A recent quote by Paul Volker, ex-Fed Chairman, certainly causes one to stop and think, he said “The fate of the world economy is now totally dependant on the growth of the US economy, which is dependant on the stock market, whose growth is dependant on about 50 stocks, half of which have never reported any earnings.”
Prudent investors are beginning to diversify out of financial institutions and paper promises and into tangible assets. Gold is recovering from twenty year lows, and today gold coins provide an opportunity to take a low risk position amidst volatile world financial markets. At the very least, gold provides insurance and peace of mind. In our opinion, placing a third of your money into gold coins is easy, it’s what to do with the other two thirds that is so hard.
For the Past 6,000 Years, the most sought-after form of asset protection has been gold. Gold is the most liquid financial asset in the world. It has no borders, is recognized throughout the world, and can easily be transported or hidden. For this reason, owning gold represents financial privacy and independence. Gold frustrates the attempts of governments to completely control the finances and lives of their citizens.
Gold performs the role as the only true money. Tyrants, dictators, can’t undermine its value nor politicians who print paper money at will, making their currencies worth less and less each year. Unlike paper money, gold hold its value over the long run. For example:
Back in 1933, you could buy a first class, tailor-made suit of clothes with a U.S. $20 gold coin or a $20 bill. Today, that $20 gold coin, worth about $1,100, will still buy a nice suit of clothes. The $20 bill, however wont even buy a decent necktie.During the great depression, cash was king because cash was backed by gold. In truth, gold was king. While most assets plunged like a stone in the 1930s, the price of gold shot up dramatically.
In a depression, economic crisis, inflation or war, people seek financial security. They invest in assets that represent more than just a paper promise to pay. For many, that means owning gold.
GOLD PROVIDES INSURANCE AND PEACE OF MIND
The past few years have not been kind to investors in the traditional markets. Investors and saver have lost over $8 trillion in market declines. Increasing unrest and instability throughout the world will lead to a greater need for financial security. Will we see the kind of double-digit inflation that has plagued the U.S. in the past? Never forget the power of the Federal Reserves printing press. Due to the Fed’s recent record expansion of the U.S. monetary supply, it is likely that the U.S. dollar will continue to weaken.
A spastic economy, with elements of both inflation and deflation, will make more traditional investment strategies obsolete. Gold coins should be a major part of every investorâ€™s portfolio over the next turbulent years.
WHY GOLD PRICES WILL CONTINUE TO RISE
The fundamentals for gold have never been stronger. Global demand for gold exceeds supply by over 1,000 tons per year. Central banks have made up the shortfall- and have helped suppress the price of gold- by selling or loaning thousands of tons of their gold reserves.
Nevertheless, all that is about to come to a screeching halt.
The bull market in the U.S. dollar is now over. As the dollar goes into a long-term downtrend, millions of foreigners will start re-directing their money out of the paper financial markets and into the world’s other proven reserve currency.
All it would take to spark an explosion in the price of gold is one major event- an escalation of terrorism in the U.Sâ€¦.an expansion of the war in the Middle Eastâ€¦another stock market meltdownâ€¦ or a major bank failure.
Once the price takes off, panic buying could easily set in. If you are not in position before the price explosion starts, your opportunity for profits will be substantially reduced.
To safeguard your financial portfolio, we recommend that you place up to 1/3 of your investments in precious metals. The best way to own gold is in the form of privately held gold coins.
However, a shortage of gold coins is already developing. U.S. $20 double eagles are in very short supply. Sophisticated investors are quietly acquiring millions of dollars worth of non-reportable gold coins. When the crowd comes rushing in, supplies of these coins will evaporate and prices will skyrocket as they did in 1979-80.
NON-DEALER REPORTING REQUIREMENTS
Virtually every asset or investment which we own is highly visible, traceable, reportable and under the watchful, scrutinizing eyes of the government. With the new cash and metals transaction reporting law and regulations, even cash, cashiers checks, money orders and most forms of gold transactions are reportable. In effect, the privacy, which was guaranteed by the Constitutions 4th Amendment, has, for the most part, disappeared in the area of investments.
If you sell bullion coins to a coin dealer, the dealer is required by law to report that sale to the IRS on Form 1099. That is one reason to avoid gold bullion coins. However, coins with a premium above 15% do not have to be reported by a coin dealer when you sell them. For example, the semi-numismatic $20 Liberty and $20 St. Gaudens have premium above 15% and are, therefore, gold coins which do not have dealer reporting requirements.
Everyone should own an asset that no one else knows about- a low profile, bearer type investment that leaves no tracks when bought or sold. Semi-numismatic gold coins fit the bill perfectly.
GREATER UPSIDE POTENTIAL
The semi-numismatic $20 Liberty and $20 St. Gauden gold coins currently have a 40-90% premium over bullion. (Numismatic coins have 500-5,000% premiums over their bullion content.) The premium on the $20 gold coins have expanded to 100% in recent years, and under certain bullish gold market conditions, could rise even higher. In a rising gold market, the semi-numismatic $20 Liberty and $20 St. Gauden coins have a substantially greater upside potential than a normal gold bullion coin.
Why? Unlike bullion coins, which are freshly minted by the millions each year, most semi-numismatic coins are nearly 100 years old and in very limited supply.
For example, if the price of gold moved up $100 an ounce, a bullion coin would move up a corresponding $100. However, semi-numismatic coins have historically doubled that movement.
PROTECTED FROM CONFISCATION
Unfortunately, many governments, including the U.S., have a history of confiscating gold bullion coins. In 1933, by Executive Order, the Roosevelt Administration declared it illegal for American citizens to own gold. Practically overnight, a law went into effect that forced Americans to turn over their gold or face up to ten years in prison. Gold was confiscated and replaced with freshly printed-paper dollars. The following is an excerpt from Rooseveltâ€™s Executive Order (dated April 5, 1933):
All persons are hereby required to deliver on or before May 1, 1933, to Federal Reserve System all gold coin, gold bullion and gold certificates now owned by them or coming into their ownership on or before April 28, 1933â€¦
However, there was one type of gold that was exempt from this draconian law— namely, “gold coins having a recognized special value to collectors of rare and unusual coins.” In other words, numismatic and semi-numismatic gold coins.
Since 1975, Americans have been allowed to own gold bullion. During some future crisis, power-hungry politicians, eager to squeeze out the last drop of your civil liberties, could again make gold illegal and confiscate gold bullion bars and coins.
Could the current “war on terrorism” give the government the excuse to call in gold bullion once again? In the event of another “government gold grab,” collectible gold coins have always been excluded from such a confiscation.