Don’t own any gold or silver yet? New to the precious metals? Regardless whether you are a novice or seasoned veteran, the following seven points provide essential background information you can use to help determine whether the precious metals are right for you. Words: 1311
So says James Turk (www.goldmoney.com) in edited excerpts from an article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited ([ ]), abridged (…) and reformatted below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.
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Turk goes on to say:
1) Gold is not a commodity; it is money
Soybeans, crude oil, copper and other raw materials and agricultural products are consumed and disappear. They are commodities. Their value arises from their usefulness as a consumable item. In contrast, gold is not consumed and therefore does not disappear. Essentially all the gold mined throughout history still exists. This above ground stock of gold has value because gold is useful in economic calculation and preserves purchasing power over long periods of time. For example, the price of crude oil in terms of gold is unchanged from 60 years ago, or in other words, an ounce of gold purchases the same amount of crude oil today as it did in 1951.
2) Gold is not an investment; it is money
Gold does not generate cash-flow. Gold is not a wealth producing franchise, like a company that creates wealth by producing marketable goods and services. When you buy gold, you are not making an investment. You are simply exchanging one form of money – the national currency used in your purchase – for another form of money, namely, gold. Therefore, the decision to buy gold should be based on gold’s attributes compared to those of national currencies. In this regard, gold emerges as the clear winner. Using the example in #1 above to highlight one of gold’s most important attributes and a major weakness of the dollar, a barrel of crude oil today costs more than $100, compared to less than $3 in 1951. The dollar has not preserved purchasing power. The interest income earned on a dollar deposit over this period of time will offset some of that loss, but it is important to remember why interest is paid in the first place. It compensates you for the risk of holding dollars – risks like inflation, a bank default, capital controls and other pernicious events that are harmful to your purchasing power. You do not have these risks with gold.
3) Do not trade gold; accumulate it
It is very easy to get caught up in the emotional aspects of the precious metals, given how frequently and cleverly brokers and others benefiting from trading volumes create artificial excitement simply by fanning the flames of gold’s price fluctuations. Leave trading to the professionals and speculators. It is difficult to “make money” from gold in that way. Given that gold is money, accumulate it, or in other words, “save money”. Saving money is a good thing, particularly when you are saving sound money. So plan your household budget to put away some gold every month for your retirement or simply as a matter of prudence for that proverbial rainy day. It is savings, and available until you use it to make an investment or spend on some consumer good. Over time, you will clearly reap the financial benefits from your dollar-cost averaging program.
4) Buy physical gold, not paper-gold
Physical gold is a tangible asset, while paper-gold is a financial asset. With paper-gold, you do not own gold. You only own exposure to the gold price, and the value of your asset is dependent upon someone’s financial capacity and willingness to make good on their promise to you. In other words, you have counter-party risk, which is something you do not have when you own a tangible asset. For several years, the global economy has been working its way through a financial bust, which are always characterised by the breaking of promises. For example, Lehman Brothers could not meet its promises, and more recently, the Greek government has been unable to repay its commitments. Therefore, the rule-of-thumb is to avoid financial assets during a financial bust. Given that today’s monetary and financial problems remain largely unsolved, own physical gold and not any paper-gold substitute.
5) There are only two ways to buy physical gold. Buy it and store it yourself, or buy it and have someone store it for you
Each alternative has advantages and disadvantages, and every individual has to weigh up these pros and cons and decide which alternative, or perhaps both alternatives because diversification does mitigate risk, best suits his or her needs. For example, when you store gold at home, you have it at hand. However, you run the risk of theft, the cost of insurance is expensive (if you can even get it), and your liquidity is impaired because you have to return the coins to a dealer to exchange them for national currency. You may also even incur the time and cost to get your gold refined to determine the gold content before the dealer accepts it. In contrast, when you store your gold, silver, platinum and palladium in GoldMoney, you do not have it at hand, but it is stored for you in a secure bullion vault and insured. What’s more, you can sell your metal 24/7 and have the proceeds wired the same day to your bank account anywhere in the world, so you have exceptional liquidity.
6) When you store physical gold with others, ask to see the audits
When storing metal with others, you do not have the storage company’s counterparty risk because you are not exposed to their balance sheet, but you do have performance risk. In other words, you have the risk that your precious metals are not being stored in accordance with the Customer Agreement. Independent third-party audits are the only practical way to gain the assurances of integrity that you metal is safe and secure. Do not store with any company if they do not have independent third-party verification provided by regular audits by one of the Big-4 auditing firms confirming that the weight of metal being stored equals the quantity of metal owned by the storage company’s customers.
7) Silver is both a commodity and money
Some of it gets consumed and disappears, for example, the silver used in photography. But like gold, it has thousands of years history as money and is accumulated (saved) as coins and bars. Silver though is very different from gold in one very important respect. Silver is very volatile, which can be measured by the number of ounces of silver needed to exchange for one ounce of gold. A year ago it was 65 ounces of silver; last month it was 32 ounces, and today it is 40 ounces. This volatility is not for everyone, but if you are prepared to accept this volatility, then own some silver too. Over the next few years, these two metals are likely to move toward their historical exchange rate of 16 ounces of silver to one ounce of gold, meaning that silver will do even better than gold, or in other words, silver has some catching up to do in this ongoing precious metal bull market.
Is it too late to buy gold?
Gold has risen ten years in a row against the US dollar, and while 2011 is far from over, it looks like gold will be higher this year too. So clearly, gold has come a long way. It is therefore natural to ponder whether you should be buying gold now. Is it too late?
Believe it or not, but I have been asked this question dozens of times over the last ten years. My answer has always been the same. No, it is not too late, which is the same answer that I have today. What’s important is not the price of gold, but rather, its value.
Don’t let gold’s high price distract you from the important points that gold does not have counter-party risk and preserves purchasing power over long periods of time. Gold is sound money, which everybody should be saving.
Oftentimes perception, and not reality, rules the day with the thousands or millions of speculators placing short term bets with assets like silver. These perceptions are particularly strong given that paper players in the silver market often control the price in the short term (6-8 months), since there is so much more paper silver than physical metal out there…Here are five common myths about silver that I bet many speculators still believe are true. Words: 1638
Will our National Debt be trillions higher than today in a few years? If you think the answer is yes, than buying physical gold today is a good idea. It’s that simple. Just look at the chart. Words: 140
34% of Americans say gold is the best long-term investment, but how many of that 34% actually own it in the form of coins and bullion? No one has that figure, but my guess would be less than 1% of the total population, and when global investment demand doubles or triples (or more) from current levels — a distinct possibility — and you paint a whole new picture for gold. You begin to understand why gold is not in a bubble at all but, in fact, is in a long-term secular bull market that is still amassing considerable potential energy. Words: 1092
143 analysts maintain that gold will eventually reach a parabolic peak price of at least $3,000/ozt. before the bubble bursts. Of those 143 a total of 103 see gold achieving a price of at least $5,000/ozt. and 20 predict that gold will reach a parabolic peak price of $10,000 per troy ounce or more. Take a look here at who is projecting what, by when and why. Words: 745
Once you see that precious metals are the place to be, then you need to choose between the big 4 precious metals; gold, silver, platinum and palladium. Platinum and palladium have rarity and industrial use going for them but they have never been used as money in history. With a currency collapse, I want something that will have the most demand to drive up the price the most. I want my metal to have industrial, investment and monetary demand. This leaves us with gold and silver as the only two rational choices for investment in the face of a mathematically inevitable world-wide currency collapse. So let us go through the competitive advantages of silver over gold. Words: 220
You have no doubt read countless articles on the price of gold costing x dollars per “troy ounce” or perhaps just x dollars per “ounce” but the difference between the two measurements is significant. For that matter, what’s the difference between a 24 karat gold ring and an 18 karat gold ring? What’s the difference between a .75 and a 1.0 carat diamond? Let me explain. Words: 963
For the past decade gold has been “catching up” to the amount of money (M2 and M3) in the system to make up for understatement of the gold price due to U.S. price fixing on its way to an inflation-adjusted value of approx. $2,300 – and that is just the beginning. If, and when, we see a release into the market of the trillions of U.S. dollars being stored on balance sheets of banks, companies, and other countries around the world then the price of gold should explode upward. Let me explain why that would be the case. Words: 850
You already know the basic reasons for owning gold — currency protection, inflation hedge, store of value, calamity insurance — many of which are becoming clichés even in mainstream articles. Throw in the supply and demand imbalance, and you’ve got the basic arguments for why one should hold gold for the foreseeable future. [T]here is another driver of the price, however, that escapes many gold watchers and certainly the mainstream media [a]nd I’m convinced that once this sleeping giant wakes, it could ignite the gold market like nothing we’ve ever seen. [Let me explain.] Words: 788
Beyond its role as a diversifying agent in a portfolio, perhaps the most enticing attribute that gold offers is the huge potential for price appreciation. Although prices were stuck in somewhat of a rut in the middle part of the last decade, financial turmoil, money printing, and widespread fears over inflation have pushed gold prices sharply higher in recent years to near all time highs… Given the continuation of easy money policies by the Fed and other central banks around the world, as well as the very real possibility of more turmoil in the financial space, it isn’t surprising that many investors are looking to cash in on this modern day gold rush. For these investors looking to make a play on this elusive metal, we explore below every nook and cranny of the investing world to offer 50 ways to play gold. Words: 2768
In the East…gold is not only celebrated, acquired, worn or displayed during holidays or special occasions; it is seen as an everyday symbol of wealth. Increases in demand from China and India have driven a 7.5 percent increase in demand for gold jewelry during the first half of the year despite a 25 percent increase in the price. [Overall,] gold buying in India jumped 38 percent during the second quarter alone…China’s gold purchases jumped 90 percent on a year-over-year basis through June. In addition, demand from central banks is growing dramatically. [Such activity is setting up a] perfect storm – a tidal wave of gold demand [which can only keep prices high and escalating. Let me be more explicit.] Words: 959