Solid Reasons To Accumulate Physical Silver And Gold

..by Biz Bluetree

Intelligent economists, analysts, investors and businessmen with names James Turk, Eric Sprott, Robert Fitzwilson, Stephen Leeb and others remind us that history repeats itself and trends don’t lie. Their clear message is if a slippery slope goes ignored by uninformed masses, calamity and chaos ensue.

In fact, read why Stephen Leeb believes Germany, Russia and China are intent on replacing the U.S. dollar as the world’s reserve currency with their own “currencies and gold.”

How can Joe Average stay informed, make the right investment choices and protect his savings?

Certainly an experienced trader has a better chance of achieving gains than does the average investor. For this “average Joe investor” reading as much as possible from the far left to the mainstream middle to the far right, and forming an opinion then taking action, is the best strategy.

In this opinion, for instance, contrary to mainstream mantra, the stock market is over-valued while silver, gold and shares of certain metal mining companies are vastly undervalued. Having said that, opinion here is that a time may come when retirement accounts, bank accounts and brokerage accounts come under the scrutiny of hungry governments. Therefore it has become this writer’s practice to save/invest almost exclusively in physical silver and gold, with greatest focus on silver – held under private lock and key.

Paranoid or realistic? There are solid reasons

Today, as it’s no secret, the formulas used for measuring inflation, unemployment, the consumer price index [CPI] and gross domestic product [GDP] (among other indicators) have all changed. The formulas have been changed, of course, to a method that allows more favorable numbers to be fed by central planners to the mainstream masses via mainstream media to create an illusion that everything is OK, and in fact improving.

There is however a camp of respected professionals who believe, based on their own analysis and experience, that things are in fact OK and improving. Their arguments carry merit and are sometimes close to convincing, but at the end of the day for this average Joe, the only thing improving seems to be the slippery surface of the slope.

See the change in U.S. interest rates over the last few decades. Today’s zero interest rate policy [ZIRP] differs greatly from the calculated high interest rates of Volker’s Fed in 1979 and 1980. Decades ago procedures in Fed policy were put in place to control inflation by controlling the growth rate of the currency supply.

Today?

A tapering of QE is currently in place, but as pointed out in a previous article, The Salvation Of Silver And Gold, the Fed will soon realize a negative impact from tapering and reintroduce an even more aggressive stimulus program, including debt purchase and increased currency creation which will prove unsustainable.

Any economist worth his salt knows there is a close relationship between the rate of inflation and the growth rate of the currency supply. And greater the supply of currency, the lower the value of each unit of that currency.

Yet, the other camp argues that the growth rate of the currency supply was actually greater prior to 2003 than it is today and that the Fed’s balance sheet is bloated because the banks are holding greater reserves in collateralizing themselves. And because this currency is not making it into the economy at large, it is in fact not being devalued.

This article suggests, try telling that to China

While this government’s cost of running its show is dependent on short-term debt, what could happen if and when interest rates rise? Could the government’s burden of maintaining itself spiral out of control and destroy its own currency? Could hyperinflation, as is being suggested in some circles, become our reality?

In this opinion, the potential is real and is reason enough to accumulate physical silver and gold for purpose of risk management and wealth protection.

After all, there are many experts on both sides of the argument with conflicting opinions making it difficult for the average Joe to decide for himself what is credible and what is not. Market and economic fundamentals don’t seem to indicate a clear path as they once did when followed correctly. The road today is muddied and unrecognizable.

A recent Casey Research article written by senior precious metals analyst, Jeff Clark suggests those believing the gold peak of $1,921 per ounce in 2011 was equivalent to the high of $850 per ounce in 1980 are employing “flawed logic.”

This furthers our point 

Even the U.S. Bureau of Labor Statistics [BLS] suggests $850 gold in 1980 is actually equivalent to $2,320 gold in 2011 dollars, yet that number is derived from a changed calculations formula, too.

In order to compare the inflation adjusted numbers more accurately, Jeff Clark asked John Williams of Government Shadow Statistics [Shadow Stats] to use the very method of calculation employed by the US government in 1980 to determine what today’s number should be. Here’s how it added up:

“Using the 1980 formula, the monthly average price of gold for January 1980 would be the equivalent of $8,598.80 today. The actual [one day] top of $850 on January 21, 1980 would equate to a whopping $10,823.70 today.

 [...] the current [BLS] CPI formula grossly dilutes just how much inflation has occurred over the past 34 years. It’s so misleading that investment decisions based on it — like whether to buy or sell gold — could wreak havoc on a portfolio.”

This is another reason our article champions the accumulation of physical precious metals to preserve wealth and to survive financially in a volatile, ever-changing economic climate.

Consider the signs that through-out history have spelled financial collapse: a declining workforce, high real unemployment, rising inflation, unsustainable levels of world debt, unfunded domestic liabilities, devaluing of currency and foreign wars. All of this, coupled with never ending government intervention and regulations, has this contributor reading a recipe for disaster.

Physical silver and gold are nobody’s liability

For investors interested in accumulating precious metals assets, there is no time like the present. The price is right. Though it is no secret current bargain prices for silver and gold are the result of rigged-markets including price manipulation and propaganda, this cannot go on forever. It is only a matter of time before the huddled masses yearning catch wind as to what is really happening. At some point metal prices will soar and supply shortages will be realized. In other words, as according to Eric Sprott, there “won’t be anything left to buy” for whomever arrives late to the party.

Perhaps a normalcy bias has you comfortable this scenario could never play out in the U.S. Please try to imagine for a moment that it can… Imagine banks accepting gold and silver on deposit and issuing alternative currencies or crypto-currencies. Still too far fetched? JP Morgan (JPM) doesn’t think so. JP Morgan not only holds a sizable physical silver hoard against its short position, it has also applied for a crypto-currency patent.

Click here to view the JP Morgan patent application.

Convinced what may be sobering for some will be categorically dismissed by others as unsubstantiated or alarmist theory, Robert Fitzwilson of the Portola Group shares this insight:

“At some point there will be an implosion of the monetary system. Common sense tells us that it is inevitable, as do arithmetic and history. Investors in gold and silver should not be attempting to predict the timing of the event, nor specific magnitude. It is about wealth preservation, pure and simple.

Gold, silver, and precious metals mining companies are the only absurdly undervalued assets on the planet [right now] and should continue to be considered [by] those wishing to survive the financial maelstrom ahead.”

Increasing numbers of experts share this opinion and feel it’s just a matter of time before we experience an uncomfortable end game. If their assertions are to be given credence, our opinion supporting physical silver and gold makes perfect sense.

James Turk makes a good observation and point after reviewing 63 commodities priced from 1980 to the present as chronicled on the World Banks web site. Included in that list of all higher priced commodities is silver whose current price is only 51 percent of its price 34 years ago.

Turk asks:

“How is it possible that silver can be so cheap given its use in so many new applications and the continuing drawdown of its above-ground stock? We all of course know the answer to that question because silver is part of the central planners’ scheme to keep the price of the precious metals as low as they can. Yet gold is 192 percent of its price at the end of January 1980. So why hasn’t the silver price risen at the same rate?

Turk then surmises:

Some people will answer that question in a variety of ways, but to me there is only one answer. The price of silver is much easier to control than the price of gold because silver is a much smaller market, so paper derivatives can have a much bigger impact on silver. [...] imagine what a group of governments and their bullion bank agents can do with their combined resources if they are intent on manipulating silver.

But regardless of the ongoing manipulation of the silver price, one obvious fact stands out from my comparison of commodity prices — silver is very, very cheap. Silver is by far the cheapest of the 63 commodities I compared. That makes silver a tremendously undervalued asset and therefore one of the best buys on the planet today.”

For wealth preservation and risk management, good advice remains to buy and hold physical silver and gold. There will come a time when the price you paid for it does not matter. And the only thing that will matter is you own it rather than do not.

Physical Gold: How To Stack With Stealth

“Every day I wonder, ‘Is there a deal between the East and the West so that we are permitting all of our Western gold to be taken by the East so they don’t collapse our paper markets?’ I don’t know, but the fact is I couldn’t be more bullish about the prices of physical gold and silver going forward.” –John Embry, Sprott Global Assets

 Physical Gold: How To Stack With Stealth ..by Biz Bluetree

Gold bugs, inflation hedgers, coin collectors and sovereign central banks everywhere, especially in the east, are putting their hands on as much physical gold as they can at bargain prices.

In fact the price has dropped so low the cost to purchase one ounce of gold in many cases is now on parity with the cost to produce one. Some mining companies are already curtailing exploration and development to save associated costs, and if the price of gold continues to drop, these miners one by one could at least temporarily stop production. Strong companies should endure the costly task of putting mines on “care and maintenance” while others will go away and not come back.

Imagine what might happen to gold’s price if demand stays the same or drops to just half the shortage.

But for the John Embry quote above, there will be no more opinion of the kind in this article, except to say it’s ironic how the price of gold is disconnected from the physical realm, but rather fixed in the over extended paper gold universe. And using the word “fix” here is not a shallow implication. It is what the LBMA does twice daily in the city of London via conference call.

Welcome to another 1%

If you stack gold and know why you stack gold, welcome to an alternate 1% of the wealth demographic.

No one knows for certain the percentage of people buying and holding gold, which is one of the nice things about stacking the physical – it’s a private practice – I’ve heard only two percent of Americans hold physical silver and gold.

This article will focus on gold.

If you’re not interested in stacking gold and don’t agree with an importance to do so because of a sagging price or because an economic recovery is underway, or for whatever reason – like having read my last piece, “Physical Silver: How To Stack With Stealth“, you may feel you’ve misspent your time reading here, too.

This article simply serves as a guide for those interested in stacking the yellow stuff. If you agree transferring paper currency into physical gold makes sense as a store of wealth outside the fractional, fiat banking system, you may too agree physical gold is to have and to hold, not to trade – that is what the SPDR Gold Shares ETF (GLD) or the Sprott Physical Gold Trust (PHYS) among others, are about. Or if you want exposure to gold without the responsibility of personally storing it, a paper gold investment like those above might make sense for you. Not for me, if your intention is to hold gold in your private possession; stack the physical and read on…

Let’s get into it

Some readers agree stacking gold makes sense, yet ask, “What is the best way?” Are hold-in-your-hand bars, ingots or rounds right? Should I accumulate government minted gold coins? Which ones? Where to buy? Is this a good deal on eBay?

The best way to address these questions is to out right show you Bluetree’s method of gold stacking. I hope this is helpful.

Note: you are wise to avoid buying precious metals on eBay (unless you really know what you’re doing and trust who you are dealing with) as counterfeiting is rampant in the coin sector. Also be aware the best and most reliable dealers don’t have to advertise on TV.

In discussing Bluetree’s method

We will discuss what to have and to hold and where to buy. Not how to store or how to protect. That’s personal.

For this discussion, we begin

*One ounce of gold means one troy ounce, weighing 31.1 grams (same for silver) and generally minted in 24 karat which is 9999 pure gold bullion or 22 karat which is 9160 fine gold alloy. Note: 12 troy ounces equal one troy pound.

*A karat is a measure of purity of gold based on a 1/24 ratio rather than a measure of weight. However, a “carat” is usually the term used as a measure of weight used for gem stones and pearls.

*A coin is only a coin when issued by a sovereign government. A planchet of gold pressed at a private mint is not legally a coin and must be advertised as a round.

*United States minted gold coins circulated as legal tender in the U.S. economy from 1795 to 1933. In 1986 silver and gold collectible coins were minted and made available to the public. These modern coin types will be our focus here.

The Bluetree method

The Bluetree method recognizes three specific one-ounce, modern gold coins that are exempt from IRS 1099B reporting. But, before I go any further, I am not a tax professional or financial planner and cannot advise you. The examples in this article are my own observations and provided for your information and entertainment. I suggest everyone consult a tax professional before adopting my ways for my reasons.

But, exempt from 1099B? Yes, in any amount.

Over time, with help of credible sources, (confirming one here for purpose of this article) we learn that if selling 25 or more ounces of gold to a dealer, that dealer/buyer is obligated to fill out form 1099B and report the transaction in his IRS filings, unless the sale involves one of these three exempt gold coins: the American Gold Eagle, the American Gold Buffalo or the Austrian Gold Philharmonic. (You will notice compliance differs slightly for silver)

On the other hand, if 25 or more ounces of gold is sold to a dealer in the form of gold bars, ingots or rounds, or other government minted gold coins including Canadian Maple Leafs, South African Krugerands and Chinese Pandas among others, a 1099B form is required to be filled out and submitted with the tax filings of the commercial buyer.

Good-bye, privacy.

But, of course, that’s only if you intend to sell your gold to a dealer. Many gold stackers have other plans for their gold when time comes to exit.

Investment in physical is personal. Nuance of play will differ for everyone. For as important to me the legal, stealth aspect of exiting gold, a comfort level exists in buying and holding gold in these exempt coin types.

#1 The American Gold Eagle, first issued in 1986, carries a $50 USD face value. American Gold Eagle coins are guaranteed by the U.S. government, among the most popular gold coins in the world and said to be minted exclusively using gold mined in the United States. Commissioned by the Gold Bullion Coin Act of 1985, the American Gold Eagle is widely accepted as one of the most beautiful coins of modern American coinage. The obverse of each Gold Eagle was inspired by famed artist, Augustus Saint-Gaudens’ Lady Liberty design which graced the now sought after $20 gold piece that circulated in the U.S. economy from 1907 to 1933. The reverse of each features Miley Tucker-Frost’s family of eagles design, which depicts a father eagle soaring above his family’s nest, holding an olive branch in his talons.2011 American Gold Eagle coin, obverse. Photo: providentmetals.com

AGE coins contain one troy ounce of .9167 (22K) fine gold and can be purchased from a reputable online dealer individually or in stacks of 20 contained in official U.S. Mint tubes. Buying this amount will incur a lower premium per ounce over spot.

This gold coin is also available in varying weights of one ounce, half ounce, quarter ounce and 1/10 ounce.

The Bluetree method remains aware that whether for purchase of gold, the down payment on a new car, or a deposit in your bank account, $10,000 is an IRS reportable transaction.

Comply with all U.S. tax laws and sleep better at night in your own bed.

#2 The Austrian Gold Philharmonic, first issued in 1989, is the only one ounce gold bullion coin denominated in EURO carrying an €100 face value. Prior to the introduction of the Euro these coins were denominated in Shillings.

Austrian Gold Philharmonic coin, reverse. Photo: providentmetals.com

AGP coins contain one troy ounce of 9999 (24K) pure gold and can be purchased from a reputable online dealer individually or in stacks of 20 contained in official Austrian mint tubes. Buying this amount will incur a lower premium per ounce over spot.

Celebrating the Vienna Philharmonic Orchestra the obverse of this coin features the iconic Great Organ housed inside the Golden Hall of Vienna, Austria and inscribed with REPUBLIK OSTERRIECH, 1 UNZE 9999 GOLD, the date and 100 EURO. The reverse of each coin depicts a bouquet of orchestral instruments; a string bass surrounded by cellos and violins, bassoon, harp, and Viennese horn. WEINER PHILHARMONIKER is inscribed across the top.

This gold coin is also available in varying weights of one ounce, half ounce, quarter ounce and 1/10 ounce.

#3 The American Gold Buffalo, authorized by the Presidential Coin Act of 2005, the Gold Buffalo is the only 24 karat gold coin minted by the United States made available to the public and carries a $50 USD face value.

2013 American Gold Buffalo coin, obverse. Photo: providentmetals.com

AGB coins are composed of one troy ounce of 9999 (24K) pure gold. Only 300,000 American Gold Buffalo coins are minted at West Point each year. American Gold Buffalo coins arrive in original U.S. Mint packaging, while multiples of 20 come in uncut U.S. Mint plastic sheets. Buying this amount will incur a lower premium per ounce over spot.

The obverse of each gold coin celebrates James Earle Fraser’s wildly popular five cent Indian Head Nickel which circulated in the U.S. economy from 1913 to 1938. The design bears the word LIBERTY at top right, the date bottom left (with the artist’s initial F) and a profile believed to be a combination of three Native American Indian chiefs of different tribes: Iron Tail of the Lakota Sioux, Big Tree of the Kiowa and Two Moons of the Cheyenne.

Each American Gold Buffalo coin features Black Diamond, the 1,550-pound American Bison who spent his years living at the Central Park Menagerie.

Numismatics – Graded & Certified Gold Coins

Unless you are a coin collector, (numismatist) and enjoy owning these coins for their beauty, perfect Mint State pedigree or rarity, they are not the least expensive to purchase for stacking. Their cost can be many times more than their loose gold coin counter parts. However, if you know implicitly what you are looking for and have a network of other collectors who may be interested in purchasing your collectible coins, you may be successful in profiting in the near and mid term. The subject of numismatics is covered in more detail in a previous article, here.

2006AmGoldEagleMS70

2006 MS70 American Gold Eagle coin, obverse. Photo: greatcollections.com

Graded and certified coins do not currently align with Bluetree method goals. Whether modern issue or vintage, in the end if gold is priced the moon, I doubt these slabbed coins will fetch the stars based on their numismatic value.

 

Purchasing gold coins

You may already use an honest and reliable, customer-centric, bullion and coin dealer. I say, great! That’s half of the equation in this endeavor. However, if you do not have such a dealer, I am happy to introduce you to my choice, Provident Metals. I also use APMEX from time to time.

Note: I receive no compensation from these vendors.

Conclusion: We may never know gold’s true value, but its power to preserve wealth may well be fundamentally infinite.

 

physical gold, American Gold Eagle

Physical Silver: How To Stack With Stealth

-by Biz Bluetree

“…when this thing really gets going, the silver price is just going to explode.”

- John Embry, Sprott Global Assets

I like the sound of that. Though silver spot price has been in a sub-20 sideways slumber the past two weeks, and could slip even lower, with some saying another steep decline is possible, I’m buying all the way down. Silver’s true value suggests its price has nowhere to go but up.

…If you stack silver and you know why you stack silver, welcome to the new 1%, this article is written for you.

Which silver bullion coins are tax exempt?

(Read article from Biz Bluetree…)