How (And Why) To Buy Gold

May 4, 2010

By Jim Deeds

(OVER 90% OF AMERICAN PEOPLE TODAY HAVE NO GOLD “SAVINGS.”)

Since most of my neighbors know I worked in the “financial business” and have some kind of investment experience...and they know my political views are somewhere right of “Attila the Hun”, every so often one will ask, “What do you know about gold?” But as soon as my answer extends beyond two sentences, they start to look bored and interrupt to quickly change the subject. This makes me wonder: Are Americans Afraid Of Gold Or Just Plain Stupid?

(A third choice, scary as it seems to me, could be that only 5% of American people are able or want to “save” money for a rainy day anymore.)

                   Boys                                                                 Girls

Since kindergarten, gold for most of us has always seemed very valuable. For the boys, it was dreams of finding a pirate’s treasure chest full of gold coins. And for girls, gold jewelry was a dream in the first step to going somewhere. So today, (2010)...when gold may prove to be the most important SAVINGS to us in our entire financial lives, why do 90% of American people shy away from putting a significant part of their savings into gold? Let’s look closer: gold...facts and fiction.

I.    First:  Gold...The Fiction

Excuses not to buy or own gold:

      A.  “I lost a lot of money last time I bought some gold back in 1980 (30 years ago!) when I bought 5 gold coins or some Canadian gold stocks. I’ll never do that again!”

      B.   “Gold has already gone up way too high in price.”

      C.  “Gold today is in a bubble, just like the dot.com stocks I lost a fortune in back in 2000...or my Citigroup and General Motors stock last year. I want the security of a bond!”

      D.  “Gold is a barbaric metal”...end of conversation and all thought process!

      E.   “Our American government and the “Fed” know a lot more about money than I do...I trust ‘em!”

      F.   Etc...etc. change, in any fashion, from “the norm” is impossible for most people. This may be why adversity and change create huge opportunity for a tiny few.

II.  Please Don’t Confuse Me With Facts On Gold

Any short or longer term investment interest in gold must be focused on truth...not emotion. Gold’s value as a refuge for savings should be compared with the slow and now more rapid decline in the value of the American dollar since 1913 the year the Federal Reserve was established.

      A.  In 1913, gold cost $20 an ounce. Today gold costs $1,170 an ounce. Over 97 years, the American dollar has lost 98.3% of its purchasing power in terms of gold.

      B.   When I was born, gold (quoted in a uniform price worldwide) cost $35 an ounce. Since then (over 70 years) an ounce of gold has gone up 33 times in relation to our paper dollar. Our dollar has lost 97% of its buying power, as reflected in the price of a loaf of bread in 1935 which has also gone up 30 times in its “store price” today.

      C.  For “short termers”...a car that cost 95 gold coins in 2000 only costs 25 gold coins today. Measured in any paper currency in the world, gold has given savers 15% a year return or better since 2000!

      D.  And last, for “old timers”, the gold $50 Peso coin Barb and I bought in a bank in Mexico City in 1970 now costs $1,444.00. The Mexican gold coin is up 28.8 times in price over 40 years. Not an exceptional investment...but pretty good savings!

III. The Future...Gold Prices Up!

Looking ahead...both rising inflation and rising gold prices worldwide reflect both an emotional and monetary response to future bailouts and bankruptcies. As people start to recognize increasing price inflation, interest in gold as the best monetary “safe haven” also grows. As more and more people see “the problem”, both inflation and a rapidly rising gold price become more and more emotional. More gold buyers equals higher prices...as the day to day purchasing power of the dollar falls.

Inflation, initially a monetary screw-up by central banks in creating too much money and credit “out of thin air” to “fix a crisis” (continued expanding long-term bailouts), soon results in an emotional response by the general public as they race ahead to buy food and other essentials “before the prices go up”. Amazingly, the dwindling paper dollar savings of people falls rapidly in relation to increased prices...people run out of money! (There is a dollar shortage). Then, our government’s only response to the “money-shortage” is to binge in printing more paper dollars and in ballooning “credit” for people to borrow more! (Sound familiar?)

The Conclusion? In Zimbabwe’s hyperinflation (that lasted 10 years), the final currency printed before the total financial collapse was a paper one quadrillion dollar (Zimbabwe “dollars”) bill! That’s 1,000,000,000,000,000. When hyperinflation reaches this level, how much would you guess your “dollar savings in the bank” or a municipal bond or treasury bill will be worth?

YES...a gold or silver coin, or gold or silver mining company stock shares in a financially stable country. Gold and silver are the world’s most dependable free-standing “money” when all else fails.

V.  How o Interest “The Disinterested” In Gold.

The only way I know is to not make the saving of gold or investment in gold and silver shares a “big deal”. Remove the emotion. Instead, dare a non-gold investor to make it a “tiny deal”!

Just buy 1 to 5 one ounce gold coins or 50 American Silver Eagles (from a responsible coin dealer). AND, in addition...Just buy 100 shares of Agnico Eagle Mines (AEM) or Novagold (NG) stock (both Canadian corporations).

Then suggest, every time the coins go up 10% in price or the stock goes up 20% ...buy some more! Increasing gold and silver prices...especially if you also see the dollar falling or inflation gaining speed...Tells You You’re Right! Since a rising gold price is not a measure of gold but only the measure of the rapidly shrinking value of the American dollar, the only realistic answer “how high can gold go” is... “HOW FAR WILL OUR AMERICAN DOLLAR FALL?”

THE END! (Or maybe a great beginning?)