Gold.....Ready to Rumble! Part Two, Buying Gold
Commodities / Gold & Silver 2009 Feb 06, 2009 - 02:20 PM GMTBy: Richard_Mills
We Are Running Out of Gold - Production at existing mines is grinding down at the same time investor demand is climbing. A quick scan of last year's individual country production numbers shows declines right across the board except in China whose citizen's snap up all they can. China, for the second year in a row is now the world's top gold producing country, easily passing perennial top producer South Africa.
Since we are running out of gold very quickly, all the gold that's left in the ground is extremely valuable. Who does the exploration and development of gold projects? Who then mines, owns and sells the gold? Gold mining companies.
Newmont's raising $1.2 billion. Freeport is raising $750 million. Kinross raised $400 million two weeks ago. Also two weeks ago Red Back raised about $150 million. Yamana just raised $135 million and borrowed $200 million to stick $335 million in the treasury. Late last year Agnico-Eagle got $300 million from selling some stock after borrowing $300 million in the early fall. These major gold mining companies are planning on raising production levels and increasing their reserves by acquisition of other gold producing companies and post discovery resource definition juniors.
Our gold producers are quickly becoming market darlings. This is happening right now because dropping prices makes mining, milling and G&A costs a lot cheaper. It directly affects their bottom line making them suddenly attractive to mainstream investors whose normal stocks with their pathetic earnings are a whole lot less attractive.
Of course this brings up the question “Why do main stream stocks look so bad?” The answer is the worsening economic conditions, which have no end in sight and that gold shines in. Because of the breakdown in the financial markets and poor economic conditions I believe it's extremely important that each and every one of us owns some gold and keeps it close at hand.
What about holding larger amounts of gold as an investment? Money is starting to flood into the gold sector and both gold and silver look like their going to rise significantly in price.
Warning, I'm not a licensed financial planner, a broker, an analyst, a geologist nor an economist. And I'm also not, as you successfully opinionated about in your e-mails concerning my last article, an English professor. I'm also not a doom and gloomer or a gold bug. I'm just an investor who believes precious metals are a good investment and safety net to get into right now.
I believe this to be true because owning physical gold is the ultimate store of wealth and it also acts as a safe haven in the current worsening by the day crisis. Fiat currencies have come and gone since time immemorial but gold has always retained its value and it's purchasing power.
In this, the second article in a series of articles about gold (the first article Gold…..ready to rumble! was about why gold/silver now), I'll be discussing the easiest most convenient ways to buy the appropriate physical gold products to firstly act as a permanent social safety net that can be kept close at hand and secondly to purchase and store offshore gold as the one true safe haven store of value it is. This dual pronged approach to gold ownership is a strategy that risk-averse investors and savers wanting liquidity combined with low-costs as well as protection from financial market meltdown should consider.
Buy Very Small Gold Coins and Bars
A supply of different size/value gold coins and smaller bars kept close to home is the best way to ease the mind and navigate through troubled times. Say things do go to hell and you need to buy food, water or medicines with your gold stash. Do you want to saw different sized chunks off your large gold bar every time, do you want to chop your one ounce gold coin in half or quarters for smaller purchases? No, you don't, what I'm talking about is a stash of smaller bars and different denomination coins easily stored, transported, sold and traded. The slight premiums for buying these smaller sizes are more than offset by the convenience of having different products of different denominations when you need to use them. Hopefully you never will.
Bullion coins come in a range of sizes from as low as 1/25th of an ounce to one ounce. A good safety net stash of gold is a combination of coins, wafers and one-ounce bars.
The advantages of owning the smaller denomination coins/bars include:
1. Easy transportation. Slip a couple half or one-ounce gold coins into your pocket.
2. You can take a Canadian Maple Leaf, Australian Nugget or an American eagle into any coin store anywhere in the world and it'll be accepted. Everyone recognizes the value of gold; in wartime pilots are given gold so if they have to bail out over enemy territory they have a bargaining tool to use with the locals to help them escape. Who hasn't heard of people fleeing from tyranny and with the help of gold crossing borders to freedom?
3. Coins/wafers/bars are easy to store.
4. If you want to sell or trade some of your gold its easy to do.
5. Gold is actually very easy to buy, look in the phone book for a dealer (Gold, Silver & Platinum Buyers & Sellers in my Yellow Pages) that's close, drive over and buy some, it really is that easy.
Purchasing gold for most Canadians is very easy and convenient. I walked into a Bank of Nova Scotia, sat down, looked over a product sheet and ordered, paid, got my gold less than three weeks later. No bank or dealer selling gold in your town? Go online and use Google, you'll find many companies selling the appropriate size and denomination products that will be the most use to you.
There have recently been some shortages in the more popular one-ounce gold coins but other smaller sizes are readily available as are the smaller bars. My personal preference is for the smaller one-ounce bars and wafers in gold and then the smaller denomination gold coins. As for silver I like bars up to 100 oz's.
Getting a secure storage place for your precious metal stash should not be difficult or expensive. Buy a good safe, and keep it out of sight.
So now that you've got some physical gold and silver close to hand, to get through any emergency, how do you go about purchasing larger amounts of gold for investment purposes? What about insurance, offshore storage, access and regular updates combined with ease of buying AND selling? Is there a way to purchase gold much cheaper than advertised?
I've done an extensive amount of research and found what I think is an excellent place to purchase gold and have it stored offshore. I like this company so much I opened up my own account and I've entered into an affiliate program with them. Their name is Bullion Vault. http://www.bullionvault.com
Why would you want to store your gold offshore, in a foreign country? If a country is descending into chaos it's usually not the people who are stopped from crossing the border but cash, gold, silver and diamonds. In other words capital is stopped from leaving, you aren't. But I'd bet you'd find it pretty hard to leave under any circumstances if all you worked for and saved for your whole life was going to stay behind and you were being forced to walk away with nothing. But if your gold is stored in, let's say London or Zurich, you would walk across that border because you know you can sell your gold and start again somewhere else.
Another consideration is the often talked about confiscation of gold by government. If your gold is in Zurich it is highly unlikely a foreign government could or would even try to make the Swiss force a custodian to repatriate bullion.
Here are a few other reasons anyone considering purchasing gold for an investment in these turbulent times should consider dealing with Bullion Vault.
-Over 11,000 people worldwide have now bought and stored more gold at Bullion Vault's three accredited professional bullion market vault's (London, Zurich or New York) than most of the world's Central Banks own.
-The professional market, one you are otherwise excluded from, only deals in what are known as Good Delivery bars . These bars are guaranteed 99.5% pure gold or better. To get the best price buying and selling your gold you need to deal in this market.
-A strict “chain of custody” is followed. Because the bars have never been in private hands and are always moved by accredited bullion couriers, gold bar integrity is always maintained. Not having to re-assay to check purity when sold means trading costs are kept low and the trade is done quickly and efficiently. Buying and selling costs, called round trip dealing costs, were as high as 20% for gold coins in 2008. At Bullion Vault you pay a maximum round trip cost of 1.6% and for larger customers you'll pay .04%
- Through Bullion Vault you get access to this professional market and lower gold prices.
- Your gold can be held in accredited market-approved vaults in either the US, Britain or Switzerland and can instantly be sold from one jurisdiction and bought in another.
- Bullion Vault storage charges are less then one tenth of what a retail bank will cost you and less than a third what a Gold ETF will charge you as an annual fee, insurance included.
- There's many more reasons to use Bullion Vault but the bottom line is gold is cheaper, there's less hassle buying and selling 24/7 and your gold is safely stored offshore.
So there you have it, a two pronged approach to using gold as it was always intended to be used, as a flight to safety in turbulent times and as a store of value that preserves your purchasing power and builds true generational wealth.
At Ahead of the Herd we believe there is opportunity in times of crisis, that the set of circumstances we find ourselves in are better than they have ever been for astute and courageous investors. Are you going to be part of the group that plans to take advantage of the tremendous opportunity being presented for extraordinary gains?
If you're interested in the junior resource market and would like to learn more please come and visit us at www.aheadoftheherd.com
By Richard (Rick) Mills
Copyright © 2009 Richard (Rick) Mills - All Rights Reserved
Legal Notice / Disclaimer: This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified; Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report
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