Life Insurance Value in Gold Coins - PDF

Document Sample
Life Insurance Value in Gold Coins - PDF Powered By Docstoc
					10 Reasons To Own Gold
By John Embry

1   Global Currency Debasement
    The US dollar is technically very weak
and should fall dramatically. Other countries
are ve r y re lu c t ant to s e e t h e i r c u r re n c i e s
appre ciate and are resisting the fall of the US dollar. Thus, we
are in the early stages of a massive global currency debasement
which will see tang ibles (most particularly gold), rise significantly
in price.

2    Investment Demand for Gold Is Accelerating
     When the public recognizes what is unfolding, they will seek
an alternative to paper currencies and financial assets and this will
create an enormous demand for gold.

3   Alarming Financial Deterioration in the US
     The current amount of the deficit has reached levels which
have portended currency collapse in virtually every other instance
in history.

4   Negative Real Interest Rates in Reserve Currency (US Dollar)
    To combat the deteriorating financial conditions in the US,
intere st r ate s have b e e n dropp e d to ro ck b ottom le vels, re a l
interest rates are now negative and, according to statements
from the Federal Reser ve, are expected to remain so for some
time. There has been a very strong historical relationship between
negative real interest rates and stronger gold prices.

5   Dramatic Increases in Money Supply in the US and Other Nations
       US authorities are terrified about the prospects for
d e f l a tion given the unprecedented debt burden at all levels of
society in the US. Ben Bernake is on record as saying the Fed has a
printing press and will use it to combat deflation if necessary. Other
nations are following the US’s footsteps and global money supply
is accelerating.
6   Central Banks are Nearing an Inflection Point When They
    will be Reluctant to Provide More Gold to the Market
Far Eastern central banks who are accumulating enormous quantities of
US dollars are rumored to be buyers of gold to diversify away from the
US dollar.

7   Gold Is Increasing In Popularity
     Prominent developing countries such as China, India and Russia
have been accumulating gold. In fact China with its
1.3 billion people recently established a National
Gold Exchange. Demand in China is expected
to rise sharply and could reach 500 tonnes in
the next few years.

8   Gold as Money is Gaining Credence
       Islamic nations are investigating a currency
backed by gold (the Gold Dinar), the new President
of Argentina proposed, during his campaign, a
gold backed Peso as an antidote for the financial catastrophe which
his c ou nt r y has e xp e r ie nc e d and Russi a is t a l k ing ab out a
f u l ly convertible currency with gold backing.

9   Rising Geopolitical Tensions
     The deteriorating conditions in the Middle East, the US occupation of
Iraq, the nuclear ambitions of North Korea and the growing conflict between
the US and China due to China’s refusal to allow its currency to appreciate
against the US dollar headline the geopolitical issues, which could explode at
any time. A fearful public has a tendency to gravitate towards gold.

10      Limited Size of the Total Gold Market Provides
        Tremendous Leverage
All the physical gold in existence is worth somewhat more than one
trillion US dollars while the value of all the publicly traded gold
companies in the world is less than one hundred billion US dollars.
When the fundamentals ultimately encourage a strong flow of capital
towards gold and gold equities, the trillions upon trillions worth of
paper money could propel both to unfathomably high levels.
By Jim Kerben

 If you are considering buying gold and/or silver the first question
you should ask yourself is “What am I trying to accomplish?” The
answer to this question will guide you through the rest of this
  Suppose you are thinking that gold or silver would be a good
investment. The first thing you need to realize is that if you start
today with 10 troy ounces of gold, in 20 years you will still have
only 10 ounces. There is no interest, no div i dend
or any other expansion of the amount you
hold. The only way your investment will
pay is if the price of gold increases. O t he r
t y p e s o f investments may pay interest
or a d iv i d e nd and inc re as e t he amount
of d ol lars that you have, even if the price
does not change over time.
 Mo st p e opl e, w hen aske d w hat t he y are
trying to do will answer that their purp o s e i s t o
p r o t e c t t h e i r a c cumulated wealth. Stated another way, they are
looking for insurance against loss of value. For this purpose, gold
and silver are ideal. The best illustration of this is the $20 gold piece
minted prior to 1933. At that time, gold was valued at $20/troy
ounce. That one gold piece would buy a very nice man’s suit. Fast
forward to today, that gold piece is worth over $1000. So, to carr y
the analogy further, that gold piece would still buy a very nice
man’s suit. Let’s look at what happened.
 At first glance, most people would say that the price of gold
increased from $20 to $1000/ounce. This is not accurate. Gold still
buys the same amount of goods and services that it did in 1933.
Gold stayed pretty much constant. The value of the dollar fell by a
factor of 50 so that it takes 50 times more paper dollars to buy the
same amount of goods and services than it did in 1933.
 Looking forward, you must ask, will the dollar buy more or less in
10, 20, or 30 years. The gold you have today will allow you to buy
the same amount of goods and services that your money will buy
today, 10, 20, or 30 years from now. Looked at in this way, gold and
silver become a way of preserving your wealth. They are a form of
wealth insurance.
 Most Europeans have long held 10–20% of their net worth in
precious metals for this very purpose. They have a history which
includes hyperinflation, government changes, borders that have
moved and two world wars. The durability of gold has served them
well through all sorts of political unrest. In fact, it is the only
                 constant in a world subject to change.

                             WHAT TO BUY
                              You have now made the decision to make
                            a purchase and are faced with the decision of
                            what to buy. There are many ways to own
                           gold, coins, bars, old coins, jewelry, etc. Since
                         they are all a way to accomplish the same task,
                      we should look at some of the differences.
  In today’s market, there are a couple of different ways to buy gold.
Bullion coins and bars would be one way. The other is collectible coins.
Which is better? They both have advantages and disadvantages. Let’s
first look at the difference.
 Bullion coins are sold by weight. This is the common definition of bullion.
Collectible coins are sold by a complex pricing structure that includes,
but is not limited to gold weight. It is valued as a collectible. You might
also hear the term numismatic used to refer to
collectible coins. This is a bit of a misnomer.
 The term numismatics refers to the study
of money. Although coin collectors are
referred to as numismatists, the study of
money can include many different things
besides coins. Paper money is included and
one can certainly c ol l e c t mo de r n c oinage
as a hobby or num is matic pursuit. For our
purposes, we’ll call older coins “collectibles.”
 In 1933, FDR, in a desire to remove the United States from
the international gold standard, issued an order to the public to turn
in all gold coins, bullion and gold denominated
paper bills. People were paid at par value for
these items. After this was accomplished, he
immediately devalued the dollar by raising
the “official” price of gold from $20 to
$35/ounce. This has become known as the
gold confiscation.
  The order made the following exceptions: gold
used in industry or profession; gold held in trust for
a foreign government and coins having a “recognized
special value to collectors of rare and unusual coins.” It is this phrase that
leads some dealers to claim that collectible coins are exempt from any
future act because of this phrasing.
 Other dealers will claim that bullion is the best way to buy because it
does not have the collectors premium and thus the price is closer to the
value of gold itself. This issue is one that you should have resolved one
way or another when you go to buy. It will determine what you buy
and as a consequence, how much you pay.
 Using our analogy of insurance, one is basic coverage and the other is
a more expensive coverage. Whether the more expensive model gives
you more protection is a matter of opinion. You should know what you
believe about this.
 The w ay gol d and si lve r are pr ic e d is t he s ource of a lot of
  Most people look at the “spot price” and try to figure out how everything relates to
that. The “spot price” for gold is the price per ounce of a 100 oz. gold bar used
to fulfill a futures contract on the Comex, or New York Commodity Exchange.
Gold producers sell their gold (sometimes before it is produced) on a forward con-
tract to a buyer. On the day that is specified by the contract, the settlement price is
called the “spot price” These contracts can vary in length of time and they all have the
same physical amount of gold, 100 ounces.
 If you are a gold user and buy a contract, you
will receive a 100 oz. bar as settlement if you
wish. To produce a more saleable product, you
must then melt the bar and put it into discs for
coins or smaller bars. There is a cost involved.
Then, a design or pattern is stamped into the gold
disc or bar. There is a cost involved in this. Once these
coins or bars are produced, the manufacturer must market
these to companies which sell these to the public. There is
an additional markup involved here. As you can see, the costs
and markups will put the price well above the “spot price”.
  Further, collectible coins have scarcity, condition, and other factors which also af-
fect price. In periods of high demand, the market may also move ahead of the price.
  An example of this is when the producers around the world cannot produce
any more coins than they are currently making. An increase in demand will not
affect the spot price at all since the producer is already buying as much gold as they
can produce. What happens then is that the premium for coins that already exist
increase even though the spot price hasn’t changed.
 In the long run, the price of gold is secondary to the purpose of holding it. Remember
our insurance analogy. If you buy gold today and sell it in ten years for a profit, you
have done well. If, in ten years, the price of gold is less than what you paid, the
difference is the cost of insurance. Spread out over ten years, it is probably a small
cost indeed. This also explains why most dealers will tell you that the longer you hold
gold the better off you will be.
 Most of us would be hard pressed to find another form of insurance that pays you
the premium back if we don’t use it. Life insurance is probably the only one and
there is certainly a cost involved there. The key thing to remember is that
“spot price” is the price for a gold contract and that there are several steps involved
in putting gold into a form that is saleable in today’s market. Anyone claiming to sell
at or near spot is probably buying from an unwitting public at 20–30% below spot.

 A confusing part of metals quality revolves around the issue of purity. Coin
purity can range from 90% up to 99.999% pure. Purity is not as important
as content.
 An American Eagle is 90% pure. It has copper mixed with it to harden the
gold. A Canadian Maple Leaf is 99.999% pure. They both contain 1 oz of
gold. Therefore, their price is similar. The Eagle will weigh more as a coin,
even though the gold content is the same as a Maple Leaf.
 Along these same lines, most coins have a nominal amount of metal and
an actual amount of metal. Since these coins are already made and no on
will melt them down to extract the metal, they will trade at their nominal
 An example is the $5 Liberty or Indian. They are ¼ oz nominally, although
the actual amount of gold is .24187 oz. Even though they are slightly less
than a full ¼ oz., they are priced and traded as though they were a full ¼ oz.
                     Another quality consideration is coin grading. High
                     graded collectibles are graded and encapsulated
                      in tamper proof plastic holders by two recognized
                           sources, NCG and PCGS. Generally, MS 60 and
                              higher are treated this way. In addition, very
                                rare specimens known only in lesser grades
                                 can also be graded this way. As long as the
                                 plastic holder is intact, once graded, these
                                 coins are easily bought and sold as known
                          There are also known to exist, rolls of silver
coins which have never circulated. These BU (Brilliant Uncirculated)
specimens are often found in their original wrappers and are best not
handled as their value could drop should the coins become scratched or
 Finally, a condition known as toning is often associated with silver coins.
Interaction with chemicals in ambient air can produce this effect and it is
not considered a flaw or detriment to the coin. In fact, some collectors see it
as a sign of authenticity.
 If you currently have an IRA or a qualified plan such as a 401(k), 403(b),
etc most likely your plan does not allow you to own physical gold or silver in
your account. If that is the case, there is a way to do it that is relatively easy
and inexpensive. What follows is a step by step explanation of how to do it.
 The first step is to find a custodian that will allow such a transaction. There
are several including Sterling Trust Company, Goldstar Trust Company and
Entrust. There are many others.These three are the most experienced with
holding metals. Once you select a custodian, you will need to open a self
directed IRA. This involves a minimum amount of paperwork and a fee to
set up the account.
  Once you have the account established, it needs to be funded. If you
already have an IRA, the money can be transferred to your new IRA. If you
have a qualified plan, you can rollover assets to your new IRA. CAUTION.
If you are still contributing to your plan, or are still employed by the plan
sponsor, they may not let you rollover your money.
 Before you open your new account, make sure you can fund it the way you
 Another option for funding would be to begin to make annual
contributions to your new account. Currently, the maximum allowed is
$5000.00 a year with an additional $1000.00 if you are over the age
of 50.
 The new custodian (Sterling, Goldstar, Entrust) will transfer the funds for
you. Your other option is to make the withdrawal yourself and then send
the check to your new account. The danger here is that this must take place
within 60 days of the withdrawal date or you will be liable for taxes on the
withdrawal. Please note, the transferring of money from one custodian to
another does not make you liable for the 10% early withdrawal penalty. You
did not make a withdrawal, you transferred the assets from one custodian
to another.
 Once your new account is funded, you can then direct your broker to
purchase gold, silver, platinum and palladium for your account. Your broker
will withdraw payment for the purchase and send the appropriate amount of
metals to the custodian’s storage facility. The storage facility will report the
receipt to your custodian and show the metals in your account.
French 20 Franc (Angel)        French 20 Franc (Rooster)      Swiss 20 Franc
Fine Gold Content:             Fine Gold Content:             Fine Gold Content:
.1867 Troy oz                  .1867 Troy oz                  .1867 Troy oz
Fineness: 90.00% 21.6 Karats   Fineness: 90.00% 21.6 Karats   Fineness: 90.00% 21.6 Karats
Diameter: 21.0mm               Diameter: 21.0mm               Diameter: 21.0mm

          British Sovereign                       South African Krugerrand
          Fine Gold Content:                      Fine Gold Content:
          .2354 Troy oz                           1 Troy oz
          Fineness: 91.67% 22 Karats              Fineness: 91.67% 22 Karats
          Diameter: 22.05mm                       Diameter: 32.6mm

           Canadian Maple Leaf                     Austrian Philharmonic
           Fine Gold Content:                      Fine Gold Content:
           1 Troy oz                               1 Troy Oz
           Fineness: 99.99% 24 Karats              Fineness: 99.99% 24 Karats
           Diameter: 30.0mm                        Diameter: 37.0mm
American Eagle                 Liberty                         St Gauden’s
Fine Gold Content:             1850–1907                       1908–1932
1 Troy oz                      Fine Gold Content:              Fine Gold Content:
Fineness: 91.67% 22 Karats     .9675 Troy oz                   .9675 Troy oz
Diameter: 32.7mm               Fineness: .900 21.6K            Fineness: .900 21.6K
                               Diameter: 34mm                  Diameter: 34mm

          American Buffalo                            Indian
          Fine Gold Content:                          1907–1933
          1 Troy oz                                   Fine Gold Content:
          Fineness .999 24K                           .48375 Troy oz
          Diameter: 32.7mm                            Fineness: .900 21.6K
                                                      Diameter: 27mm

American Eagle               Morgan Dollar                    Peace Dollar
Fine Silver                  1878–1921                        1921–1935
Content: 1 troy ounce        Fine Silver Content:             Fine Silver Content:
Fineness .999 Pure Silver    .7734 Troy oz Fineness:          .7734 Troy oz
Diameter: 40.6mm             90.0%Pure                        Fineness: 90.0%Pure
                             Diameter: 38.1mm                 Diameter: 38.1mm
         Walking Liberty Half Dollar                  Kennedy Half Dollar
         1916-1947                                    1964
         Fine Silver Content:                         Fine Silver Content:
         .36169 Troy oz.                              .36169 Troy oz.
         Fineness: 90.0%Pure                          Fineness: 90.0%Pure
         Diameter: 30.6mm                             Diameter: 30.6mm

           Modern Commemoratives                     Merc Dime
           1982–Present                              1916–1945
           Fine Gold Content: .24187                 Fine Silver Content:
           Troy oz Fineness: .900 21.6K              .07234 Troy oz
           Diameter: 21.6mm                          Fineness: 90.0%Pure
                                                     Diameter: 17.9mm

Free Lakota Bank                 Ludwig von Mises                    Clean Silver Rounds
“Crazy Horse” 2009               2009-Present                        Fine Silver Content: 1 troy
Fine Silver Content: 1 Troy oz   Fine Silver Content: 1 troy ounce   ounce
Fineness: .999 Pure Silver       Fineness .999 Pure Silver           Fineness .999 Pure Silver
Diameter: 39mm                   Diameter: 39mm                      Diameter: 39mm
 To begin the process, all you need to do is call 800–686–2237. Our brokers
will take your information and work with you to insure you are investing in
coins that will meet your investment goals.
 When you have decided on an order, your broker will give you the total
amount due and a trade number.
 The trade number will lock in your price for five business days and is
a binding agreement for the purchase. Regardless of the fluctuations in the
price of the metals after the trade date, the contracted price is binding on
you and on us. In a busy market, prices change rapidly!
 You will send in your payment, either by check, money order or bank wire to
Midas Resources within those five business days and the processing of your
order will begin.
 Your broker will notify you when your order has been shipped and will give
you a registration number to track your shipment online.
 All orders are shipped registered and insured by the U. S. Postal Service.
The USPS requires signature upon delivery of registered mail and is the
safest delivery method aside from picking it up yourself. Midas Resources
has excellent record of delivery for over a decade.
Our brokers are ready to answer your questions and help you get started.
Your future is too precious to postpone. Don’t delay, call Midas Resources
today. 1–800–686–2237

Description: Life Insurance Value in Gold Coins document sample