a better asset for that strategy. Yet numismatic coins are geared to the saver/investor who wants wealth preservation over a longer time-frame and when privacy and a lack of government interference is important.
In short, buying numismatic gold coins offers you numerous benefits over gold bullion:
* Numismatic gold coins are investment-grade and often outperform bullion investments due to the added value of rare coins
* Numismatic gold coins can be less volatile than bullion because they are not paper or ETF traded
* Numismatic gold coins are completely private and non-reportable and can be bought and sold in any amount without paperwork
* Numismatic gold coins are not subject to government confiscation as gold bullion was in 1933 (see Deadly Myth #6)
Deadly Myth #6: All Gold Can Be Confiscated During Crises
During the darkest days of the Great Depression in 1933, President Franklin D. Roosevelt was desperate to stabilize the U.S. dollar from the ravages of a shrinking economy. By executive order, Roosevelt confiscated U.S. gold coins from U.S. citizens in exchange for paper currency notes, under the severe penalty of a $10,000 fine and a maximum 10-year imprisonment for anyone who failed to cooperate. Some historians believe this was the beginning of the “shrinking U.S. Dollar,” as the government melted the majority of confiscated coins into bars and then devalued the dollar, raising gold’s value by nearly 75%.
Today, some investors are weary of buying gold because they fear another government confiscation during bad economic times. But they fail to realize that not all gold was subject to government confiscation in 1933. In fact, certain types of gold coins – namely, pre-1933 numismatic gold coins – have never been confiscated by the U.S. government and never will be.
Roosevelt’s 1933 executive order excluded “gold coins having a recognized special value to collectors or rare and unusual coins,” which meant pre-1933 numismatic coins were exempt from government confiscation. And that’s doubly good news for today’s investors. Number one, when you invest in numismatic gold coins, you won’t have to worry about them ever being confiscated. Two, because the majority of confiscated U.S. gold coins were melted into bars, any existing pre-1933 U.S. gold coins remaining today have both a “gold value” and a “scarcity” value because of high investor demand and low supply.
Deadly Myth #7: Gold Is for Collectors, Not Investors
A number of our clients at Wholesale Direct Metals initially make the mistake of referring to pre-1933 numismatic coins as “collector” coins. While it’s true that many people do collect numismatic coins as a hobby, it is severely limiting to think of numismatic coins just in terms of their value to “collectors.” We call numismatic coins “investment-grade” coins because they are as durable, well-performing and wealth-protecting as any investment products on the market. And the fact that they are also valuable to collectors means that they are scarce and maintain an intrinsic premium value over gold bullion, all of which make numismatic coins a great investment for anyone looking to grow their money and protect their wealth.
The 7 Empowering Signs That Now Is the Right Time to Invest in Gold
Now that we’ve dispelled the deadly myths that often prevent people from making prudent investments in gold, you still might wonder when is the right time to invest in gold. Any smart investor wants to be able to read the tea leaves and know what signs indicate a good time to buy. So in the next section, we examine “The 7 Empowering Signs That Now Is the Right Time to Invest in Gold.”
Empowering Sign #1: The Dollar is Falling
We all know the damage caused by the devaluation of the US dollar. Every day, your money is worth less than it was yesterday. Your purchasing power shrinks and your investment portfolio suffers. The good news is, with each downtick of the US dollar comes an uptick in the value of gold. Fundamentally, gold's value increases because the amount of printed fiat currency is also increasing. Simply put, the increase of fiat currency devalues fiat currency. As long as the Federal Reserve and the central banks around the world keep printing fiat currency, the price of gold will continue to rise.
Investing in gold can form the cornerstone of a conservative or aggressive portfolio because it tends to move in the opposite direction of paper investments and the US Dollar. It has become even more popular as a necessary addition to any diversified portfolio in the last few years. You buy gold to hedge the items of perceived performance in your portfolio, but don’t be surprised if gold continues to outperform most everything else if we keep printing currency, accumulating debt, and spending money we don’t have.
As a clear illustration, investors who held $100,000 in cash since the turn of this century saw their buying power decrease by over 30%, as measured by the U.S. Dollar Index. In comparison, over the same period, $100,000 held in U.S. Gold Eagles acquired in 2001 were valued at over $300,000 by the end of the decade.
Protecting yourself from US dollar devaluation and currency debasement is an important aspect of preserving your wealth. Yet, protection from a falling US dollar can also be tricky in the current economic environment. Let’s look at how and why. In the past, before the game of global “competitive currency destruction” began, one could have bought a competing currency or other country’s currency, which should have become more valuable as the dollar deflated and served as a hedge to a falling US dollar. The problem with that strategy now is that all the central banks around the world are printing fiat currency in order to be able to trade with one another. The fact that all fiat currencies are all being debased is an effect of the global effort to kick-the-can and avoid painful default and or restructuring, which means there is no longer any security in foreign currencies.
Holding any asset that trades globally in terms of US Dollars should serve the purpose of hedging a falling dollar. Unfortunately, this isn’t going to work for you. You’re not going to store barrels of oil in the garage. Demand for something like diamonds is far too volatile to call anything about it “protection.” And real estate brings tax issues, loan issues (bank involvement) and maintenance fees, not to mention real estate isn’t going anywhere until unemployment and wage growth get better. So gold makes the most sense as a wealth preserver. This should make perfect sense, since that is exactly what gold is designed to be and ultimately what it is. Not only does gold protect you against a falling US dollar, it protects you from the monetization and debasement of all fiat currencies and paper promises. And even in a default scenario, it protects you because gold loves chaos, debt and a falling US Dollar.
Empowering Sign #2: The Debt is Rising
Many economists have argued that going into debt is sometimes a necessary and unavoidable way to maintain our nation’s infrastructure, protect our national interests, and keep the economy stable. Yet we all know there’s a serious price to pay when the national debt skyrockets and remains at unmanageable levels for decades. The value of our currency shrinks, meaning your money in the bank and many of your investments are shrinking in value right along with it. So, how do you protect your investments against the scourge of national debt?
History shows us that the most reliable hedge against rising national debts is investing in gold. Just take a look at the last few years as an example. In 2008, the national debt stood at $9 trillion and the price of gold was $850 per ounce. In less than 2 years, the national debt rose 67% to $15 trillion. Meanwhile, gold rose at exactly the same rate: 67% to $1425 per ounce. Now, you may agree or disagree with why the debt was increased, yet we can all agree that the national debt has increased precipitously over the last decade, and gold has once again proven to be the most reliable hedge against rising debts.
Empowering Sign #3: The Fed Keeps Printing Money
We’ve already examined how printing money and increasing the national debt devalues our currency and spawns a proportionate increase in the price of gold. What must be emphasized is that the actions of our federal reserve and policy makers is not something in the past; the fact is, the Fed continues to print money as we speak.
Presently, the US prints money to buy treasuries to keep rates low. Not only does this cause a major drop in the value of the US Dollar, it also makes it impossible for our trading partners to sell us anything. So they all turn on their own printing presses to “equalize” the value of global currencies by devaluing their own currencies against the dollar. Needless to say, this current central bank action makes holding any fiat currency a huge risk and almost a guarantee to lose your purchase power and wealth. So as the Fed keeps printing money, it becomes more and more imperative to own gold as a hedge against plummeting global currencies.
Empowering Sign #4: The Stock Market Is Losing Value Even As It Rises
To understand how the stock market actually loses value even as it rises, you need to go back to the crisis that has been created by increasing debt and printing money. As an illustration, use your imagination and pretend the US government, Europe and the central banks of the world act like a public company. This company has 100 shares at $1 dollar per share. To pay down its debt and make the debt more manageable, the company prints more shares. The only way to keep the company afloat is to pay interest payments, so the company prints even more shares. But the stockholders aren't made aware; they think their shares are still worth $1 dollar, yet the company has sold 100,000 more shares and used the money to pay down debts. This is essentially what the Federal Reserve is doing with the US currency. And in response, the international community uses US dollars to buy gold, silver, sugar, cotton, oil, and other commodities. Why? Because even if the stock market goes up to Dow 15,000, in real dollars that’s closer to Dow 9,000.
The example that is often cited is the devastating two-year inflation rate of 24.7 percent from 1979-1980, the highest in modern-day America. During the five worst years of inflation in U.S. history, the average return on Dow stocks was significantly lower than the rate of inflation. Not the most inspiring reason for investing wholly in stocks. Meanwhile, gold reacted protectively by hitting $850 an ounce and silver reached $55. This is fundamentally why pre-1933 numismatic gold and silver coins have a history of being complementary to traditional stocks, meaning they actually tend to move in the opposite direction of stocks.
So clearly, pre-1933 numismatic gold and silver coins maintain an important position in a prudent portfolio. And not just as an antidote for inflation, high interest rates, or political uncertainty. Although perfectly suited for these roles, investment-grade numismatic coins are best evaluated on their own record of long-term growth. Converting your assets from cash, money markets and mutual funds into physical U.S. gold provides you with protection and diversification against the shrinking dollar, inflation and volatile global stock markets.
Empowering Sign #5: The Wealthiest People in the World Are Buying Gold
It’s often said that, if you want to become wealthy, just look at what wealthy people do and follow suit. And if you’re already wealthy and want to stay that way, pay close attention to how the wealthy class maintains their wealth over many generations. What’s the common denominator in both cases? Investment in gold.
You need not look much further than the top .001% -- central bankers who essentially control the world and most of its wealth – to see how they protect themselves from the debasement of the US Dollar (and global fiat currencies), and copy what they do to your own personal advantage. After all, the central banks know when they are going to print money, and gold becomes the true currency of central bankers. Central banks have been net buyers of gold for nearly a decade now, and countries like India, China, Brazil, Korea and many others have been buying literally tons of gold at a time. So be your own central banker, so to speak. Protect yourself from the debasement of currency by investing in gold.
Empowering Sign #6: Retail Investors Are Just Now Discovering Gold
When we countered the “gold boom is over” myth, we mentioned that penetration and participation in gold investing was far from being on a mass scale. In fact, even when gold peaked at $870 in 1980, gold made up just 5% of the average investment portfolio. Today, even with the precipitous rise in gold, exposure to gold makes up less than 1.5% of the wealth in the US. Shockingly, wealth today is still concentrated in paper.
What this all means is that retail investors – average people looking to grow their money or protect their investments – are just now waking up to gold. This is exactly why the majority of experts who are bullish on gold point to the fact that retail investment in gold is just beginning. Since gold tends to move in the opposite direction of paper investments and the US Dollar, gold is soon to become even more popular as a necessary addition to any diversified portfolio. Federal bailout programs and stimulus measures have caused a major increase in the volume of dollars printed and have also caused the federal budget deficit to grow to historical and unprecedented levels. As a result, investing in gold and holding hard gold as a hedge has become more important for Americans than ever before. And it’s only the beginning.
Empowering Sign #7: Gold Has Been A Durable Investment for 5,000 Years
How can you argue with an investment that has been a top performer for over 5,000 years? Indeed, gold has outlasted every single debt-based paper currency that human beings have ever invented. As the Roman Empire crumbled around them, Roman emperors sought refuge in their asset of last resort: gold. Gold hording during the final days of the Roman Empire crippled the global economy, leaving only those who owned gold any real security from the collapsing empire.
For over 5,000 years, gold has been the purest form of money and the oldest, most durable wealth-preserving asset on the planet. Governments can’t devalue it. It has no debts, no board of directors, no politicians or central bankers who can manipulate its value. That’s why investing in gold has survived every economy in history, has outlasted every paper currency ever printed, and has preserved investors’ purchasing power over a span of over 5,000 years. Negative economic, political, environmental, or monetary policy conditions contribute to a rising gold price. This is the reason gold has always been referred to as a perfect diversifier.
Bonus: The 7 Best Gold & Silver Investments
As we discussed above, numismatic coins can increase your opportunity for profit at the same time they can reduce volatility. Unlike the gold bullion markets that are designed for short term profit-taking, the numismatic markets have offered long-term steady growth and stability with a decreased amount of short-term volatility. The reason for this is simple: With numismatic coins, there are generally more buyers than sellers, so the market is generally more stable and can appreciate more consistently over time.
One of the best reasons to use numismatic coins as your long-term investment vehicle is that, while gold has recently traded close to historic market highs, numismatic coins are well below their historic highs. Their upside profit potential is very significant, while their downside risk remains quite small.
A recent study by Penn State University, provided to the Joint Committee on Taxation of the House and Senate, showed that U.S. rare coins were a better hedge than gold and produced better investment returns. The study served as the investment basis for legislation that was passed by Congress and which provided for the inclusion of gold in Individual Retirement Accounts. The conclusions over the 28-year period covered by the report were remarkable:
* Rare coins were a better inflation hedge than gold bullion.
* Rare coins were a better hedge than gold bullion against falling prices for stocks and bonds.
* Rare coins produced significant profits even during periods when the price of gold bullion was falling. For example, from 1988-1990, rare coins went up more than 100%; the price of gold bullion fell from $500 to $360.
* The average annual return on rare coins was more than 200% greater than the return on gold bullion.
* The return on rare coins in their best year was approximately 100% greater than the return on gold bullion in its best year.
* The return on rare coins in their three best years was approximately 100% greater than the return on gold bullion in its three best years.
Many financial advisers recommend that investors place 10% to 20% of their discretionary funds in tangible assets to maintain a properly diversified investment portfolio. Rare U.S. coins have proven to be an excellent hedge against the effects of inflation. Although renowned for their performance in periods of high inflation, rare U.S. coins have generated strong long-term price gains in virtually every period of economic growth over the past thirty years. They can also be very useful in reducing the overall volatility of an investment portfolio because, on average, they tend to move in the opposite direction of paper investment vehicles. Thus, rare U.S. coins can provide investors with security and peace of mind.
Furthermore, with the advent of the independent coin grading services – Professional Coin Grading Service (PCGS) and Numismatic Guaranty Corporation (NGC) – rare U.S. coins have become the most liquid collectibles of all. On a typical trading day, thousands of certified rare U.S. coins are bought and sold on the Dealer Trading Network.
Below is a list of the best gold and silver investments we recommend to our clients at Wholesale Direct Metals. All of these investments are rare numismatic coins that maintain all the advantages of numismatic investing we have detailed throughout this book.
Best Investment #1: St. Gaudens Gold
$20 Saint Gaudens gold coins, also known as Double Eagle Gold coins, were minted from 1907-1933. The $20 Saint Gaudens gold coins were commissioned by President Theodore Roosevelt and designed by sculptor Augustus Saint-Gaudens. $20 St. Gaudens gold coins are considered by many to be the most beautiful of U.S. coins.
Best Investment #2: Liberty Gold
$20 Liberty Gold coins, also known as Liberty Head Gold coins, are the most popular and recognizable coins of their day. Designed by James B. Longacre, the obverse of the $20 Liberty Gold coin features Miss Liberty donning a crown inscribed with the word “Liberty” and thirteen stars representing the original thirteen colonies. The reverse features a bald eagle behind a striped shield and “United States of America” arced around the top.
$10 Liberty Gold coins, also known as Liberty Eagle Gold coins, were one of the most circulated and popular coins in U.S. history. $10 Liberty Gold coins were minted from 1838 to 1907 with a diameter of 27mm and containing nearly half an ounce of pure gold.
$5 Liberty Gold coins, also known as Half Eagle Gold coins, were the first gold coins minted by the United States government. Millions of $5 Liberty Gold coins were minted between 1866 and 1908 and almost all were used as currency. $5 Liberty Gold coins are the only U.S. coins to have been struck at all seven U.S. Mints open during its circulation.
$2.50 Liberty Gold coins, also known as Quarter Eagle Gold coins, were designed to look very similar to the other Liberty Gold coins. The obverse of the $2.50 Liberty Gold coin contains an image of Lady Liberty with her hair in a bun and wearing a coronet inscribed with the word “Liberty” and is surrounded with 13 stars which represent the 13 original colonies. The reverse side of the coin has the American Eagle with its head tilted sideways holding an olive branch in one claw and arrows in the other.
Best Investment #3: Indian Head Gold
$10 Indian Head Gold coins were commissioned by President Theodore Roosevelt and designed by sculptor Augustus St. Gaudens. The $10 Indian Head Gold coins use raised images rather than incused images as those featured on the $2.5 and $5 Indian Head Gold coins. The obverse side of the $10 Indian Head Gold coin includes the Head of Liberty wearing a headdress containing the word “Liberty” and a 13 star arc along the upper edge representing the original 13 colonies. The reverse side contains the image of an eagle perched on arrows and olive branches.
$5 Indian Head Gold coins were designed by sculptor Bela Lyon Pratt. $5 Indian Head Gold coins were the first to be minted using the incuse relief method, which features recessed images rather than the standard raised image. $5 Indian Head Gold coins were the first coins to feature an authentic American Indian. The obverse side of the $5 Indian Head Gold coin contains a Native American in war headdress and 13 stars along the edges which represent the original 13 colonies. The reverse side of the coin contains an eagle perched on arrows and olive branches.
$2.5 Indian Head Gold coins were also designed by sculptor Bela Lyon Pratt and joined their $5 counterparts as the first to be minted using the incuse relief method, which features recessed images rather than the standard raised image. $2.5 Indian Head Gold coins also join the $5 coins as the first to feature an authentic American Indian. The obverse side of the $2.5 Indian Head Gold coin contains a Native American in war headdress and 13 stars along the edges which represent the original 13 colonies. The reverse side of the coin contains an eagle perched on arrows and olive branches.
Best Investment #4: Gold Proof Eagle
The U.S. Mint produces proof versions of Gold Proof Eagle coins for collectors, also known as Gold Proof Sets. Gold Proof Eagle coins are semi-numismatic with all the privacy and legislation benefits of a full numismatic coin in a contemporary piece. Since Gold Proof Eagle coins are produced by the U.S. Mint, each coin's content, weight and purity are guaranteed by the United States Government. Gold Proof Eagle coins are packaged in a custom-designed portfolio presentation case.
Best Investment #5: Silver Proof Eagle
The U.S. Mint produces proof versions of Silver Proof Eagle coins for collectors. Silver Proof Eagle coins are semi-numismatic with all the privacy and legislation benefits of a full numismatic coin in a contemporary piece. Since Silver Proof Eagle coins are produced by the U.S. Mint, each coin's content, weight and purity are guaranteed by the United States Government. Silver Proof Eagle coins are packaged in a custom-designed portfolio presentation case.
Best Investment #6: Morgan Silver
The Morgan Silver Dollar was minted in the U.S. intermittently from 1878 to 1921. The Morgan Silver Dollar is named for its designer, George T. Morgan. The obverse depicts a profile portrait representing Liberty, while the reverse depicts an eagle with wings outstretched. Containing about 90% silver content, Morgan Silver Dollars are one of the most popular collector coins in the U.S.
Best Investment #7: Peace Silver
The Peace Silver Dollar was minted from 1921 to 1928 and again in 1934 and 1935. Designed by Anthony de Francisci, the Peace Silver Dollar’s design is emblematic of peace. Its reverse depicts an eagle at rest clutching an olive branch with the legend "Peace.” The Peace Silver Dollar was the last U.S. circulating dollar coin to be struck in silver.
Secure Your Retirement with a Gold IRA
If you’re like most investors, you’re worried about jeopardizing your retirement in risky stocks and bonds. If you’d like a safe and time-proven retirement portfolio that has a long history of steady growth, then you’d be wise to secure your IRA or 401K with gold.
Opening a Gold IRA offers you many advantages over other IRAs:
* Owning a Gold IRA means you actually own gold
* Gold IRA's can include any combination of gold, silver, platinum, or palladium
* Gold never becomes worthless like some stocks and bonds
* Gold has a proven history of steady growth
* Gold is a tangible asset with far less risk than other investment assets
Securing your IRA or 401K with gold is actually a very simple process:
* Start a new IRA backed by Gold
* Transfer your existing IRA into a Gold IRA
* Transfer funds from a previous employer’s 401K into a Gold IRA
So in short, Gold IRAs offer you all the advantages of investing in gold with the many advantages of securing your money in an IRA.
Conclusion: Waiting Is the Hardest Part
Even with all the convincing evidence that now is the right time to invest in gold, it’s understandable that you might need a little more time to buy gold. People need to convert their green paper money and their debt-based savings into gold when it’s comfortable for them to do it. It’s important to note, however, that most investors who have waited to buy gold over the past 10 years have cost themselves a lot of money. Remember, you don’t buy physical gold today to sell it next week, so “market timing” is less important. The dollar’s decay has been a long road in one direction; and yes, there have been short bursts of dollar strength (and thus gold weakness) along the way. But waiting to own gold is the same as waiting for the dollar to fall.
Let’s be crystal clear about the concept of “waiting” in this type of global monetary landscape. If you are considering gold, you must be aware of the following issues: the volatility of banking systems around the world, unsustainable national debts globally, the decay of fiat money, and the general frustration with our taxation systems, trade systems and Wall Street’s basic functions. After the meltdown of large institutions like Lehman Brothers and MF Global, anyone “waiting” to protect their financial wealth is simply walking on thin ice while juggling fire. You either get it, or you don’t. And those that get it… aren’t waiting.
That’s not to say you don’t still have some very good questions about investing in gold and silver. That’s why we continually address investor concerns on our website, www.WholesaleDirectMetals.com, and you are always welcome to contact me directly with any of your questions or concerns. You’ll find all our contact information on our website.
Addendum: Gold & Silver Bullion Investing
For all the reasons we’ve cited in this book, we typically advocate investing in numismatic coins over gold and silver bullion when advising our clients at Wholesale Direct Metals. Yet some of our clients are still interested in investing in gold and silver bullion, and we’re happy to accommodate them. Below is a primer on gold and silver bullion investing, followed by a list of the top gold and silver bullion coins on the market today.
Bullion refers to any precious metal in a form in which its primary value comes from the worth of the metal, not from a currency value or rarity value. Bullion is most often traded in the form of coins minted by national governments, or in bulk ingots.
While government-issued coins have a nominal value assigned to them upon minting, this value is virtually always overshadowed by the commodity value of the metal itself. As an example, most government issued gold coins have a currency value of between $10 and $100, but usually contain at least one troy ounce of gold. Given that the exchange rate of gold consistently rises and has been worth at least $350 a troy ounce since this century began, one can see that the government-assigned currency value of a bullion coin is essentially meaningless.
Instead, the value of bullion is affected by three factors: metal, weight and purity. The metal consisted in the bullion is obviously important in determining its overall value: gold is worth more than silver, while platinum is often worth more than gold. The weight of bullion is usually measured in troy ounces, where one troy ounce is equal to approximately 31g. Purity also varies widely in bullion, though many countries release coins with 99.99% purity, which is as close as one can practically get to pure.
The average minting of a bullion coin is less than 10,000, which is one of the reasons they are so popular with collectors. Extremely limited presses are also relatively frequent, with countries sometimes releasing as few as 20 to 50 of a certain bullion coin. Silver coins, particularly, are popular with collectors; because of the relatively low worth of their metal, they are in general cheaper. For this reason, silver bullion coins, more than gold or platinum, are often valued substantially above the market value of their metal content.
At this point, most major countries offer at least one type of bullion coin. Usually these coins will have one main symbol they use each year, though some nations choose to keep the same theme but alter the image yearly. Below are the top gold and silver bullion coins on the market today.
American Gold Eagle
In 1986, the United States began striking silver and gold bullion coins to compete with world bullion coins such as the Canadian Maple Leaf, the South African Krugerrand, and others. The value of these coins is tied directly to their metal value. The obverse of U.S. gold bullion coins follows the artistic design created by Augustus Saint-Gaudens for the $20 Gold Double Eagles issued from 1907-1933. The design features Lady Liberty carrying an olive branch and a torch.
American Silver Eagle
Silver Eagles are the official silver bullion coins of the United States. First released in 1986, American Silver Eagle have a face value of one dollar and usually trade at a percentage above spot silver price. They feature the Walking Liberty design that was originally used between 1916 and 1947 on the obverse of the half-dollar coin. On the reverse of these beautiful coins is an eagle design by John Mercanti.
British Sovereign
Simply put, "Sovs" are one of the most popular gold bullion coins in the world. Each gold British Sovereign features the bust of the reigning Monarch – King George the Fifth. The reverse of each coin is the mythical "Saint George Slaying the Dragon" design. They contain about one-quarter ounce of pure gold (.2354 troy oz.). British Sovereigns also have a fascinating military history. For decades, they were recognized worldwide as "emergency money." During World War II, Allied pilots carried British Gold Sovereigns in their survival kits, as do American pilots in case they are downed in action.
Swiss 20 Franc
Like the Gold British Sovereign, Gold Swiss 20 Francs are one of the most popular gold bullion coins in the world. Swiss gold coins were first struck in 1492 and were known worldwide as a universal currency for many years. Swiss gold coins are recognized around the world as an inexpensive way to acquire beautiful gold bullion coins. Each Swiss 20 Franc weighs 1/5 of an ounce and contains .1867 troy oz. of pure gold.
Canadian Gold Maple Leaf
The Canadian Gold Maple Leaf is the official bullion gold coin of Canada and is produced by the Royal Canadian Mint. The Gold Maple Leaf is one of the purest gold coins of regular issue in the world, with a gold content of .9999 fineness (24 carats). It contains virtually no other base metals at all, only gold exclusively from gold mines in Canada.
Gold Krugerrand
The 1 ounce Gold South African Krugerrand has been a gold bullion investor favorite since they were introduced in the 1970s. These coins come in a variety of sizes and are generally not collected by date. They are traded on a daily apply basis as a standard of the gold bullion market.
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Damon Geller serves as CEO of Wholesale Direct Metals and is one of the most respected gold and hard asset managers in the industry. His trend analysis is widely read and quoted, and he is often invited to appear on financial radio and television programs nationwide. Damon’s insights are carefully derived from Fed and monetary policy, debt-based economies and the history of money. This background supports his exceptional ability to interpret how current policy frameworks affect numerous investments. Damon doesn’t reserve his expertise and trend forecasting for high net-worth clients only; rather he freely shares his views and knowledge with anyone seriously interested in investing in gold and other precious metals. Damon’s company, Wholesale Direct Metals, has received the highest marks in client services, delivery time, investment returns and customer service. Damon received an economics degree from The University of California-San Diego. Damon’s feature analysis, “Ask the Expert,” can be read on his company website, www.WholesaleDirectMetals.com.