Category Archives: Buy Gold

The first steps to hyper-inflation

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Not for the first time the Financial Times says we are “nuts” – a
word which all too often follows on from “gold” in the financial
media.

I should rise above this sort of thing. What does it matter if the
FT thinks me nuts? But I find I’m irritated, both for myself and
on the collective behalf of successful gold investors. I don’t
think we deserve to be called “nuts” after our gold has for 6
years so consistently outperformed all those other serious
investment classes so diligently analysed on Wall Street and in
the City.

Gold continues to strengthen against the Dollar. Faint hopes of a
swift “V-shaped” recession are dwindling, which is hardly
surprising. Global economic activity up to 2007 was driven by rich
world consumers buying things even they couldn’t afford. In the US
alone they have since lost about $12 trillion of private wealth –
$120,000 per family. Judging by estimates published in The
Economist this should induce a demand slump of about $500 billion
per year, for 10 more years.

That means a typical family will be cutting back spending at the
rate of $5,000 per year for a decade. So our economies will stay
shrunk, threatening deflation.

To combat this governments are trying to engineer some inflation.
Deficit spending here, quantitative easing there, and zero
interest rates everywhere; with all of it geared to stimulating
more production in a world already suffering over-capacity. This
is where they step into dangerous territory.

Retail prices inflate in an overheating economy when there is a
supply shortage of consumer goods. Because demand outstrips supply
the producer has the whip hand, and he exploits it by asking more
money for his goods. But look around you today and you will see
there is no supply side shortage in the world economy. So if we do
get inflation it’s not going to be because of overheating.

Hyper-inflation, on the other hand, has little to do with supply
side shortages and overheated economies. It happens when a
currency dies. Once the realization grips savers (not consumers)
that their money is losing its purchasing power then they exit
money and look for better stores of value.

So while ‘normal’ inflation is driven by consumer-pull for goods,
hyper-inflation is driven by saver-push of money, and this
explains a big qualitative difference between inflation and hyper-
inflation.

Modest inflation through undersupplied goods has a negative
feedback because new supply pulls prices back, bringing the
economy back to equilibrium. Hyper-inflation does the opposite.
Once it starts it suffers a positive feedback by encouraging more
and more savers to dump cash. What starts as a trickle accelerates
into an unstoppable torrent of savings pouring into circulation.

The unusual problem we now have is that after using cash rescues
to protect the overcapacity in our economies we are not going to
be able to create normal, controllable, supply-shortage inflation.
It’s increasingly likely that the only style of modest price rises
which the central banks can engineer will be the trickle which
precedes a hyper-inflation.

Indeed, what caused the Financial Times to wheel out the old “gold
nuts” phraseology was the strange case of last week’s bond
markets. Bond prices – the best proxy for the future value of cash
– were falling when they should have been rising. The markets are
telling us that cash 10 years forward is becoming less valuable.
This is a hint of savers losing faith in their currency.

And why wouldn’t they? Their deposits will pay them no interest
for the foreseeable future. Inflation and tax will eat into their
savings. The economy looks mired in recession. Governments, which
are now welcoming devaluations as a trade benefit, are deep in
debt and are toying with hyper-inflationary policies like
quantitative easing. It all points to the inflationary transfer of
the government’s enormous debt into plummeting values for
depositors’ cash and investors’ bonds.

An insight – courtesy of Bill Bonner – suggests what could soon
happen. There is an $11 trillion bond mountain, which is $96,000
of issued US Dollar bonds per US family. With total federal
obligations now reaching above $63 trillion, this is the polar
icecap of contemporary finance, and it holds the bulk of the
savings of two generations, all denominated in dollars which are
frozen solid until their redemption date. If the Fed gets what it
wants, then a modest dose of inflation now will forestall a
depression. But inflation will heat that icecap and make the bond
market more jittery, and at exactly this point the Fed says it
will reverse its QE policy and sell bonds back into the market,
because this is how it plans to get cash back out of circulation
to control the inflation it has created.

Choose your poison: The trickle of excess QE cash or the trickle
of excess bond redemptions, both in a world of over-supply. It
seems all roads lead to inflation. Don’t assume it will be the
manageable kind.

Kind regards,
Paul Tustain
Director, BullionVault

Now is the Time to Buy Gold

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By Darryl Kelley
MidasLetter.com
Tuesday, April 7th, 2009

Given the false hope inspired by the conclusion of the G20 summit in London last week, and its associated residual ‘positive sentiment’ effect on global equity markets, now is a good time to accumulate gold and related asset classes. That’s because the price has suffered exactly the kind of steep correction that over the last 8 years have typically preceded a fresh assault on new highs.

And there are other telltale signs that gold is about to take a Great Leap Forward.

Foremost amongst them is the fact that the AMEX HUI Goldbugs Index is foreshadowing a jump with its habit presaging enhanced interest in gold with a sharp drop followed by a sharp rise. (The rise part of the equation has yet to form).

Secondly, the engineered ‘positive sentiment’ by U.S. media and financial elements has now served its purpose, which is to lend a mantle of credibility to the G20 process by allowing participants and leaders to point to robust markets as proof that their collective actions embodied in 15 pages of summary were in fact successful.

Third, there is the deluge of corporate earnings to be unleashed pre and post Easter weekend, which are almost uniformly awful. S&P 500 companies are expected on average to decline 37 percent, the eighth straight quarter of double digit losses in quarterly earnings.

And finally, analysts (to use the term loosely) have seemed to arrive at the unanimous conclusion that the IMF’s planned sales of gold to raise $50 billion will have no meaningful impact on the gold market. Maybe that’s because, as GATA will tell you, they don’t have it.

SOURCE: http://www.midasletter.com/news/09040703_Now-is-the-Time-to-But-Gold.php

Bob Prechter on Silver & Gold

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By Nico Issac

In case you hadn’t noticed: Over the past year of financial turmoil, the “safe haven” premium of precious metals has offered about as much support as a rubber ducky in a tsunami. Despite a string of powerful rallies, silver and gold remain well below their March 2008 peaks.

It goes without saying that the greatest opportunities in precious metals were not had by those who played the “disaster hedge” card; but rather by those who timed the trends as they developed, regardless of the fundamental backdrop.

Bob Prechter is in the latter group. Amidst the buzz and whirl of the most bullish backdrop in precious metals’ recent history, gold and silver prices soared to new, all-time highs and calls for a “New Gold Rush” and “$30 Silver” flooded the mainstream airwaves. Yet Bob alerted subscribers to an approaching top in the March 14, 2008 Elliott Wave Theorist.

“The wave count [in silver] is nearly satisfied, though ideally it should end after one more new high. If this analysis is accurate, and silver does peak and begin a bear market, gold is likely to go down with it.”

In the days that followed, prices in both metals fell off a cliff. In turn, Bob was asked to address his exceptional call for a turn down in a March 19, 2008 Bloomberg interview. Here are of excerpts from that conversation:

Bloomberg: “Why did you put out that call on Friday (March 14) about a peak in precious metals?”

Editor’s Note: You can download Bob Prechter’s 5-page report, Gold & Recessions, free from Elliott Wave International. It features 63 years of historical analysis that reveals how gold, T-notes, and the DJIA have performed in recessions and expansions.

Bob Prechter: “One of the reasons is that it seemed like an absolutely sure thing. We track several indicators of sentiment. One of them is the Daily Sentiment Index (DSI). That reached 98% bulls on a one-day basis going into this last high. We were tracking silver as well… as it is clearest in our minds. Now, at the time, we needed one more slightly new high. That happened Monday morning and silver dropped 15% in 48 hours. That’s a heck of a reversal and I think it’s real.”

“Real” indeed: From their March peaks, gold prices plummeted 34%, alongside a 60% sell-off in silver before hitting the breaks in October. Here, the October 2008 Elliott Wave Financial Forecast prepared for a corrective rebound and wrote:

“Silver traced out a five-wave decline from its March peak…Gold should also rally as silver pushes higher. Once silver’s rise is exhausted (initial target: $15.15), the larger downtrend should resume for both metals.”

A powerful, four-month bounce ensued in both metals: Gold prices came within kissing distance of its March peak before turning down on February 20; silver followed suit — a fulfillment of this bearish, near-term insight presented in the February 23 Elliott Wave Theorist:

“Silver has been clear as a bell. Silver is due to turn back down, and gold, which is back at $1000/oz, is likely to follow.”

Since then, it’s been a steady march lower for both metals. Obviously, EWI’s forecasts do not always prove this accurate. Yet in this case the analysis speaks for itself.


For more metals analysis from Bob Prechter, download Gold & Recessions a free 5-page report from Elliott Wave International. It features 63 years of historical analysis that reveals how gold, T-notes, and the DJIA have performed in recessions and expansions.


Robert Prechter, Certified Market Technician, is the founder and CEO of Elliott Wave International author of Wall Street best-sellers Conquer the Crash and Elliott Wave Principle and editor of The Elliott Wave Theorist monthly market letter since 1979.

Protecting Yourself From the Collapse of Fiat Money

What has happened to Iceland (bankruptcy) is what
naturally happens when any country lives beyond
its means, and creates a debt pyramid.

The only reason it hasn’t happened as yet in the
larger countries is because the debt pyramid is
being expanded to delay the evil day.

How? It’s being expanded by using more debt to
solve the problem of too much debt already. And
if you’re confused by this truism, then sit back
and relax – your “leaders” really do know what
they are doing. NOT.

But just ask yourself – if banks need more capital
(which in any rational world means savings), how
can injecting debt or more paper money solve their
problem, when such injections are clearly not
capital?

However, it’s entirely possible the worst case
“Iceland” scenario will not happen in the USA,
Canada, UK, Australia, New Zealand and the EURO
zone – at least not at this time. The current
policy of “recapitalising” banks with non-existent
money may just forestall the final reckoning to
another day.

The debt pyramid system has hobbled along now
for some time – by simply injecting more debt.
And the magic trick of “confidence” may just
pull off another delay in the inevitable.

Which gives us an opportunity – an opportunity
to actually find a long term solution. Doom-saying
and panic will not solve anything. So if MORE
debt is not the solution to an over-indebted
global economy – what is?

A good start would be to read this article
by Lew Rockwell:

“How to Fix Our Depreciating Money”
http://www.lewrockwell.com/rockwell/positive-program-for-money.html

Then get yourself this book – “Good Money”
by George Selgin:

http://www.mises.org/store/Good-Money-P519.aspx

What is most important to know and act on is the
fact that government FIAT money is money by decree.
It’s only as good as the faith people have in it.
That’s why through most of history people have
used either gold or silver as money – something
which con-artists (governments most definitely
included) cannot manufacture at will.

Zimbabwe is a good example of government fiat money
being inflated to worthlessness. The best use for
it is probably toilet paper!

In the absence of any competition in currencies –
i.e. that you are limited to legal tender in your
own country – a good personal strategy is to start
owning gold. Gold as potential future money.

My recommended ways to own gold (or silver) are
via the services below:

BullionVault
http://www.bullionvault.com

BullionVault allows you to buy, sell and trade
gold in a live market. You can have your gold
stored in Zurich, London or New York – and can
buy and sell in seconds. You get a free gram of
gold for opening a new account.

GoldMoney
http://www.goldmoney.com

GoldMoney also allows you to purchase gold AND
silver, as well as transacting with other GoldMoney
account holders. In this way gold (and silver) can
act as money, and as a means of exchange.

Both services require full ID and proof of address
to activate an account – but it will be well worth
the effort to start storing some of YOUR money
in there – just in case!

David MacGregor

SovereignLife Enterprises

Why the Mania Phase in Gold May Be Upon Us

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Here is another interesting article I came across in the August 2008 edition of Escape from America Magazine. In this article, Jeff Clark, makes the interesting assertion that there is a gold mania right around the corner. I don’t know about mania, but I can definitely agree that gold will continue to robustly appreciate in value. The current low price of gold just may be the perfect buying opportunity. For the long term I believe we are witnessing a brief correction and once it is over the rally in gold should resume. It’s all about inflation folks. Keep an eye on inflation indicators!

Well, without further ado let me pass you on to the source article. Click here to read Jeff Clark’s article.

Enjoy!

Gold & Silver bullion coins appeal to investors as stocks sink

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As investors watch their 401(k)s and RRSPs continue to melt away with every stock-market drop, many are rethinking their investment strategies. In some cases volatile stocks and low-yield bank accounts are giving way to coin collections and stockpiles of gold and silver.

“We’re dealing in gold and silver bullion and we are doing extremely well. Quite a bit of the (economic) stimulus money is coming into the store,” said Phil Carlino, the president of Fremont Coin Co. “People are smart. They are protecting their money by putting it into something other than paper.”

Checkout my source article for more details:

http://www.lvbusinesspress.com/articles/2008/07/07/news/iq_22468788.txt

I’m not so sure buying precious metal coins is the best route to go. You typically have to pay a much higher above spot premium when buying precious metal coins. Don’t get me wrong, it is a good idea to have some physical gold on hand, but for large scale investing I think buying bullion coins is not the best idea. You can save a lot of money by buying either investment grade bullion bars or buying gold from a popular gold storage provider.

Here are some  of the most popular ones:

BullionVault – from what I can tell this is the most economical provider

GoldMoney – brainchild of gold bug James Turk

Anglo Far East Bullion – no storage fees for up to 7 years

Alternatively you can buy gold and silver “e-currencies” (digitized gold and silver) from the likes of c-gold, e-gold, e-bullion, pecunix, webmoney, crowne-gold, phoenix dollar, etc. However I believe that these e-currencies carry a slightly higher risk than the above mentioned established gold storage providers. The upside is that the storage fees that e-currency providers charge can be substaintially lower.

If you’re still planning on buying precious metal coins I’d recommend you checkout ebay. I managed to find some pretty good deals on investment grade bullion coins (such as gold & silver maple leafs). The premium that I paid over the gold & silver spot rate was quite low. The only downside is the risk that comes with ebay – you know, the seller not sending you the item after you paid for it. I do not recommend this for large purchases!