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8/13/2019 The Gold Report
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The Gold Report Stuart Goldsmith www.stuartgoldsmith.com
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The Gold Report
By
Stuart Goldsmith
Dateline: October 2011
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For legal reasons we are obliged to state the following:
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NOTE
Please do not worry about this report being old. It is a download so I keep it
right bang up to date. The advice you are reading is almost certainly less than a
week old (if you downloaded it recently, of course!).
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Hello.
Several years ago I wrote a very prophetic
edition of theStuart Goldsmith Newsletter
in which I urged my readers to buy gold.
I usually try to practice what I preach and
so I took a spoonful of my own advice at that
time and piled into gold.
As a result, over the last few years I have made 369,567.00 pure
profit by doing absolutely no work at all!
I did this by making a simple investment decision and sticking to my guns.
I made the investment... I sat back and watched...
Gold did diddly-squat for two years and so I effectively lostmoney (the interest I
could have had if I had invested the money elsewhere.)
Id like to say I snapped my fingers in the face of fate and calmly waited, sure in
the knowledge that I was right. In fact, I got a little jittery. No investment
decision is a sure-fire thing.All anyone can do is to carry out some duediligence, come up with a strategy and then play it for real.
So I checked my facts and checked the fundamentals. They were all screaming
out buy gold so I sucked up my pantyhose and bought more. Quite a lot more, as
it happened!
Then I waited a bit longer...
The graph on the next page tells you the story. Gold started to rise and hascontinued to rise ever since, obviously with a few corrections from time to time.
Some of the corrections can even be quite dramatic!
The result is the very nice profit I mentioned above. Naturally I wish I had
bought even more of the glittering stuff. But there you go.
Now I hope you realise Im not writing this urgent report to boast to you about
how well Ive done! Good for me, but what has my success got to do with you?
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Simple. I believe we are just at the START of a huge ramp-up in gold prices
which could see gold at anything between $3,000 and $5,000 an ounce or even
higher.
At the very leastI expect gold to double over the next twoyears.
I hope you appreciate that if I told you about an investment which wassuretodouble in two years, you would sell your house, car, liquidate everything you own
and pile into that investment, right? I mean you'd be crazy not to.
The only thing that would stop you going all in would be your fear that the
advice was wrong and that you could lose a significant portion of your investment.
Thats perfectly understandable. After all, even I did not bet the farm on gold.
Far from it. In fact I put about 2% of my total wealth into gold at that point. How
timid is that???
You are not alone in being fearful. But in this report I hope to convince you that
gold is a very safe bet (you will not, for example, ever lose ALL of your money,
unlike many other investments) and it also has fantastic upside potential.
The take home advice in this report is to BUY GOLD as much
of the shining stuff as you can get your grubby hands on. As
much as you dare to invest.
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And... you need to do it ASAP because things are getting increasingly ugly out
there.
You could wake up any day to another massive bank collapse
and currency inflation which would wipe out almost everythingyou own.
So having told you to buy gold, the rest of this report is aimed at convincing you.
Oh, and I hope I hardly need to say there is nothing in this for me. No amount of
gold you (or anyone else who reads this) buy will affect the price by a hundredth
of a cent, so Im not in the share-ramping business!
What The Hell do I Know?
But you probably shouldnt listen to me. I am not an IFA (i.e. I am not a brokeperson in a cheap suit advising you on your investments). I have no investment-
related qualifications (thank God). I am not an economist. Im telling you this
because I believe it's something you should urgently do. Take my advice with a
pinch of salt... or seriously. Its up to you. Get a second opinion from some broke
people if it pleases you.
My only qualification is having made many millions following
my instincts and playing with serious money.
On that latter point, here is something really, really important. You cant make
serious money playing with pennies.If you buy 500 in gold after reading this
report, and it doubles, do you care? I doubt it very much. Youre not in the game
if you do that. In fact, I wouldnt bother with such a low stake because the
winnings are insignificant. And worse, it persuades you that you are doing
something about getting rich or at least protecting your assets, when in fact you
are not. You are playing at it or dabbling.
Get Serious!
To make real money you need some balls (for the men) or true feminine grit
(for the ladies).Everyone who has made a decent wedge of the folding stuff will
tell you the same there was a time when their ass was on the line and they were
sweating. You dont want to be betting the farm of course, but you do need to be
betting with real money in any of your investments. Property, shares, gold, silver
whatever it is theres no point in having a few quid in the pot.
I put way over a hundred and fifty grand on the table in my first gold play. Im
not so rich that it wouldnt have hurt me if I had lost that it would.
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The take home here is this: if it doesnt hurt you to lose the
money, it wont excite you to win.
Compare with putting 10p on a horse which comes in at 14-1. Hoorah! Whatever
will you spend your 1.40 on?! You dont care if the horse wins, or loses.
Now consider putting 5,000 on that same horse. Ouch! It hurts if you lose that
amount, but if you win, that 70,000 in winnings is very tasty, thanks very much.
So dont fiddle around with gold its not worth the hassle. You need a serious
(to you) chunk of change in the game
Okay lets get started on convincing you...
What is Money?
This stuff you loosely call 'money'. Just what is it,
exactly? Where did it come from? Is it serving our
current purposes, or could we lose the lot
overnight?
Money is really a way of exchanging units of
labour.
If I live with my family in an isolated region far from other humans, then we will
have to make our own shoes, plough our own fields, fix the roof, grind the corn,
tote that barge and lift that bale - all on our ownsome. No flicking through Yellow
Pages and hiring 'Barge -U- Tote Ltd' or 'Lift-a-Bale & Co' to do the job for us.
We wouldn't need money. This is the way it was for thousands of years.
But it is inefficient for me to do all of these jobs myself. For a start, I'll be
complete rubbish at some of them, and it'll take me far longer to make (say) a pairof shoes than my fairy-fingered friend in the next village. He can knock out a pair
in half an hour - it takes me all day to get the bleedin' cow gum to be the right
consistency to stick the soles on. God, I hatethat job!
People soon wised-up to the fact that living in splendid isolation sucked. It
became obvious that if a few of the guys got together, then they could watch your
sheep whilst you caught a bit of shut-eye, and heck, you could watch theirsheep
whilst theygrabbed some zees.
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Everyone was happy.
Then, after endless tedious centuries of
mutual baa-lamb watching... (cue theme tune
from 2001...) we had a brain-wave...
I could mendyourwalls (I'm brill' with a
hammer, me. I'm a real man) whilstyoucould
ponce around doing all that poofy shoe-
making and sewing stuff (because you are,
let's face it, a great big girl's blouse - no offence). That way, we're both doing what
welikedoing, and are also being far more efficient. This means that between us,
we work fewer hours than we would if we lived apart. Great! The idea spread
quickly, and soon people specialised in their chosen professions of butcher, baker
and candlestick maker.
Butstillwe didn't really need money (although it probably existed even back
then in some form). People lived in tight, small communities which were really
extended families. And just as you would not charge your son for fixing his bike,
so they did not compare hours. They didn't say: Hey! I spent fourteen hours on
time and a half fixing your barn and you only spent a lousy eleven ploughing my
field. Everyone just mucked-in.
I'm talking thousands of years ago, of course.
Time went by. Sheep were born. Sheep died. Lambs gambolled, lambs kicked
the habit. Gradually societies got larger. Too large. Some people discovered The
Pharaoh Principlethe knack of exploiting people by pretending that you have a
direct line to God or that you are God. They were called Pharaohs. Some people
discovered the 'Lazy Bastard' principle, and that ancient term is still used today.
People started to grumble. They started keeping time-sheets and comparing the
number of luncheon vouchers each had. So... spontaneously, money was invented.
Money was a tokenrepresenting a number of hours of labour, and from that day
(about five thousand years ago) right throughout recorded history, until about fifty
years ago, money had to fulfil five main functions:
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The Five Functions of Money
1. It had to be a good store of value. A five-hour token
shouldn't gradually become worth (say) three hours. After all,
you put the five hours in, you deserve to get the five hours paid
back to you. Furthermore, your five hour token shouldn't rot
away, or corrode, or break. For this reason (and a few others)
cabbages make lousy money.
2. It had to be freely exchangeable. If I give you my five
hour token, you must be prepared to accept it, and do five hours work for me. I
don't mean you have to, but you must at least recognise it as a valid token.
3. It must be freely transportable. No point in having fifty foot oak logs asyour basic currency, sub-divided into one hundred six-inch-thick wagon wheels,
which you couldn't spend anyway because (as Douglas Adams would say) the
shops in those days didn't take fiddling small change.
4. I think it should offer privacy. Nobody has the right to examine your
affairs, to come barging in and demand to see how much wealth you have, to
confiscate it, steal it or render it worthless.
5. Finally, it must be hard to forge. In practice, this means it must be rare orhard to make/copy. Those cute ancestors of ours soon realised that if stones were
used for currency, you didn't actually have to work the five hours. You could
squander your time spearing a few bison, swimming in the lake and taking in the
sunset before tooling-off home and scooping a pocket full of money from the
gravel drive right outside your hut... The cads! As if anyone would.
These were, and still should bethe essential characteristics of money. The rest is
history. They tried a few things, cowrie shells (too much wave noise), beads (too
round - kept rolling under floorboards, getting stuck up small children's noses etc.)
copper coins with Nero's head on (anyone with a hammer and a bit of nonce could
knock out a dozen before tea time).
Until... finally they hit on... gold.
Let's see if this 'gold' stuff fits the bill...
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Does Gold Tick the Boxes?
So, is gold a good store of value. Yes. It doesn't rot, wear out, make silly sea
noises or roll around in an irritating fashion. It tends to hold its value, or increase
in value, although it can also go down on occasions.
Is it freely exchangeable? Yes. Try getting a waiter in Botswana to take your
lousy English ten pound note and he'll spit in your face. But gold can be
exchanged in almost any country on the earth. It is still a universal currency.
Is it transportable? Yes. A Krugerrand is about the size of a 50p piece (but a lot
heavier) and is worth about 1100at the time of writing. It is highly transportable.
A slight downside is that there are no small denomination coins. 250 or so (in
value) is about the smallest common coin (say a sovereign).
Is it safe from forgery?Yes.
Gold is...well,...gold, really.
About all you can do is clip bits
off the edges and pretend the
coin is still full weight. You
then save up your clippings and
make yourself a free gold coin
six months down the line.
Waddya mean "What sort of lousy cheapskate would do this?"- why do you
think they invented milling around the edges of coins...?
Well, gold seems to tick all the boxes for me, I dont know about you.
For contrast, let's have a look at the bits of worthless paper and cheap copper
junk we laughingly call money nowadays...
Fiat Currency
The pounds in your pocket are called fiat money, which is definedas:
any money declared by a government to be legal tender
state-issued money that is neither legally convertible to any other thing, nor
fixed in value in terms of any objective standard
money without intrinsic value
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precious time - over one thousand hours will be lost over ten years. If you wait
another ten years, a further five hundred hours will disappear. Finally, they will
become worthless.
The Peril of High InflationI believe that the UK is about to enter a period of very high inflation and that
means the erosion of your savings (actually it is government theft of your savings)
is about to accelerate. This is one of the prime reasons to get into gold right now.
An interesting question which I'm sure is on your lips is: Where does the 'stolen
time' go to then? I won't go into the detail of the answer now, but stated simply,
your time is stolen by the state to squander as they see fit. This is in additionto the
thefts associated with punitive taxation. The 'leak' is caused by inflation. Inflation
is caused by governments 'printing' money which they don't have. We have just
printed hundreds of billions of funny money this will (indeed must) eventually
filter through into higher inflation.
If hyper inflation occurs, you will lose the lot (your entire life's efforts, stolen by
the government). If there is a banking collapse again, you could lose every penny.
The banks will not even be open and you will be lucky to eventually get 10p on
the 1. If you have money sitting in a bank, it can be frozen, confiscated and
seized on the whim of any one of half a dozen 'authorised' government agencies -and the list is growing.
As I write, the shares of Lloyds Bank are worth 33p.Down from 6 four years
ago. Yes folks, the great Lloyds Bank is apparently worth one twentiethof what it
was worth four years ago. Bet you didnt see that coming? (Neither did I, by the
way).
By putting money in a bank you are, in fact, betting on the
honesty and integrity of bankers and governments.Is modern money freely exchangeable? Well, within your own country it is, but
not outside. If you want to take your chips off the table and leave, you have a
problem. Not a bigproblem, but heck, you shouldn't have any problem at all if
money was doing its stuff, right?
Is it freely transportable. Again, sort of. It depends on the mood of the
government. If they want exchange controls, they will impose them, which means
that your money is frozen in one small area of the globe. This is not free
transportation. Today you have to declare if you are taking more than 10,000
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cash out of the country. Why? Some specious anti money-laundering tosh. Also,
even those worthless bits of paper (banknotes) are becoming hard to use. Try
buying a car with 20,000.00 in notes and you will find detectives waiting to
interview you when you collect it. Yes, you've guessed it, car sales people are now
expected to report any 'suspicious' transactions on penalty of a five year prisonsentence...
A friend recently tried to take 10,000 in cash from a major High Street bank. He
found this difficult.The bank had to scratch around for money from all the tills
and in the end he had to come back the following day for the balance.
So is it free from forgery?
Hardly. In 2010, Bank of England
figures revealed 566,000
counterfeit notes in the UK. Of
these, 95% were twenty pound
notes. That figure has come down
a bit since as new printing
processes are making it harder to
copy a note. The most common
fraud is of one pound coins. There are some 30-40 million in circulation, so about
2.8% of the total are fakes.
If you think bits of paper are worthless and easily forged, what value do you give
to a few bytes on a 100 terabyte hard drive sitting at Lloyds/Barclays or wherever?
That, nowadays, is all that represents your 'bank balance'.
Does it offer privacy? I don't think I even need to answer this. Governments
seem to believe they have the right to examine your income, savings and bank
accounts at will. All staff at banks must, by law, tip-off the government to any
suspicious activity on your account. It is an offence if they tell you that they arespilling the beans.
So modern money barely scrapes by on one and a half out of five. Gold scores
four and a half out of five. The 'half' is missing because gold can go down in
valueas well as rise in value. This makes it less than perfect as astoreof value.
Still, it's not bad.
Now, seriously, with the current highly perilous state of the Euro and the British
economy, with banks teetering on the very edge of another major collapse, smartpeople are heavily investing in 'real' money. That is, physical gold, silver and
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maybe even property, with only a smallish stake in the stock-market (at present,
because of the potential for huge losses) and little in the banks and building
societies.
On this latter point, if you have conventional savings you are effectively payingthe bank to look after (!) your money. The interest rates are derisory and
inflation is rising. 20,000 in a savings account is currentlyguaranteedto lose
you money in real terms.
Maybe that would be okay if the banks offered safety. But incredibly, almost
unbelievably, they will not even guarantee to return your initial investment with
them! What does that say about the banks belief in themselves? They cannot even
guarantee that they will not steal the bulk of your money.
Staggering, really.
Gold the Ultimate Safe Haven
The government can print endless money, but they cannot increase the supply ofgold. Anything the government cannot replicate by decree, I want to own.
Michael Pento, Chief Economist, Delta Global Advisors Inc.
Right. Enough of the banter. Lets get serious. I presume you are interested in
keeping and increasing your wealth? In short, getting more money?
The first thing to realise is that its not looking good for fiat currency that is the
pounds in your pocket and in your accounts. With the coming inflation spike and
continued questionable banking practices, most people in the know are
predicting double digit inflation for the UK in the near future.
Your first lesson is that gold does not have to make money in real terms(although it is great if it does) its main function is to protect your money.
Look at it this way, gold might double in the next two years but that might be
accompanied by a halving in the value of money (so gold is still worth the same
as it was). If you had not been in gold however, you would have lost half of
your money.
The U.S. dollar has been losing value since they abandoned the gold standard.
But the situation now is probably worse than its ever been in my lifetime. The
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pundits I respect are predicting it might collapse. And this could happen faster and
sooner than you might guess.
The graph below tells its own sorry story.
And in case you think it is just those careless crazy Americans, thing again!
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If the inflation spike happens, as I expect it to, it will impoverish most of the
middle class and lead to a drastic decline in most peoples standard of living
unless you are prepared.
Given the speed at which we are printing money, inflation is all but inevitable. If
you dont prepare for it immediately, you may wake up one day and realize the
value of your savings account has been reduced to almost nothingwhile your
income is insufficient to meet your needs. Any money you have saved will be
almost worthless. There will still be the same number of pounds, of course, its
just that they wont have much purchasing power.
Its happened in the past. The total value of German mortgages in 1913 was
about 7 billion. By 1923, due to 800 billion percentinflation, these were only
worth 1 penny! Bank notes were so worthless that people used them to light their
fires with.
Its happening right now in countries like
Zimbabwe who have just introduced two
new bank notes in $20 billion and $50
billion denominations! The new $50 billion
note will buy you two loaves of bread!
You can protect yourself now and profit in the future by investing shrewdly in
the way I am disclosing to you. I firmly believe that part of your investmentsshould include precious metals and investments related to precious metals.
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arepredominantly in the 0.5 to 2.0 million ounce region. It takes years for a large
mine to begin producing.
Production is falling and the mining industry is not coming close to replacing its
reserves.
And even if we did begin to discover one huge deposit after another (unlikely), it
takes years for a large mine to begin producing. Not to mention environmental
pressure that is putting the brakes on mine development. (Goldmines are nasty,
highly polluting places and nobody wants them anywhere near them.)
London-based metals consultancy GFMS confirms that despite surging gold
prices, the production bottleneck is here to stay:
The financial crisis will undoubtedly have negative implications in coming years
as the funding gap in project and exploration expenditure begins to filter through.
The bottom line is that gold production will remain heavily constrained for years
to come. Combine that with steadily rising demand and you have an equation for
soaring gold prices!
Central Banks Are Now Gold Buyers
We could soon see demand seriously outstripping supply. This is incredibly
bullish for gold. But until now, this supply gap has been filled by central banks
selling and leasing gold into the market.
The banking elite have used official gold sales and leasing operations to
artificially keep rising gold prices in check. But the banks are running out of
gold to dump on the market.
In fact, many central banks have stated that they intend to increasegold reservesand are adding to their supplies aggressively.
Russia added 135 tonnes of gold to its reserves in the first eleven months of last
year (2010), including 9 tonnes in December, to become the world's eighth largest
bullion holder, the World Gold Council said recently.
According to Harvard Professor Jeffrey Frankel, the worlds central banks are
gradually reversing their policy of selling their gold stocks and are now buying.
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The Peoples Bank of China, the Reserve Bank of India and other central banks in
Asia have all now bought gold.
Jeffrey Christian, managing director of CPM Group, told the Denver Gold Forum
recently What we are seeing is that central banks are making the transition fromlarge net sellers to large net buyers. You will see a net buying of 6 (million) to 10
million ounces per year by central banks, and that is an extremely conservative
projection.
Christian believes that European central banks will now stop further gold sales.
Meanwhile central banks in emerging countries are now diversifying into gold due
to volatility in the dollar.
The Director of Chinas Central Bank recently stated: An increase in our
countrys gold reserves is necessary.
Central banks, holding about 18% of all gold ever mined, are expanding theirholdings for the first time in a generation as investors in exchange-traded funds
amass bullion as an alternative to currencies.
Nicholas Larkin, Bloomberg.comNick Moore, an analyst at Royal Bank of Scotland, told Bloomberg. There's
clearly been a renaissance of gold in central bankers' minds, it's not just been
central banks taking on gold, but a general shift for physical gold in the
investment sector.
But it is not just countries that are stepping up their buying...
Worldwide Investment Demand is Surging
There is a massive worldwide migration to gold and the trend has only begun.
It is no longer just the gold bugs who are chasing the yellow metal. Every day,
more and more pension funds and advisors to wealthy investors are recommending
a double-digit percentage allocation to gold and gold stocks.
Axel Merk, Chairman of Merk Mutual Funds, recently wrote, Gold is moving
toward the mainstream. It is also becoming part of the asset allocation of larger
fund managers having a portion in gold.
What used to be a trading vehicle has now become a coreholding for many hedge funds and institutional investors.
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$10,000 an Ounce? It Could Happen!
If just 1% of the money that is in stocks and bonds migrated to gold, the metal
could easily soar past $10,000 an ounce. And if you invest in gold at the current
price you could double, triple or quadruple your money!
China is Diversifying Out of Dollars
If China is worried about their holdings of US dollars, shouldnt you be worried
about your holding of near-worthless fiat currency?
Hardly a day goes by that China does not announce an investment in hard assets
or express concern about their dollar holdings. The Chinese Premier, Wen Jinbao,
didnt beat around the bush in a recent speech when he said: We have lent a huge
amount of money to the US. Of course we are concerned about the safety of ourassets. To be honest, I am definitely a little worried.
Mr. Johnson, a former Chief Economist for the International Monetary Fund,
estimated that China holds about $1 trillionin US currency.
And in the days leading up to the Group of 20 Summit, Chinese officials were
talking openly about a new reserve currency that would remove the inherent
deficiencies caused by using credit-based national currencies.
Hmmm... which national currency do you think they were talking about?
With nearly a trillion dollars of funny money in hand, China is treading
carefully. The last thing they want to do is spook the market and see those dollar
holdings halve in real value. But make no mistake. They know the dollar is
doomed.And they are taking steps to seek protection.
The last thing the Federal Reserve would do is encourage you to own gold. But
that is exactly what the Chinese central bank is doing urging the Chinese citizens
to start buying and saving gold.
If the Chinese people and government were to achieve the same per capita gold
backing as the US, it would require 1.2 billionounces... 10 years of world global
mining production!
Chinese demand for gold has been growing at an average of 13% per annum over thepast five years and it now has to import gold to meet national demand, despite being
the largest producer of gold in the world.Source: Goldcore
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A Monetary Meltdown
When some of the richest and most knowledgeable moneymen think the dollar is
doomed, its best we sit up and listen:
Warren Buffett advises us to build an ark to protect against the falloutfrom the plunging US dollar.
Paul Volcker, the former head of the Federal Reserve Board, gives a75% chance of an economic crisis in the next five years, and...
Professor Kenneth Rogoff, a former head researcher at the InternationalMonetary Fund, warns of a potential 40%+ drop in the greenbacks value.
Im talking dollars here because, lets face it, whatever happens to the USA is
likely to happen to Europe since we are following a near identical trajectory. Also
gold is priced in dollars. If dollars lose their real purchasing value, gold soars.
So how can we protect our assets and stay diversified in this type of
environment?
One major part of your strategy is to invest in gold, as I have said.
This is what many consider the ultimate crisis commodity, and for very good
reason. Gold is the only commodity that has consistently outperformed otherinvestments during periods of world tension.
Since the end of World War II, the five years when US inflation was at its
highest (1946, 1974, 1975, 1979, and 1980) saw an average real return on stocks
as measured by the Dow of minus12.33%.
Meanwhile, the average real return on gold was 130.4%!
But gold doesnt have to be just a hedge against inflation. We have moved into anew era, one that looks to be very favourable for gold, and this is going to play a
major role in generating healthy returns for you.
All Aboard Gold is Leaving the Station
According to Robert McEwen, CEO, US Gold Corporation:
Gold prices may reach $2,000 an ounce in 2011 on demand for an alternative tocurrencies. You have much, more money than there is gold, and as people see theircurrencies falling relative to gold, theyre going to be saying Maybe I should have
some of this.
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Holding Physical Gold
So how do you get into gold? The first and most obvious option is buying
physical gold. If you dont own gold, you might want to start buying some now.
At a minimum, you should have enough physical gold to keep you afloat for two
or three years. If you cant afford that much, you should begin to buy what you
can. Dont stop until at least 10% of your savings are in precious metals.
What You Should Be Buying
I recommend sticking with the five most commonly traded gold bullion coins in
the world:
1. South African Krugerrand
Kruggerands were the most commonly traded coins in the lastgold bull market and are still commonly traded today.
2. Canadian Maple Leaf
The coin was first minted in 1979 and was an instant success.
Like the Krugerrand, it contains a full troy ounce of gold. It
actually has a face value of $50 (Canadian Dollars), which is far
less, of course, than the value of the gold it contains.
3. Australian Kangaroo
The Roo, as its called, replaced Australias Nugget coin. It,
too, has 1 troy ounce of gold.
4. Chinese Panda
The Panda was first introduced in 1982, and remains a popular
choice for gold buyers but be careful, as it also has
numismatic (collector) value. The premium charged on Pandas
by the Chinese mint is higher than that charged for
Krugerrands, Eagles, or most other gold bullion coins.
Although this may make Pandas slightly less attractive to
investors interested purely in their gold content, it does not appear to have deterred
collectors.
5. American Eagle
This is the gold bullion coin favoured by USA buyers. It is
the equivalent to the Kruggerand.
When buying gold and silver coins, be sure to buy top quality
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coins that arent damaged in any way. Nicked or scratched coins wont get you the
full value when you go to sell them. And make sure that you are not paying a big
premium for them 5% or 6% is the absolute limit, in my opinion.
I must mention eBay. Amazingly you can buy gold coins on eBay pretty muchany day of the week and the price is almost always exactly the spot gold price for
the day as it is a very efficient market. I have both bought and sold gold coins on
eBay without any problem, but obviously apply the usual precautions, particularly
as this is quite a high ticker purchase.
What, Exactly isGold Bullion?
Lets look at gold bullion in a little more detail. First, Ill explain what gold
bullion is and what it is not.
Bullion is a standard of money (usually in the form of coins or bars) that uses a
specific quantity of pure gold to determine its value. Bullion can usually be
converted easily into the currency of other countries.
In other words, gold bullion is a precious metal coin or bar whose market value
is determined by its inherent precious metal content. The cost of a one-ounce gold
bullion coin is usually closely linked to the spot (current) price of gold.
The spot price of gold can be found on hundreds of financial websites, including
Kitco.com, TheBullionDesk.com, and Bloomberg.com. The site I use the most is
www.goldprice.org
The Gold Cycle
Gold markets follow a fairly predictable cycle. Thats right predictable. An
investor can make money in any gold cycle. However, its important to remember
that there are several gold markets and the markets for rare gold coins,
numismatic coins, and bullion are similar but not identical. These gold productsusually follow the general trend of spot gold, but there can be fluctuations within
gold markets too. For example, the price of bullion can spike upward, while the
price of gold coins can lag behind.
Gold Bullion in a Class of its Own
Bullion coins have a universal exchange value in practically every country of the
world.
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impossible to sell in the open market for what you paid. Often, they are utterly
worthless.
The American Gold Eagle Bullion Coin
Gold bullion is minted in countries around the world. But the standard of goldbullion coins is still the American Eagle, the official gold bullion coin of the
United States. If you are a gold newbie, I strongly urge you to start out with a
small collection of American Eagles. Kruggerands are also a good starting coin.
Authorized under the Gold Bullion Coin Act of 1985, the Eagle was first
released by the United States Mint in 1986. It is offered in various sizes: 1/10 oz,
1/4 oz, 1/2 oz, and 1 oz denominations. The one-ounce gold American Eagle has a
diameter of 32.7mm, a thickness of 2.87mm, a total weight of 1.0909 troy ounces.
An odd weight, you may think, but thats because the coin is notpure gold that
would make it too soft to use. Instead, it is 22 karat gold mixed with an alloy of
silver and copper to help increase the stability and scratch-resistance of the coins.
How Much Gold Does a Coin Contain?
Most gold bullion coins (and certainly the American Gold Eagle) areguaranteed
to contain the stated amount of actual pure 24 karatgoldweight in troy ounces.
(One troy ounce is equal to 31.10 grams, slightly more than a conventional ounce.)
The bottom line is, if you melted a one ounce Eagle or a Kruggerand down andchucked out the alloys, youd be left with exactly one troy ounce of pure, 24 karat
gold.
Remember, the market value of the coins is generally about equal to the spot
market value of their gold content, nottheir face value. So their actual selling
prices vary daily based on the current spot price of gold. The United States Mint
also produces a proof version of the Eagle for coin collectors.
A proof coin is a coin struck using a special, high-quality minting process.Modern proof coins often have a mirror-like appearance. The term proof always
refers to a type of coin, or the way it was struck, and not to a coins grade or the
amount of precious metal it contains.
There are many ways to make money in the gold market. An investor can trade
gold futures contracts, or invest in gold-backed CDs or even rare coins and
numismatic markets. But investing in the gold market with bullion is a viable
option and one of the safest and easiest to get into. Believe me, theres nothing
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like the feeling of having a few tens of thousands of pounds in real, tangible gold
hoarded away!
What About Mining Stocks?
Another way to hedge against inflation is to buy mining stocks. But you must becareful when doing this, so Ill only mention it briefly.
The mining business is problematic. It requires lots of expensive employees and
capital equipment. Key employees jump from one company to another without no-
tice especially when the market is good.
In addition, the mining industry now faces extensive environmental and other
regulations. That generally means two things: inefficiency and extra costs.
Like so many investment-related industries, the mining stock business is
crowded with cheats. As Mark Twain said, A goldmine is a hole in the ground
with a liar standing next to it.
And if all that were not enough, know this: Mining is a boom and bust industry,
thanks to price swings and the unwillingness of banks to lend to small miners
when commodity prices are low. These days, due to the scarcity of easily mined
deposits, it costs almost as much to get the stuff out of the ground as its worth onthe open market so profits are slim.
All these problems discourage smart investors from putting their money into
mining companies. And that is why, during the 20-year bear market in metals
(1980-1999) it was possible to buy mining companies very cheaply, based on their
fundamental values.
But all that changes when precious metals prices climb. Gold mining stocks
move up first and fastest. But silver quickly follows gold. Platinum, copper, andpalladium can shoot up too.
Recently, the cost of mining stocks has been lagging the price of gold, and that
means they are extremely attractive right now. This anomaly will not last with
coming higher precious metal prices. Many people are saying now is a good time
to snap up some mining stocks.
Precious Metals Pooled Accounts
You dont have to bury gold in the backyard to profit from precious metals.
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last day or so. Thats to be expected. Nothing goes straight up. Buy on these dips.
Gold could even go as low as $1500, so dont panic (in fact thats a great buying
opportunity).
Finally. I am not telling you to do something I am not doing myself. I have putmy money where my mouth is and currently have 650,000 invested in gold.
Thats a big punt, I hope you agree.
I could be totally wrong of course. Nothing is certain in the investment game.
You need to do your own due diligence and make a decision for yourself whether
to get into this or not. The only thing I would say is to repeat what I stated at the
beginning of this report dont dabble or play. Its not worth bothering with if you
put a few hundred (or even a few thousand, probably) into gold as the gain will not
excite you.
In conclusion, gold is set to perform with or without major calamities coming
our way. You stand to do exceedingly well with precious metal investments in the
coming months and years. You can even hunker down for doomsday, if you want,
secure in the knowledge that gold will always have good buying power when fiat
currencies are crashing and burning.
What Ive provided here is enough to get you interested. I hope youve started
thinking seriously about protecting yourself from inflation by investing in precious
metals, especially gold.
All the best to you
Stuart Goldsmith
www.stuartgoldsmith.com