ABCs of Gold Investing 3rd Edition

Preview - ABCs of Gold Investing 3rd Edition


"The possession of gold has ruined fewer men than the lack of it." -Thomas Bailey Aldrich


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abc's of gold 3rd


This book is a distillation of nearly forty years' experience working with private investors interested in adding gold to their investment portfolios. For many years, investors looking for a "how-to" guide on private gold ownership have gone home from the bookstore empty handed. With the publication of this guideline, a basic who, what, when, where, why, and how of private gold ownership is now available.

At the outset, I would like to make it clear that the purpose of this book is not to offer a proposed solution to the current economic problem now gripping the United States, Europe, and other nations around the globe. Insofar as it examines these problems, my intent is to explain their connection to the growing demand for gold in coin and bullion form. At the same time, anyone who reads the financial section of the morning newspaper and does not come away with a sense of unease should question whether or not he or she is processing the information correctly. A sense of anxiety, it would seem to me, comprises the rational response. Though we live in an age of gold, given its nearly ten-year bull market, it has not been in any sense a golden age.

It is to allay this sense of anxiety that so many, over the past decade and particularly over the past five years, have opted to diversify their portfolios with gold. Investment demand has reached a record level, as has demand from financial institutions, like hedge and pension funds, and lately from central banks. In the process, the gold price has steadily advanced on world markets to record highs. Over the past decade, the primary motivations for gold ownership have been asset preservation and wealth building as stock markets around the world went into a tailspin, yields trended toward zero, and confidence in the long-term purchasing of the dollar began to erode.

Now a new motivation for gold ownership has entered the market, one rooted in a dynamic shift in gold's supplydemand fundamentals. There is a sense of change in what is required in the modern investment portfolio to counter economic uncertainties over the long term. Gold, as the ultimate architect and protector of wealth, has recaptured its place as a permanent fixture in the asset portfolio, both public and private. This important change in sentiment strongly suggests the possibility of steady to increasing demand in the years to come as more and more investors come to view gold as a permanent, or semipermanent, portfolio fixture and a long-term savings alternative.

For many, this book could not have come at a better time. You now have in your hands a practical and comprehensive "how-to" manual for making an informed decision about gold ownership. Perhaps gold can offer you what it has offered countless others over the centuries: solid, unassailable protection against the gathering storm.

Michael J. Kosares
Denver, Colorado


Chapter 1

A is for . . .Asset Preservation: Why Americans Need Gold

The possession of gold has ruined fewer men than the lack of it. - Thomas Bailey Aldrich

The incident is one of the most memorable of my career. Never before or since has the value of gold in preserving assets been made so abundantlyclear to me. It was the mid-1970s. The United States was finally extricating itself from the conflict in South Vietnam. Thousands of South Vietnamese had fled their embattled homeland rather than face the vengeance of the rapidly advancing Communist forces. A couple from South Vietnam who had been part of that exodus sat across from me in my Denver office. They had come to sell their gold. In broken English, the man told me the story of how he and his wife had escaped the fall of Saigon and certain reprisal by North Vietnamese troops. They got out with nothing more than a few personal belongings and the small cache of gold he now spread before me on my desk. His eyes widened as he explained why they were lucky to have survived those last fearful days of the South Vietnamese Republic. They had scrambled onto a fishing boat and had sailed into the South China Sea, where the U.S. Navy rescued them.

These were Vietnamese "boat people," survivors of the final chapter in the tragedy of Indochina. Now they were about to redeem their life savings in gold so that they could start a new business in the United States. Their gold wrapped in rice paper was a type called Kim Thanh. These are the commonly traded units in Hong Kong and throughout the Far East. Kim Thanh weigh about 1.2 troy ounces, or a tael, as it is called in the Orient. They look like thick gold leaf rectangles 3 to 4 inches long, 1½ to 2 inches wide, and a few millimeters deep. Kim Thanh are embossed with Oriental characters describing weight and purity. As a gesture to the Occident, they are stamped in the center with the words OR PUR, "pure gold." It wasn't much gold—about 30 ounces—but it might as well have been a ton. The couple considered themselves very fortunate to have escaped with this small hoard of gold.

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