HISTORY OF GOLD
For the past 6,000 years, the most sought-after form of asset protection has been gold. Gold coins are the most liquid financial asset in the world.
- It has no borders
- It is recognized throughout the world
- It can be easily transported or hidden
For this reason, owning gold represents financial privacy and independence. Gold frustrates the attempts of governments to completely control the finances and lives of its citizens.
LIFESPAN OF CURRENCY
DEFINITION OF CURRENCY
According to dictionary.com, “currency” is something that is used as a medium of exchange; money; the fact or quality of being widely accepted and circulated from person to person.
LIFESPAN OF CURRENCY
History is full of examples of what happens when a currency dies. Sadly, fiat currencies (meaning a currency with no tangible backing) have a zero percent life expectancy in the long run.
According to a study of 775 fiat currencies conducted by dollardaze.org, the average life expectancy of a fiat-based currency is 27 YEARS. The shortest being one month, and the longest being the British pound sterling at 317 years. However, nobody should be doing any cheers for the British pound sterling as success is relative. Due to printing without discretion (no tangible backing) the pound sterling has lost 99.5% of its value since inception.
Another case in point is the U.S. Dollar. The U.S. Dollar was taken off the gold standard in 1971, making it a fiat currency. Since 1971, (42 years at the time of this webinar), the U.S. dollar has lost 97% of its value.
This is why people need gold! First and foremost you should view it as an insurance policy against a collapsing currency. It will maintain its purchasing power over time.
GOLD AND PURCHASING POWER
AN EXAMPLE OF HOW GOLD HAS MAINTAINED ITS PURCHASING POWER
Back in the 1920s, gold and the U.S. dollar were convertible. One ounce of gold could be switched back and forth with a $20 bill. This is because the U.S. dollar used to be backed by gold.
QUESTION: What did one ounce of gold or a $20 bill purchase back then?
ANSWER: It would buy a finely tailored men’s suit, shirt, tie, belt, and shoes.
QUESTION: What does that $20 bill buy you today in 2017?
ANSWER: It barely gets you a meal for you and your spouse at McDonalds!
One ounce of gold at well over $1600 per ounce today still buys you a finely tailored men’s suit, shirt, tie, belt, and shoes. Gold, (or precious metals in general) is your insurance policy against a collapsing currency, in addition to being a fantastic investment. Right now, because of the global, political, geopolitical and economic conditions we are faced with, all arrows are pointing toward gold and silver for preservation and protection.
In a depression, economic crisis, inflation or war people seek financial security. They invest in assets that represent more than just a paper promise to pay. For many, that means owning gold coins.
Precious metals generally respond counter-cyclically to good economic news. That means the worse things get politically, economically, and geo-politically the better they perform. A spastic economy, with elements of both inflation and deflation, will make more traditional investment strategies obsolete. Gold coins should be a major part of every investor’s portfolio over the coming turbulent years.
As I discussed in, “Optimizing your Investments for Safety and Growth,” and “How to Beat Inflation,” the U.S. dollar, for fundamental reasons of too much debt coupled with too little revenue, is now in a long term bear market.
As the dollar goes into a long-term downtrend, millions of foreigners will start re-directing their money out of the paper financial markets and into the world’s other proven reserve currency! All it would take to spark an explosion in the price of gold is one major event: an escalation of terrorism in the U.S., an expansion of the war in the Middle East, another stock market meltdown, or a major bank failure.
Once the price takes off, panic buying could easily set in. If you are not in a position before the price explosion starts, your opportunity for profits will be substantially reduced. To safeguard your financial portfolio, I recommend that you place up to ½ of your investments in precious metals.
PROPER ASSET ALLOCATION
Having ½ of your investable assets allocated into precious metals (at this time in history) makes sense as they will be a hedge against declining paper asset classes like stocks, bonds, and currencies. During the 1980s and 1990s, having ½ of your portfolio allocated into precious metals WOULD HAVE BEEN TOO MUCH as everything else was booming. Conversely, if we were on the eve of hyperinflation, having 50% of your portfolio in precious metals would be TOO LITTLE as they would be the only thing that may maintain value.
The recommended percentage allocated into precious metals is dynamic.
The recommended percentage allocated into precious metals is dynamic—it will change given the conditions of the world around us. As the economy gets better, you would lock in profits and reduce your holdings of precious metals. As the economy gets worse, you would need to ADD to your position. Times change, and so should your investment strategy. A BUY AND HOLD forever strategy is a HORRIBLE strategy because nothing GOES UP forever and nothing GOES DOWN forever.
WHEN SOCIETY ERODES
Society gets ugly very quickly when people have no means to buy food, clothing, fuel or shelter. People will be looking for anything that has value to trade for the necessities of life.
Physical precious metals offer exactly what is needed as they are:
GOLD AND SILVER ETFs
Gold and silver ETFs don’t fit the bill. They are just paper.
Mining shares are just another stock and have a lot of additional risks associated with them. Gold and silver have never been worth zero, whereas mining companies can go out of business.
PHYSICAL GOLD AND SILVER COINS
Physical gold and silver coins and bars are the safest, lowest-risk ways to invest in gold and silver. Actually, they are the only way to invest in gold and silver as the other options are just paper assets.
TYPES OF GOLD COINS
The word “numismatic” is derived from the Latin word numisma, which means coin. Numismatic coins are the OPPOSITE side of the spectrum from BULLION COINS. Numismatic coins are legal tender coins that were minted decades ago and now exist in very limited supply. These are the coins that are eagerly sought after by collectors.
A numismatic coin’s value is based on its rarity, age, condition, and demand in the marketplace. The current price of gold can play a small part in the price of each coin, and premiums are far higher than those of bullion coins. This is the polar opposite of a BULLION COIN, for which scarcity, rarity, and market demand have very little to do with the price of the coin. For bullion, the price is directly a function of the market SPOT price and the number of ounces of metal in the coin.
Most rare numismatic coins are purchased in higher grades, such as MS66 to MS70. This category would include very rare, museum-quality U.S. and foreign gold coins.
Semi-numismatic coins fall between the above two categories. These coins are not as rare — or expensive — as numismatic coins. Semi-numismatic coins generally range in condition from lightly circulated to MS65. The commissions on semi-numismatic coins are much lower than on numismatic coins, and they also offer investors a greater amount of liquidity. I would classify these as INVESTMENT grade coins because they can be purchased at lower prices than numismatic coins; they can provide a multiplier effect through premium expansion and are 100% liquid.Your EXIT strategy needs to be just as important as your ENTRANCE strategy as NOTHING GOES UP FOREVER and NOTHING GOES DOWN FOREVER. Eventually, you will lock in profits and sell. Therefore, your investments MUST be liquid.
EUROPEAN GOLD COINS
CRITERIA FOR PURCHASING EUROPEAN GOLD COINS
- Easily identified: Stay with a recognized coin from a well known country. When it comes time to sell your coins, you will want a well-established market.
- No restrikes: Many bullion coins, such as the Swiss and French 20 francs or Austrian gold coins are re-strikes. Re-strikes might exhibit older dates, but they were actually minted many years after the date that appears on the coin.
- Low mintages: For a coin to have collector appeal, it must have some scarcity or rarity. In other words, the number of coins originally minted should not be astronomical.
- Uncirculated condition: Collectors and investors alike are drawn to an attractive higher-grade coin. Seek out coins that were never released for public circulation, but were hidden away in bank vaults.
- Significant age: Like any true collectible, age does matter. A piece of furniture made in the past 10 years obviously does not qualify as an antique. The same applies to coins. A coin minted in the past few years has little collector appeal.
- Fractional sizes: Most European gold coins are 1/4 ounce or smaller – very logical since they were once actually used as money! Their small fractional size is especially convenient when it comes time to sell, barter or liquidate the coins.
- Semi-numismatic: The coins need to have a valid rarity value to avoid dealer reporting requirements. The combination of age, mintage and condition is very important.