Dear Gold Investor,
Welcome to the March edition of my monthly Gold Report.
Gold started strong in
February with news that the eurozone would relent and start the printing
presses to bail out Greece again, yet the yellow metal finished lower
as Fed Chairman Bernanke threw investors off the scent of QE3. Many
investors seem to be numb to the inflation already created and are
waiting for even more as a signal to buy gold. That means it's a good
time to buy for those who know that inflation is coming.
Gold settled at $1,770
as February closed, after touching a high of $1,783, yielding a 1.72%
gain for the month. It has since corrected to $1,705 on misplaced
optimism for economic recovery. Silver peaked at $37.23 to close out the
month, a 10% increase, but has since dropped to $34.11 in the early
days March. Again, I think this dip will be temporary.
Warren Buffett continues
to make headlines in opposition to gold and in favor of punitive taxes
on the wealthy. In my commentary, I take a closer look at Buffett's
worldview. Is he an impartial sage looking out for the best interests of
his fellow citizens, or is he really looking for his next government
Meanwhile, Jeff Clark's
article tells us another secret about sound money - it has a message for
all investors, if they choose to listen.
And Mark Motive of Plan B
Economics examines gold compared to the S&P 500 as one way to gauge
how far this bull has left to run.
Finally, this month, I
am proud to introduce a new feature in which we answer our customers'
questions about buying and owning physical precious metals. If you would
like to submit a question for a future issue, please email me at
Euro Pacific Metals, LLC
report is designed to give you an edge when buying or selling, and, of
course, we hope to have your business. To speak with a Precious Metals
Specialist, call 1-888-GOLD-160.
|BUFFETT'S BURSTING BUBBLE|
by Peter Schiff, CEO of Euro Pacific Precious Metals
gold doomsayers have found their champion in the media's favorite
financial advisor and one of the world's richest men. Warren Buffett,
the man dubbed the "Oracle of Omaha," has repeatedly and publicly denied
that gold is an investment, and called gold buyers "speculators" and
people "who fear almost all other assets." In fact, Buffett claims that
gold's rise has the same characteristics as the housing and dot-com
bubbles, and it is only a matter of time before it reverses course. He
doesn't mean that the price will decline because of austerity measures
and a free-market interest rate, mind you. He just asserts that because
he's deemed it a bubble, it will inevitably burst.
financial world by-and-large views Buffett as an objective observer, a
rare investor who still considers the best interests of common man when
he speaks. Each year, there is much hullabaloo over the letter Buffett
writes to the shareholders of Berkshire Hathaway. When Buffett makes a
claim, the financial world coos and repeats it without question.
concede that Buffett is a talented investor and a great communicator.
He clearly has had great success and has much to offer. But that
shouldn't blind anyone to the fact that Buffett is not a trusted
observer. He's a crony capitalist who bends the truth to serve his
long-held ideological commitment to big government.
In the early stages of the financial crisis, when I was writing and promoting my first book Crash Proof to warn private investors
about trouble ahead, Buffett was accumulating shares in companies such
as Goldman Sachs, Wells Fargo, Bank of America, and General Electric. I knew these companies were insolvent, so I
wouldn't touch them with gardening gloves on. When the credit markets
seized up, Buffett worked behind the scenes and in public to make sure
each of his pet companies were bailed out. This was not by coincidence.
Buffett actually stated in September 2008 that he would not have
invested in Goldman Sachs if not for the implicit guarantee of federal
assistance. As a result, he profited at the expense of taxpayers at the
very time when they were losing their savings in the markets. Meanwhile,
many "in the know" politicians bought Berkshire stock during the
height of the crisis, making a profit from their votes, and giving them
incentive to revere Buffett all the more. Buffett once said if that if
the government didn't bailout failed companies, he would be "having my
Thanksgiving dinner at McDonald's instead of having a big dinner at my
daughter's." Seems like there were two bloated turkeys at that
Buffett were a true capitalist, he would be in favor of gold. He has
noted that the value of the dollar has fallen 86% since he took over
Berkshire Hathaway in 1965 and even said in his latest shareholder
letter that investors are "right to be fearful of paper money." But he
continues to harp on gold. It seems the only unit of account Mr. Buffett
approves are shares of his own company!
adoption of an independent measure of value like gold presents two
problems to Buffett. First, it would reduce the nominal returns of his
dollar-based investing strategy. Second, it would restrict Washington's
ability to goose the financial system in his favor.
the 19th century, when gold and silver were legal tender, the outsized
returns to which Buffett has become accustomed were much harder to earn.
Most people kept their money in physical bullion or bank deposits - and
earned a real rate of return. Now, under the fiat system, working folks
are forced into the more complicated world of equity investing. This,
too, can generate real returns, but it's a tougher playing field for the
Also, the fiat system artificially balloons the financial services portion of the economy. In
the 19th century, fortunes were made more often by business owners than
simple equity investors. People were more likely to rewarded for
providing a productive service than having direct access to the Fed's
quick look at Berkshire's performance verses gold since the Credit
Crunch goes a long way to explaining Buffett's antipathy toward the
Source: Google Finance
Mr. Buffett's lack of credibility goes deeper than a differing monetary
philosophy. He has been in the press since last August claiming that he
pays less taxes than his secretary - and urging Congress to pass a
"Buffett Rule" mandating a 30% minimum tax on millionaires. The natural
reaction is to say, "If you want to pay more, go ahead." But Buffett has
gone on record saying that it's not enough for him to lead by example,
and demanding that all of America's well-off bear the burden of
Washington's reckless spending binge.
problem is that Buffett's entire argument is constructed on deception.
Buffett is rated as the third richest man in the world for managing the
nearly $393 billion in assets, and he highlights that he pays only pays
17.4% of his income in taxes. But this is because he earns less than 1%
of his annual wealth from his salary, while over 99% is earned as the
largest shareholder of Berkshire Hathaway. Buffett claims that he
discounts his Berkshire holdings because he plans to give it all to
charity when he dies. So, it's not that the tax rates are so low, it's
that Buffett plans to give away 99% of his wealth.
even accounting for this clever accounting trick, Buffett is still
grossly understating his personal tax burden. He owns roughly 1/3 of
Berkshire's outstanding shares, the profits from which are subject to a
29% corporate tax rate. Last year, Berkshire paid $5.6 billion in taxes -
and the IRS says they owe $1 billion more! In addition to
corporate taxes, Buffett is also subject to an additional 15% capital
gains tax on his stock when he cashes out, not to mention any future
estate tax, leaving many to conclude that his share of taxes is
certainly higher than his secretary's.
might wonder what Buffett would hope to gain by understating his own
tax rate. To answer that, you have to understand Buffett's ideological
background. His father, Howard Buffett, was a US Congressman known for
his staunch libertarianism. As has been recounted by biographers,
Buffett resented being uprooted from his Omaha, NE home to move to
Washington, DC and felt estranged from his stoic father. That is to say,
Buffett's commitment to the nanny state runs very deep.
also, as mentioned earlier, Buffett personally benefits from the
current corrupt state of affairs. He gets prestige from nominal gains in
his stock price. He gets bailout money to guarantee the insolvent
companies in which he invests. Even that estate tax that will hit him
when he passes currently allows him to buy out other businesses at a
also shouldn't be a surprise that humble Howard was a staunch advocate
of gold and silver as money - nor that wealthy Warren rejects precious
metals as having "no utility."
media has built Warren up to be a demigod, a straight-talking Nebraska
boy that can hold his own against the vipers of Wall Street. But he is
just a man with a talent for making money, and his motives should not be
beyond reproach. Is he advocating the use taxpayer money to bailout his
business interests so he can profit? Is he being honest about what
money is? Does he even understand the business cycle?
prices will only go down when governments change course and make
significant cuts. Until then, gold is not in a bubble. It's the only way
to protect your wealth; and in the current economic condition, it's
poised to go much higher. I think it's high time Buffett takes to heart
his father's wise words: "For if human liberty is to survive in America,
we must win the battle to restore honest money."
Peter Schiff is CEO and Chief Global Strategist of Euro Pacific Precious Metals, a gold and silver coin and bullion dealer offering honest products at competitive prices.
If you would like more information about Euro Pacific Precious Metals, click here or go to our website, www.europacmetals.com. For the fastest service, call 1-888-GOLD-160.
|HOW HIGH CAN THE GOLD BULL CLIMB?
by Mark Motive of Plan B Economics
is once again above $1,700 and eyeing its all-time high. Yet, the same
two camps are saying the same things they have since the yellow metal
was at $600: either this is a bubble, or it's headed much higher. While
the gold bulls have clearly been right for over ten years, that doesn't
mean they will always be right. There are many ways to determine whether
gold will continue its historic climb. In the past, I have looked at
gold fundamentals - such as monetary inflation, increasing government
deficits, and an unsustainable debt - all which indicate a bullish
future. Today, I am examining a technical bellwether which has been used
for decades to analyze the relative performance of stocks vs. gold.
The S&P 500-to-gold ratio
measures the value of the stock market relative to gold. When the ratio
is high, stocks are considered expensive relative to gold, and vice
versa. This is used as an "adjustment factor" that isolates stock
market performance from the effects of monetary expansion. In other
words, if the S&P 500 were rising in nominal terms but the ratio to
gold were falling, investors holding the S&P 500 would be losing
wealth in real terms.
you can see in the chart below, between 1980 and 2000, the S&P
500-to-gold ratio rose from 0.17 (stocks cheap) to 5.46 (stocks
expensive). This rise in stocks vs. gold was led by an American business
renaissance and real wealth creation, fueled by deregulation,
technological progress, and globalization. Unfortunately, the US
government chose to squander this progress with massive printing,
borrowing, and bailouts.
|Data sources: Plan B Economics, Measuring Worth, |
World Gold Council, and Robert Shiller
2000, Washington's bad habits finally caught up to the private sector
and the S&P 500 tipped into a colossal decline relative to the price
of gold. This period, which is still unfolding, is marked by eroding
real wealth, systemic financial stress, and inflationary pressures.
Since 2000, stocks are more-or-less flat in nominal terms, but this
falling ratio implies that the real value of the S&P 500 has
plummeted. During this period, investors who owned gold saw their
purchasing power rise relative to those who held stocks.
looking at the historical range for the S&P 500-to-gold ratio, one
can infer the extent to which a gold bull market can run. The question I
often get is, "Gold has rallied for over a decade - how high can it go?" While there isn't a 'correct' S&P 500-to-gold ratio, historical bounds provide a useful guideline:
current S&P 500-to-gold ratio is about 0.778. To hit the ratio's
post-war low of 0.17, witnessed in the summer of 1980, the S&P 500
would either have to fall by about 78% or gold would have to rise to
approximately $7,850/oz (or some combination of the two).
back at the entire history of the S&P 500 and its predecessor
indices (see chart below), the ratio was as low as 0.156 in 1878 and
was consistently under 0.5 for half a century. To reach the 1878 low,
the S&P 500 would either need to fall by over 80% or gold would
need to rise to roughly $8,800/oz (or some combination of the two).
Date sources: Plan B Economics, Measuring Worth,
World Gold Council, and Robert Shiller
S&P 500-to-gold ratio is just one of many ways to evaluate the gold
bull market. While I can't predict the future prices of the S&P 500
or gold, this short historical analysis illustrates that today's ratio
is not even close to treading on new territory. Until the gold
fundamentals change, I believe that the yellow metal will continue to
Mark Motive is the pen name of a respected business journalist. He is the publisher and chief author of Plan B Economics, a premier source for market insights overlooked by the mainstream media. Follow Mark on Twitter for free eBooks, research, documentaries and more: @planbeconomics.
|IF GOLD COULD TALK |
by Jeff Clark of Casey Research
you ever had any doubts about gold? Does it sometimes feel like it
should be performing better? Are you concerned about its volatility? Do
you worry about how it might perform in the future? Have you ever
wondered about its true purchasing power? Maybe you're nervous about a
big drop in price again? I decided to go directly to the source to
address these concerns: Gold himself. He put his arm around me and asked
me to tell you a few things...
hear that you've had some worries about me. I understand. Your world is
a very uncertain place right now. And when it comes to money, it looks
as though your leaders don't understand some basic monetary principles,
making things even more unsettling.
I want you to know that the problems you're experiencing are actually
nothing new. I've seen these monetary, fiscal, and economic difficulties
many times before. And I can tell you this: you're safe with me. That's
a bold proclamation, but I've provided monetary protection numerous
times throughout history - too many to count, in fact. I've served all
kinds of people over the centuries, from kings and counts to serfs and
put your mind at ease let's review my core characteristics, along with
some history, to show how I can protect you against the monetary danger
that's likely to worsen in your near future. We'll also take a look at
your peculiar set of circumstances to see how I can be of service. By
the time we're done, I think you'll feel much better about my ability to
help your portfolio withstand whatever is thrown its way.
Let's start with the basics. I have some characteristics that no other matter on Earth has...
I cannot be:
Printed (ask a miner how long it takes to find me and dig me up)
Counterfeited (you can try, but a scale will catch it every time)
Mistaken (how many metals are bright yellow?)
I cannot be destroyed by:
Fire (it takes heat at least 1945.4° F to melt me)
Water (I don't rust or tarnish)
Time (my coins remain recognizable after a thousand years)
I don't need:
I don't have:
Industrial Dependence (keeps my volatility lower)
Counterparty Risk (remember MF Global?)
Shelf life (I never expire)
As a metal, I am uniquely:
Malleable (I spread without cracking)
Ductile (I stretch without breaking)
Beautiful (just ask a bride)
As money, I am:
Liquid (easily convertible to cash worldwide)
Portable (you can conveniently hold $50,000 in one hand)
Divisible (you can use me in tiny fractions)
Consistent (I am the same in any quantity, at any place)
Private (no one has to know you own me)
"GOLD IS MONEY"
heard that statement before - but do you know what it really means?
Money is a medium of exchange and a store of value. Almost anything can
be used as money, but obviously some things work better than others.
It's hard to exchange things people don't want or don't store well.
Over thousands of years, I have emerged as the best form of money (along
paper dollars in your wallet are technically just a currency, not real
money. In other words, they are a government substitute for money. Money
must be durable, divisible, consistent, convenient, and have value in
and of itself.
My function is
as money and a store of value, so the proper comparison is to your
dollars or Treasury Bills (of similar nominal value). And here is where I
excel and serve my purpose: since 1913, the US dollar has lost 96% of
its purchasing power. I have lost none.
I am the only financial asset that is not simultaneously someone else's
liability. I don't require the backing of any bank or government.
THE HISTORY LESSON
I am eons old, I've observed something throughout history that you may
not be aware of: government fiat currencies are a relatively new
invention, and none have held up. Eventually, they have all failed. Me?
I've never defaulted. Remember this the next time you have any doubts
about my long-term worth.
Another of my roles is to protect your purchasing power. Here are a few examples of how I've kept my word:
During the time of
Christ, an ounce of me purchased a Roman citizen his toga (suit), a
leather belt, and a pair of sandals. Today, one ounce will still buy a
good suit, a leather belt, and a pair of shoes.
In 400 BC, during the
reign of King Nebuchadnezzar, an ounce of me bought 350 loaves of
bread. Today, an ounce still buys about 350 loaves ($1,700 divided by
350 = $4.85/loaf).
In 1979, my average
price was $306.68. This bought an average-priced full-size bed.
Thirty-three years later, $1,700 would still buy you a nice full-size
bed (and then some).
You can rest
assured that over time, I will hold my value. And when you near the end
of your life, you can pass me on to your loved ones, knowing full well
they will have something that cannot be devalued, debased, or destroyed.
WHAT COLOR IS YOUR MONEY?
you, I'm concerned about the current state of fiscal and monetary
affairs. It seems your government leaders have boxed themselves into a
corner. They've incurred too much debt and are spending too much
money . It's important that you understand some lessons from
history about this kind of behavior so that you're certain of what I can
do for you.
common denominators that lead to the downfall of every fiat currency
are the two big Ds: debts and deficits. With that in mind, consider the
many of your leaders pursue is to print more paper money . Here's
an updated picture of the increase in the US monetary base vs. my rise
in price since 2008, when your problems starting surfacing.
monetary base has grown 205.8%, while my price is up 65.8%. This alone
implies that my price in dollars is likely to climb much higher.
This is also the reason why I'm not in a bubble, as some have tried to claim. It is your central banks and bond markets that are in a bubble.
The fact that my price is rising is a warning that what your leaders
are doing is unsustainable and potentially dangerous to your currency.
about this: the US has debt backed by debt, based on debt, dependent on
debt, and leveraged with debt. You can, for example, buy a bond (i.e.,
lend money) on margin (i.e., with borrowed money). This is not a sound
way to run financial markets.
Meanwhile, the warning bells continue to sound regarding Europe's debt crisis. In just the past month:
Moody's cautioned that
it may cut the AAA status of France, Austria, and the UK; and it
downgraded six other European nations including Italy, Spain, and
Standard & Poor's
cut the AAA status of France and Austria, while Italy, Spain, Portugal,
Cyprus, Malta, Slovakia, and Slovenia were downgraded.
Belgium, Cyprus, Italy, Slovenia, and Spain, and stated there was a 50%
chance of further cuts in the next two years.
crisis is far from over; and the path of least resistance for
politicians is to create more paper money. This action can and will have
clear and direct consequences: currencies will devalue, and inflation -
perhaps hyperinflation - will result.
Once again, I encourage you to use me to protect some of your wealth.
HOW MUCH IS ENOUGH?
the state of your monetary system, you should accumulate me (and my
cousin silver) on a regular basis. Just buy some every month and put us
in a safe place. After what I've witnessed throughout history, and based
on the current path your government leaders insist on pursuing, I
suggest using me as your savings vehicle instead of putting dollars in a
you don't own enough of me when these fiscal troubles really
accelerate, I fear you will regret it. I've warned many in the past
about the dilution of nations' currencies, and those who didn't heed my
warnings experienced severe financial pain. Excuses won't pay the
mortgage nor feed the family when the effects of currency debasement hit
your home and pocketbook.
sure you own enough of me to make a difference to your portfolio. This
means having more than a couple coins or a few shares of GLD, the latter
of which is only a proxy for my price.
How do you know if you own enough? Ask yourself:
- If inflation returns, or even hyperinflation hits...
- If the economy is flat...
- If uncertainty and fear continue around the globe...
- If stock markets languish...
- If stimulus from the world's governments proves futile...
- If government interference in the economy continues to increase...
- If the value of the US dollar takes a major fall...
- If the world enters a recession or depression...
- If the world enters a recession or depression...
... would you feel that you own enough of me?
a sufficient amount so that as your currency continues to lose value,
your portfolio won't. If you do your part, I promise I'll do mine.
Jeff Clark is the editor of BIG GOLD, Casey Research's monthly advisory on gold, silver, and large-cap precious metals stocks.
For ongoing guidance about physical gold and silver, as well as the large-cap precious metals stocks, try BIG GOLD today for just $79 per year, with 3-month money-back guarantee.
|QUESTIONS FROM OUR CUSTOMERS
WHAT KINDS OF PRODUCTS DOES EURO PACIFIC PRECIOUS METALS SELL?
Pac Metals offers various sizes of gold, silver, platinum, and
palladium in bullion coins and bars from both government and private
coins tend to be the first choice of gold buyers as they are
recognizable worldwide. Euro Pacific Precious Metals sells
industry-standard American Eagles, Canadian Maple Leafs, Australian
Kangaroos, Austrian Philharmonics, and the South African Krugerrands.
Although coins are typically more liquid, there is normally a higher
premium because they are being produced by a government instead of a
private mint. Bars, by contrast, offer lower premiums and come in higher
denominations, including 10 ounces, 1 kilo (32.15 ounces), and up. Our
bars are minted by the world-renowned Perth Mint in Western Australia.
gold continues to increase in price, some buyers are also seeking
smaller denominations than the 1 ounce bullion coin. These products are
known as fractional gold coins. We carry Gold American Eagle and
Canadian Maple Leaf coins in 1/2, 1/4, and 1/10 ounce weights. Their
appearances are identical to their larger coin siblings, except for the
relatively smaller size.
is a more variety in the silver market. We sell government-minted
American Eagles, Canadian Maple Leafs, and Austrian Philharmonics, but
also carry privately minted rounds (the government reserves the word
"coins" for its own products), as well as 10 ounce, 100 ounce, and 1000
ounce bars. In silver, there is less of a price difference between
government and privately minted products. Private rounds and bars carry a
lower premium and are popular for bartering.
For the truly
cost-conscious, we also offer bags of junk silver. These are previously
circulated US dimes, quarters, and half-dollars minted before 1964 -
back when each of these US coins contained 90% real silver. The real
junk is what's in your change purse now, but "junk silver" got its name
because it's less-fine alloy of silver than coins minted for storage.
You actually get more silver overall for your dollar, but there is less
in each particular coin.
we sell platinum and palladium 1 ounce American Eagle and Canadian
Maple Leaf coins, as well as 1 ounce and 10 ounce bars. These are less
common precious metals, but have their own attractive attributes.
most important decision is not which product you choose but whether you
want to preserve your capital from a collapsing US dollar. Any of these
metals will help you do so. To find out which is the best choice for
you, call one of our Precious Metals Specialists at 1-888-GOLD-160 to start the conversation.
|THIS MONTH IN GOLD
South Africa's Largest Bank Eyes $2,500 Gold
Bloomberg - Walter
de Wet, Head of Commodities Research at South African giant Standard
Bank, says gold at $2,500 an ounce is possible in the near term due to
forecasted low interest rates over the next 12 to 24 months. "Gold these
days is trading as a quasi-currency," de Wet said, and the current
spot already prices in some expectation of additional quantitative
easing (QE) in the US. Even without more QE in the US, de Wet says gold
would still find major support at around the $1,600-$1,650 an ounce
level. See video >>
China Set to Become Biggest Gold Market
Financial Times -
The World Gold Council forecasts that China will overtake India to
become the biggest gold market in the world in 2012. Marcus Grubb,
Managing Director of Investment at the Council, says that as growth and
inflation remain relatively high in China over the coming year,
Chinese consumers will increasingly move their savings into gold to
safeguard their wealth in an economic environment offering few
alternatives. Grubb expects Chinese gold consumption in 2012 to
increase at approximately the same rate it did in 2011, an encouraging
20 percent. Read full article >>
Emerging Market Central Banks Driving Gold Higher
CNBC - Mark
Bristow, CEO of Randgold Resources, a miner with operations in western
Africa, says that emerging market central banks are underpinning
today's elevated and rising gold price. In a financially volatile
world, Bristow maintains, emerging market central banks are using gold
to mitigate their foreign exchange risks and as a general hedge.
Bristow also thinks this will drive the yellow metal for years to
Read full article >>
CitiBank: More Printing to Boost Gold in 2012Bloomberg - David
Wilson, Director of Metals Research and strategy at Citigroup, says
more central bank quantitative easing (QE) in 2012 will boost the price
of gold. Wilson sees bullion climbing to $1,800 an ounce or more by the
end of the year. "The key driver behind gold is risk. And there's a
lot of risk out there... Everywhere you look there is potential support
for gold," Wilson remarks. Wilson goes on to stress that the risk of
inflation only grows with QE - making this a good time then to invest in
the ultimate hedge with upside potential aplenty and zero counterparty
risk. See video >>
More States Mull Gold and Silver as Alternative Currencies
CNN Money - Utah
got the bullion rolling last March. Since then, 13 other states are
legislating gold and silver as legal tender for good and services. South
Carolina, Washington, Minnesota, Iowa, Georgia, Idaho, and Indiana are among the states considering proposals
to make specie legal tender. For lawmakers backing the proposals,
Article I, Section 10 of the US Constitution provides the legal
authority: "No State shall...make any Thing but gold and silver Coin a Tender in Payment of Debts."
Read full article >>
Miner: Fantastic Opportunity in Silver
CNBC - High-beta
silver is the place to be to outshine the competition, Gavin Thomas
insists, CEO of Australian gold miner Kingsgate Consolidated. Thomas
sees silver climbing to $50/oz over the next 24 months, calling it a
"fantastic opportunity" due to the failure of supply to keep up with
surging demand. Thomas points out that diminishing stocks of lead and
zinc, the raw materials that yield most of the world's silver as a
byproduct during processing, are squeezing supply. Moreover, Thomas
notes, Chinese and Indian consumers are increasingly turning to silver
as gold becomes more difficult to obtain due to scarcity and price.
Read full article >>