Friday, September 2, 2011

How To Invest In Gold

Current market conditions are characterized by persistent and maddening asset deflation with simultaneous monetary inflation.  For new readers we will break this down into a more simple statement.

Everything you own is going down in value while everything you buy is going up in price.

This is a challenging set of circumstances for small investors.  The reason that the challenge is greater than normal is that these conditions are the product of economic manipulation.  The laws of markets have been bent in order to benefit a select few.  Before labeling this a conspiracy consider that the money center banks profited handsomely from issuing, packaging and selling mortgages that were not worth the paper they were printed on.  Then, when the house of cards collapsed the public was told that if these companies fail everyone would be doomed so we must keep them solvent.

What you must understand about 0% interest rate policy is that money center banks are allowed to borrow funds at 0% and purchase US Treasury notes at 2-3%.  The newly purchased notes are used as collateral for the loan so there is no cost to the bank.  They are then allowed to use the interest payments to repair their balance sheet.  Meanwhile, they are providing funding for an out of control and delusional congress who insists on spending $1,400,000,000,000 more than it receives in annual income.  Do you see the problem?  Do you see why the founding fathers warned of the dangers that come with a central bank?

This is not a political site.  In fact, we remain devotedly agnostic with respect to politics.  It just does not matter anymore who gets elected.  Most people write us off as negative after hearing that statement but maybe you should consider this.  The conditions present today have nothing to do with politics.  Economics is all that matters.  The only way to survive and protect capital is to understand markets, economics and human psychology.  Grasping these three concepts simultaneously then using them as indicators is the key to survival in a system that reeks of fascism.

Your stock broker still has not received the slap in the face that is coming from the gold market.  Please understand something very very clearly.  Gold is not a commodity.
Gold is Money
When you purchase gold your are engaging in a currency swap.  This means you are trading dollars that are printed in unlimited quantity for money that has a fixed supply and can not be duplicated.  Consider the following chart which compares the performance of gold vs the dollar over 5yrs:

That is probably not good enough for your stock broker as he will wait until there is a 60 Minutes broadcast telling him that the dollar is no longer useful.  Maybe we should try to persuade him with a chart comparing this "Useless commodity" with the S&P Index Spider ETF that he calls "Aggressive" market exposure based on the formulaic marching orders handed down from his superiors.

Well, you can draw your own conclusions from these facts.  Remember, the critical tool for survival is the ability to objectively think for yourself.  You were told that thinking for yourself was dangerous and not politically correct.  Get this ability back as soon as possible because when you don't think for yourself someone else thinks for you.  A quick study of human history will show that exchanging this autonomy for perceived security this will not end well.

When investing in precious metals we suggest an allocation of bullion, mining stocks and cash.  If your broker can not help you with this please contact us to receive information about other options.

See our three part series on gold at

1 comment:

Romocop said...

Would like your commentary on GoldMoney. Is it legit? Is it safe?