The Ascendancy of Gold
The Opportunity of a lifetime
If you miss this chance to make your fortune in gold there won't be another
opportunity in your lifetime
This is a free report. You may pass it on to anyone you wish and share it
with friends and family who will benefit from this information.
Web site owners you may also file this away and send it to your email list if
To access our library of articles click here
As you've got this far, you've probably read a load of 'stuff' on investing in stocks,
on forex trading, stock options, commodity futures, and the many other ways you
can make (or lose) a fortune. You've almost certainly been drawn-in, by 'killer'
headlines, to read clever marketing on how investing in some guru's advice will set
you up for life, where you're often asked to pay in the thousands of dollars to be
privy to the innermost investment secrets of guru X.
I wasted a lot of time and money on advice until it finally dawned on me
to concentrate on one market, invest some time in learning about it, and then
select my advice a lot more carefully – which is what brought me to Gold and
Silver. Yes, I have an emotional attachment to gold and silver, and yes, you're not
supposed to be emotionally involved with your investments, but I love the thrill, the
excitement and sense of adventure associated with gold, and the passions the
tumultuous events inspired by gold down through the centuries.
Even today there is excitement and tragedy aplenty – the tiny exploration
companies hitting their gold lode and zooming to the moon, or the sad stories of
the money and dreams being ground into the dirt.
The history of gold is the history of civilization and at particular times it rises to the
fore and penetrates the public consciousness – which is what is beginning to
happen now - while the powers-that-be attempt to suppress its influence and
consign it to the refuse bin of economic failure, gold continues to push against the
resistance levels rising ever higher. And I am convinced it still has a long way to
Frightened to dip your toes into the waters of gold investment? You and a million others.
Gold is top of every savvy investors discussion list right now. Gold has been in a bull market since
reaching its lows of $255/ounce in 2001. It is already showing close to a 400% rise and some
forecasters are claiming gold will rise to $2000/ounce or more in the foreseeable future. True or
false? And if true how can we get in on the gigantic gains to be made. We will all be kicking
ourselves if we miss the boat to gold's price explosion. It only happens once in a generation and
if you miss this incredible opportunity, there won't be another in your lifetime.
Back in 2004 when gold had risen 100% from its 2001 lows, many investors were thinking it had
already peaked and were getting nervous. The investment community stood on the sidelines as it
moved inexorably up, defying most of the predictions. At that time the credit crisis hadn't yet
exploded on to the economic scene, but now that it has, the attitude to gold is changing fast, with
investors accepting that it has outperformed all the major markets, and in the current climate, its
likely to continue on the same path.
In the last year almost everything has bombed. Banking shares may have gained in the last few weeks
but they fell 600% between March 2007 and March 2009. The Dow, the S&P500 and the FTSE
may be looking up right now but they are still down almost 50% since in the last twelve months.
Commodities and mining which were booming less than a year ago fell off a cliff and are showing
little sign of recovery yet, and to cap it all, the dollar which strengthened against the other main
currencies, is now weakening with deflation and recession being forecast. But through all of this
turmoil, the gold price has held up.
• Gold had bounced between $850 and $1000 in the midst of all this turmoil, but has
remained ahead of the other major indicators. Why, you may ask, in these
uncertain times didn't gold soar like the proverbial golden eagle?
• Manipulation by the central banks is a popular theory amongst conspiracy theorists (and don't
we all love a good conspiracy), but manipulation of the gold price is also given high credence
among some highly respected sources.
Gold vs. the S&P500
In November Gold broke loose from the S&P. The
synchronized action with the markets has stopped
and gold is now ploughing its own furrow, rising
independently of the markets.
• Unloading of gold positions by the hedge funds has probably had a significant
influence throughout this crisis as the funds tried to claw back cash to cover their
positions, and, lack of cash for solid investments while the banks were in the
process of collapsing
Gold vs. Oil & Gas
Oil has traded a range of $147 down to $32
in the last 12 months, falling 78% at its lowest
point. Gold has remained steady
trading a range of under 30% and remains close to its
WHAT DRIVES THE GOLD PRICE
Since October last year gold has displayed high volatility, rising to $1011 at one point. It has
swung from $1011 to $712 and is currently trading at around $980
Recently, the supply of old gold scrap – consisting mainly of jewelery sold by owners to turn their
metal into cash – has exceeded demand for jewelery manufacture. In America, Tupperware-style
parties to sell old jewelery are becoming increasingly popular; reminiscent of the silver melt-
down sales in 1979/80 as silver rose to a peak in excess of $50 an ounce, and millions brought
out every silver teaspoon, candlestick and heirloom to sell for scrap.
The economic crisis is having conflicting effects on the price of gold. Consumers are buying less
jewelery and selling what they have to raise cash. This depresses the price.
On the other hand uncertainty is driving investors to gold as a reaction against the banking credit
collapse and the havoc being wreaked by governments in an attempt to deal with the crisis.
The last time gold reached all-time highs was in the 1980s at a time the world was under serious
political and economic threat - which is exactly what is happening now. As a result of
unnecessary wars, weak leadership and weak financial controls, gold is again responding to fear
and uncertainty. In 2008 the demand for investment gold rose over 60% while jewelery demand
fell and the sale of scrap gold increased by 27% (GFMS Gold Survey 2009). Central Banks which
seemed previously to be intent of dis-investing themselves of gold slowed down their sales by
half. Each of these supply and demand changes had a major effect on the gold price causing
increased volatility and wild fluctuations. Currency fluctuations are likely to escalate and the
banking system will more than likely have more shocks in store. The resulting fear and uncertainty
drives investors towards precious metals to protect wealth in the future. It's quite likely that gold
will go through its usual summer doldrums, but this can be taken as an opportunity to acquire
gold in physical or paper form. Plan for a small portion in carefully chosen equities, to achieve
some gearing when the price resumes its upward trajectory later in the year.
Gold pays no interest, but if the bank is paying little or no interest on your savings, gold becomes
rather more attractive. Which would you rather invest in – paper money paying no interest and
losing value, or gold paying no interest? I know my answer to that one. If interest rates are close
to zero, the money will flow to gold.
The price of gold shares has already decoupled from the leading equity markets. Until October the
gold equities were tracking the Dow, but after the October lows the Dow continued to decline
while the HUI (the index of major unhedged gold miners) has risen over 100%. Does that mean
its too late now? If we consider the actions of the previous major crash in 1929, gold equities
have followed the same course so far, over exactly the same time frame, bottoming out with the
Dow in late 1929. The major gold equities finally peaked at 10 times their low in 1934. So far the
progress of the bear markets has followed a remarkably similar pattern and If the same course
should be enacted this time round the HUI could end up at around 1500 from its low of 150 - and
junior gold stocks (if you pick the right ones) will go to the moon!
Gold vs. S&P and the HUI
The index of major gold stocks
has also outpaced the S&P but
WHAT IS DRIVING THE PRICE OF GOLD RIGHT NOW?
Fear – fear is the emotion that will send gold to the moon. Fear and insecurity. Just imagine,
unemployment rising over the whole of the western world gives rise to fear and a feeling of
helplessness. Your life can spin out of control, your house can be re-possessed, your family may
suffer deprivation. It is in these times when the largest economy in the world may be crumbling
that gold is likely to shine its brightest. If the economy recovers as our governments insist it will,
we can all breath a great sigh of relief, but if it continues to deteriorate and our predictions on
gold come true, who will have missed the chance to protect yourself and your family.
Holding gold is an insurance against the worst our governments and the economy can throw at
What else – the value of the dollar – but that hasn't been holding true this time. Gold has
maintained a high average price. What do you think will happen when the dollar really loses its
value? Gold is likely to soar. The dollar will devalue because of the trillions of dollars being
pumped into the economy, supposedly to save it. We are going through a brief period of
deflation now but this is unlikely to last. Inflation will take over, eroding any dollar strength and
causing fearful investors to take to them golden hills.
Right now gold is holding fire until the next tranche of bad news, and there is still likely to be plenty
of that to come. Until it does gold will probably continue to bounce between $850 and $1000.
DEMAND FOR PHYSICAL GOLD
In the first two months of 2009 there was an unprecedented surge in investment demand for gold.
As pointed out in the FT, in the final quarter of 2008, investors in North America and Europe went
on an "extraordinary shopping spree" for bars and coins, buying over 800% more tonnes than a
year earlier. Global retail investment jumped by almost 400%. Inflows into gold ETF's have
continued to surge this year. The gold holdings of the world's largest gold trust, SPDR Gold Trust
(GLD), has absorbed 10% of worldwide annual mine output in January and February. It is now the
world's seventh-largest gold bullion holder, behind a handful of central banks. GLD, which was
launched in the fourth quarter of 2004 has been in operation for 4.5 years. Its total holding are
over 1100 tonnes at a current value of $33billion
The CPM Gold Yearbook 2009 states that after 40 years in the financial wilderness, gold is resuming its
central role in the global financial regime, which it has held for 5,000 years.
According to the report, an unprecedented number of investors worldwide have been buying
enormous amounts of gold for the past 8 year, but they believe that the move into gold world-wide
is only just beginning.
The opportunities for retail investors to invest in gold have exploded. The gold ETFs mean new
investors can trade gold just like shares. An investment previously open mainly to the very
wealthy through commodity options and bullion purchases is now open to anyone with a few
dollars to invest.
If the growth in ETF investments continues, the demand for gold will increase. ETF demand
already exceeds the demand for gold for jewelery. Gold supply is limited, and it is this new form of
investment combined with the increasing fear and uncertainty, that is likely to put the squeeze on
supply and send gold prices soaring.
JUNIOR GOLD STOCKS
As the price of gold rises, the real opportunities for exponential returns are in the Canadian
Venture Exchange which is somewhat akin to investing in a Wild West saloon.
Many of the popular pundits have had difficulty in explaining the collapse of junior gold shares in
November last year. Reasons include the sudden cutting of liquidity by the banks and selling
loss-makers at the end of the tax year. Its been a tricky year all round.
If you want to be a prospector without leaving your desk, investing in gold juniors is the way to go.
But be prepared for some exciting rides and make sure you buy the best. You can lose your shirt
on 'junk juniors'. There is a risk and if you are prepared to take a risk you must only buy the
juniors that are set to soar when gold takes off. Not for the squeamish. How many false forecasts
have you read on the impending recovery of the juniors. But it hasn't happened. Some have
bounced back over 100% from their October lows but they still have a long way to go . While the
rest of the market has been showing some signs of recovery the gold juniors continue to
languish. If you're not an expert, dabbling in juniors can be a disaster unless you have insider
CDNX Venture composite index which
measures the TSX performance against the S&P
the juniors was hammered down more than any
other equity market from their 2007 high, down
80% by December
Gold juniors depend on equity financing to fund exploration, which isn't cheap. The preliminary
field work alone will cost many millions and if the results look promising , then the real maney
starts to flow. The drilling and the metallurgical studies need very large capital commitment, and
without the income flow this has to come from equity or loan capital. Many gold juniors may never
recover from the near fatal damage they've experienced over the last 2 years because without
further capital injection they will not be able to continue exploration activities. And attracting new
capital when the share price is barely a bip on the charts (over 40% are trading below $0.10) is
next to impossible. Many of the gold juniors are now on drip feed and are unlikely to be
resuscitated unless investor interest is regenerated. If there was ever a sector for contrarian
investing, this is it.
There are juniors out there that will survive and prosper spectacularly as the price of gold rises,
and there are others sitting on rich assets that will be gobbled up by the larger mining companies
– at knock-down prices, - but investors must select carefully. This is a highly specialized area
needing considerable research and excavation to identify those junior nuggets. Don't go exploring
on your own. Be prepared to subscribe to some really good qualified advice.
There are two diametrically opposed schools of thought on silver . The first is that its an industrial
metal and is unlikely to follow the price of gold up in a deep recession, which is what we have
now. The second is that it has the potential to be a supercharged version of gold with far higher
potential for returns. Which will it be?
Silver has risen in price from $.90 to $14 in 50 years reaching a high of $50 in 1980 and recently
climbing to over $20. It was previously official coinage until removed as coinage by President
Johnson in 1965. Why was it removed from official coinage? Because of the increasing shortage
and expense of silver. What nobody anticipated was the growth in demand for silver for industrial
uses. It is estimated that the stock of silver has fallen from 9 billion ounces to 1 billion in the last
50 years. Silver has been consumed, fabricated, and vaporized in production. Meanwhile the
world population continues to rise, industrial demand for silver is increasing, and the world stock
of silver continues to fall,unlike gold which has remained fairly stable per head of population.
Gold vs. Silver vs. S&P
Gold has held its value. Silver took a hit in November
but is now catching up with gold and outpacing the
Silver has been a highly volatile metal. The peak was in 1979 when the Hunt Brothers tried to
corner the market, amassing more than 200 million ounces of silver. The Hunts claimed that it
was never their intention to profit from price manipulation. They were concerned that a collapse of
the U.S. dollar was imminent, and to protect their wealth, decided to stockpile millions of ounces
of silver as a hedge. This is exactly what gold and silver investors are doing today, albeit on a
rather smaller scale!
The silver price peaked at $50 in 1980 rising from $1.95 in 1973, when the Hunts first started
cornering the market. Regulation changes combined with the unloading of silver onto the market
broke the back of the rise and the price plummeted, falling back to $4 by 1991. Since 2002 Silver
has experienced a steady rise from $5 to $21. its now standing at around $14. Not a ride for the
faint hearted, but where there is volatility there are potential profits.
IS THE GOLD PRICE MANIPULATED?
The price of gold is determined by the action on the futures markets, mainly New York’s Comex,
and regulated by CFTC (Commodities Futures Trading Commission). The gold market is far
smaller than the stock market and far less heavily regulated. Few trades see delivery of the
metal. They are mainly initiated by the big banks, hedge funds and large investment houses.
Practices that are illegal with stocks and currencies are allowed in commodity trading, so a bank
or a broker with knowledge of a customer's upcoming buying or selling activity in gold can use the
information to its own advantage. In other words, insider trading is not regulated.
False information and rumours can also circulate regarding an impeding sale or purchase. Such
manipulations for institutional profits may well effect the gold price but is it manipulation for
institutional gain, or more sinister, to assist in government subterfuge? A steadily rising gold price
calls government actions into question, and slowing or preventing any rise in gold would give the
illusion of a more robust fiat currency.
How about the Central Banks colluding to suppress the price of gold? There is virtually no
verifiable information on the activities of the central banks. There has been no independent audit
of US owned gold for over 50 years! Central banks lend their gold out to private bullion banks
through leasing or temporary sale. In both cases the gold is supposed to be returned, in the first
case when the lease period expires, and in the second, at a predetermined time and price. There
are no public records of the leasing and swapping activities, and the originating bank can still
carry the leased gold on their books as if it was still in their possession, and it may be double
counted by the lessee - which is another reason to question government inventories of gold. “If
you go on-line, you can find out how to build a nuclear weapon, but you won’t find any detailed
records on central gold reserves.”(Chris Powell, GATA’s secretary/treasurer). At various times the
CFTC have formally instituted investigations concerning the alleged manipulation of gold, but no
'guilty' verdicts have ever been reached.
GATA's (the Gold Anti-Trust Action Committee) claims sometimes have the ring of a Dan Brown
novel. Quote – 'some of us in GATA have called gold's enduring centrality to the world financial
system 'the secret knowledge of the universe'. (my italics). GATA allegedly believes there is
collusion to suppress the price of gold, conspirators including all the major bullion banks, the U.S.
government, and the central banks of several countries.
The gold price is the alarm signal alerting us to changes in the world's economic system. “If the
gold price had not been suppressed for more than a decade, it would have sent a clear warning
of the dangers of the credit bubble, long before the credit collapse brought financial markets and
the world economy crashing down. It would have also inhibited the ability of Western central
banks to keep interest rates so low for so long”. (Chris Powell GATA)
GATA is an educational and civil rights
organization that highlights the manipulation of
the gold market, which they state is matter of
Examples of intended price suppression include Alan Greenspan's testimony to the House
Banking Committee in 1988: "Central banks stand ready to lease gold in increasing quantities
should the price rise."
“Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not
undertaken. That was a mistake." Paul Volcker – former Fed chairman. Now a member of
President Obama's team
Larry Summers, President Obama's chief economic adviser, wrote Gibson's Paradox and the
Gold Standard, which argued that suppressing the gold price would enable interest rates to be
kept artificially low -- which is exactly what led to the credit crisis in the first place.
There are many similar examples indicating the intention of government to control the price of
gold, and there is no reason to suppose that the attitude to controlling gold prices is any different
to the way central banks seek to influence currency values.
So lets examine whats likely to happen next and how you can best respond. And I don't mean
sitting on your hands and doing nothing, because thats how you lose control over your life. You
need to be able to make an informed decision. To stay as you are, to invest in bonds to go for
equities again – ouch – or to become a bit more adventurous, and go for gold.
REASONS TO OWN GOLD INVESTMENTS
Gold and especially gold stocks are still cheap.
Governments are printing trillions to pay off our ever-increasing debts. But they can't produce
Governments are printing money to pay for war as well as pay for debt. International conflict
increases fear and uncertainty
Precious metals do well in extreme bear markets. We are currently suffering one of the most
extreme since the great depression
Interest rates are too low to compete with gold as an investment
For the majority of investors holding physical gold would have smoothed out their portfolio
performance over the past year
China is buying gold. Premier Wen Jiabao has said he is "worried" about the safety of the
nation's $767.9 billion in holdings of U.S. Treasuries and called on the U.S. "to guarantee the
safety of China's assets." In late April, the official Xinhua News Agency quoted Hu Xiaolian, the
head of China's foreign exchange agency, as saying China's gold reserves had risen 454 metric
tons since 2003 to 1,054 tons. Zhou Xiaochuan, the governor of China's central bank, asked in
February of this year, "Is it time for China to consider using the reserves somewhere else, instead
of concentrating too much on the United States”. Increased spending on commodities, including
gold, represents a reallocation of China’s sovereign wealth away from the accumulation of
financial assets .
HOW TO INVEST IN GOLD
Individual Equities Unlike gold bullion, which is regarded as a safe haven asset, unhedged gold
shares or funds are regarded as risky and can be extremely volatile. This volatility is due to the
inherent leverage in the mining sector. For example, if you own a share in a gold mine where the
costs of production are $350 per ounce and the price of gold is $1000, the mine's profit margin
will be $650. A 30% increase in the gold price to $1300 per ounce will push that margin up to
$950, which represents a 46% increase in the mine's profitability, and potentially a 46% increase
in the share price. Most brokers now offer the facility to trade in all the major markets. On line
brokerage fees are low and instant trading available. Some brokers still trade overseas stocks on
a batch basis which is less satisfactory for day or short-term trading
Gold mutual funds are one of the safest ways to invest in gold stocks. Mutual funds invest in a
diverse range of mining company stocks which enable you to spread the risk and at the same
time benefit from the experience and expertise of the fund manager. Mutual funds do tend to
have a hefty front loading of up to 5% which eats into profits, and they cannot be traded all day.
The price is usually fixed once per day and can change between the time of deciding to sell and
making the sale.
Exchange Traded Funds (ETFs) This is a security that trades on a stock exchange and generally
tracks the performance of an index. It is a single stock representing a basket of securities
underlying the index which can be comprised of stocks, or other assets such as commodities.
ETFs are traded in the same way as equities. They can be bought and sold throughout the day at
the current market price. Gold ETF providers state that individuals can take physical delivery of
gold, but this is not encouraged, and their is a reliance that there will not be a 'run' on the fund,
with all the investors demanding their gold at the same time. It is worth asking what would happen
if this were to occur.
Gold Coins and Bullion The most traditional way of investing in gold is by buying bullion gold
bars. Bullion is the general term used for refined bars of gold and silver. More recently it has also
been expanded to include gold and silver coins. Bullion coins are legal tender, produced by
government mints (therefore backed and guaranteed by the issuing government) and sold at a
low premium. During the recent rush for gold, bullion coins were selling at a higher premium due
to the shortage. The rare gold coins, known as numismatic coins trade based on their rarity,
scarcity and demand.
Perth Mint Certificates (PMCs) are issued by the Perth Mint and fully backed by the Western
Australia state government, one of the safest places to have your precious metal stored. PMCs
are a convenient way to buy and hold physical gold (or silver, or platinum) without taking personal
delivery, and they give investors a way to store gold or silver offshore.
Gold and Silver Futures Futures backed investment products do not generally take delivery of the
metal, but roll-over the investment on a paper basis. There is a degree of mistrust in this
procedure for two reasons:
1.Price fixing allegations (see Is the Gold Price Manipulated)
2. Reported shortages of physical gold
Futures trading is possibly the cheapest way to buy gold, but definitely for the more sophisticated
high net-worth investor. In order to take delivery of the real thing, the investor buys the contract in
the deliverable month and waits for it to expire. The lowest prices can be found at the Comex
Exchange. According to one gold and silver broker, “Nothing else comes close (in price)”. The
level of interest in this method of buying gold has increased significantly. Gold investors are
finding it increasingly difficult to buy the metal at a reasonable price, with ever higher fees or
premiums being charged. Those who have wealth to protect are moving into futures deliveries.
Although this is a complicated way of buying gold, it ensures the physical metal ends up in th
hands of the investor rather than their holding and IOU from Comex. US investors can use a US
broker to purchase gold in this way, but this option appears to be increasingly difficult for
overseas investors to exercise. It is rumored that it's not readily available to non-US investors.
The tightening financial regulations have effected the acceptance of overseas buyers, and the
provision of overseas deliveries is becoming a problem. The other route for UK and European
investors are ETFs backed by gold. The Hinde Capital Gold Hedge fund is said to be one of the
safest alternatives with its physical god stored in Zurich.
Some of the Major Indices for Gold include:
1. GLD A Gold EFT - an exchange traded fund with gold being the principle and
only commodity being traded.
2. HUI is the symbol of the AMEX Gold BUGS (Basket of unhedged gold stocks)
Index and is a modified equal dollar-weighted index of 15 gold mining
companies that do not hedge their gold beyond 1.5 years
3. XAU is the symbol of the Philadelphia Gold and Silver Sector Index and is a
market capitalization index of 16 companies in the gold, silver and copper
4. GDM is the symbol for the NYSE Arca Gold Miners Index and is a modified
market capitalization weighted index of 31 gold and silver mining
companies. The best way to invest in this index is via the Market Vectors
Gold Miners ETF (GDX).
5. SPTGD is the symbol for the S&P/TSX Global Gold Index of 19 precious
metals mining companies with a minimum market capitalization of US$240
million with no component having a weight in the index greater or equal to
25%. The index is maintained by the S&P/TSX Canadian Index Committee
and is calculated in Canadian dollars. The best way to invest in this index is
via the iShares CDN Gold Sector Index ETF.
6. For gold watchers who wish to watch the price of gold as it moves, see
Thank you for reading my gold report. Hopefully it will have whetted your appetite for
more information which I'd like to share with you. Expect another report in the very