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Welcome to the March 2014 edition of my monthly Gold Letter.

Dismal economic data and gold's impressive recovery thus far in 2014 indicate that the Fed's inflation-fueled 'recovery' is coming apart. Valued in gold, the stock market is declining once again. The Chicago Fed's National Activity Index for January was expected to shrink, but came in even lower than expectations. We may be at the cusp of another huge bull run in precious metals.

Many other investors seem to be coming to this same conclusion, which leads me to expect another stampede into physical metals. I want to make sure that anyone who missed the buying opportunities of the last decade won't be left behind in the coming years. Unfortunately, these buyers are also prime targets of unscrupulous metals dealers. That's exactly why I'm releasing a newly updated version of my very popular (and free) special report, Classic Gold Scams and How to Avoid Getting Ripped Off.

Our guest contributor this month is a new name to the Gold Letter, Mr. Alasdair Macleod. Alasdair has decades of experience in financial advising and is well-known for his incisive critiques of the dismal money-printing policies of global central banks. He explains why the important gold stories of 2013 have set the stage for a very exciting 2014 for the yellow metal.

And, of course, we fill out this Gold Letter with our regular segments:
  • Lampoon the System shows us this year's medalists if Money-Printing were an Olympic sport.

  • Our FAQ clarifies whether gold bars or gold coins right for your portfolio.

  • We conclude with summaries of important metals news from the past month.

Peter Schiff
Euro Pacific Precious Metals
By Peter Schiff

Peter SchiffBefore Bear Stearns and Lehman collapsed, the market for physical gold was limited to a relatively small group of investors who understood the havoc inflation was wreaking on our savings and the US markets. As the financial crisis took hold, a flood of new and inexperienced buyers entered the market, creating an opportunity for unscrupulous metals dealers to swindle their way to massive profits. This is what drove me to launch my very own gold dealer, Euro Pacific Precious Metals, to provide a safe alternative for those who were taking my advice to diversify into sound money. In our first year of business, I released Classic Gold Scams and How to Avoid Getting Ripped Off, a free report that has saved countless investors from losing their shirts.

Fast forward several years and the markets look like a film on repeat. We are once again building toward a massive financial crisis - one that will make 2008 seem like the good old days. Unfortunately, the majority of investors are once again playing the US markets and shunning gold. I encourage my readers to consider diversifying into precious metals now, while the market is still distracted. To this end, and in preparation for the inevitable mad rush when conventional investors again flock to safety, I have updated and re-released my Classic Gold Scams report to help newcomers learn how to buy gold and silver the right way.

The Bait-and-Switch

The majority of precious metals scams revolve around a core tactic: the bait-and-switch.

First, the company lures you in with the promise of a good deal on a product you're genuinely interested in buying. Once they have you on the line, a fast-talking broker will try to convince you that a different product is a better match for your needs. This new product into which they've "switched" you is almost always a rip-off.

In the precious metals world, this usually involves an over-priced numismatic or "collectible" coin. The salesman will explain that the unique qualities of this coin make it even more valuable than its metal content. "Why just buy gold, when you could buy a piece of history?" Or so the argument goes.

The entire bait-and-switch technique is designed to confuse you. The dealer preys on your insecurities by making you feel like you don't have enough knowledge to make a choice for yourself.

Keep Gold Simple

Let me share a secret that these scammers don't want you to know: gold is gold is gold.

The majority of savvy investors like you and I are buying gold and silver as a hedge against inflation and the collapse of the US dollar. It doesn't matter what form our gold takes, as long as it is pure, easily recognized, and authentic.

Sure, there may be rare, historic coins for which well-educated collectors will pay good money. But you need a firm understanding of these coins' unique traits to correctly assess their value. Without this understanding, it is virtually impossible to select the proper coins to add to your collection or get a fair price when it is time to sell. For most of us, such coins are way beyond our expertise and carry far too much risk.

All we need to protect our wealth is pure gold bullion. Fortunately, the market for bullion is very simple and easy to understand. A complete list of common gold products is included in the Classic Gold Scams report.

That's the only secret to beating the bait-and-switch scammers: know exactly which product you're interested in buying ahead of time - and stick to your guns.

The Price Protection Racket

When gold started falling from its highs in 2011, an old-time scam re-emerged: the price protection racket. This tactic is extremely popular with some of the largest gold dealers out there.

In this scam, the dealer guarantees that if the price of gold falls within a certain timeframe, the investor can buy at the lower price. Usually the price protection lasts for about a week after placing your order.

On the surface, price protection sounds great. Who wouldn't want to be able to avoid short-term market fluctuations when buying precious metals?

Of course, there's a catch. These price protection programs rarely apply to the common bullion coins that carry the lowest premiums. Invariably, these schemes are only applied to overpriced numismatics or collectors' edition coins. That's the only way dealers can afford to offer such a sweet deal. The margins are already huge on collectors' coins, so allowing buyers to adjust their purchase price has a negligible effect on the dealer's bottom line.

What's more, the price protection program often includes an additional fee on top of the purchase price. This builds in an additional cushion to make sure the dealer always comes out ahead.

At the end of the day, price protection is just a scare tactic aimed at investors too concerned with short-term volatility. This fear actually reveals that they're buying gold for all the wrong reasons.

Buy Gold for Gold

The right reason for most investors to buy gold is as a long-term hedge against inflation and financial instability.

Gold is humanity's oldest form of money and wealth preservation. A hundred years ago, a gold coin could buy you a custom tailored suit. The same is true today. The purchasing power of gold remains relatively constant over the long-term.

On the other hand, fiat money has historically always failed. The US dollar has not been backed by gold since 1971, which means it has lasted more than four decades as a purely fiat currency. The history of great empires suggests that its time is almost up.

Each of the Federal Reserve's announcements of another program of money-printing brings that crash - which I have termed the "Real Crash" - closer to fruition.

Remember, if the US economy were really recovering, the Fed's manipulative policies would not be necessary. Also, gold wouldn't be seeing the dramatic recovery it has thus far enjoyed in 2014. It's up 13% since its December lows!

There's Still Time

If you missed out on the great gold rush of the '00s, don't let the next opportunity pass you by. I believe gold's bull market has a long way to run, and now is a great time to establish holdings or add to existing holdings.

But be aware that for most investors, the physical gold market is completely new and foreign. That has created an environment in which unscrupulous dealers are thriving. Before you buy, read my recently updated Classic Gold Scams report to learn how to tell a deal from a swindle. There is no need to learn these lessons the hard way, or to let fear of the unknown keep you from safeguarding your family's savings for future generations.

Peter Schiff is Chairman of Euro Pacific Precious Metals.

If you would like more information about Euro Pacific Precious Metals, click here. For the fastest service, call 1-888-GOLD-160.
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Jon Pawelko publishes the web comic Lampoon The System to poke fun at insane economic policies and educate the public on sound economics.

Click here for more cartoons and information on his anthology book, available for only $15.
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By Alasdair Macleod

The chronological events of 2013 set the background for gold in 2014. It was a momentous year, which should ensure a rise in the gold price in 2014.

Before 2013, demand for physical ETFs was high. At the same time, Asian demand from countries like China, India, and Turkey was accelerating, leaving Western bullion markets increasingly short of physical liquidity. Between them, Hong Kong and China in 2012 had absorbed an official 1,458 metric tons, and India a further 988 metric tons. This ensured that 2013 kicked off with more global demand than available supply from mines and scrap.

The following is a list of subsequent important developments in 2013.
  1. Germany's Bundesbank announced in January that it would recall 300 metric tons of its gold stored at the New York Fed by 2020. The Bundesbank was criticized for this decision, since its gold held in New York amounted to 1,536 metric tons; why take seven years to repatriate less than 20% of it? By year-end, only five metric tons had been repatriated, fueling rumors that it didn't actually exist other than as a book entry.

  2. The Cyprus debacle in February alerted everyone to the new bail-in procedures being adopted by all G20 member states. Wealthy depositors in the eurozone suddenly realized their deposits were at risk of confiscation. Governments were no longer going to bail out large euro depositors, let alone those with bullion accounts.

  3. The new bail-in regime was followed by ABN-AMRO and Rabobank's refusal to deliver physical gold to their account-holders, offering currency settlement instead. Many interpreted this as evidence of long-term holders attempting to withdraw physical bullion.

  4. By end of March, it was becoming clear that growing demand for physical bullion was a potential systemic problem. This was followed in April by a coordinated attack on the gold price to persuade the investing public that gold was in a bear market.

  5. The result was liquidation by weak holders in ETF gold funds. However, lower prices also triggered unprecedented physical demand, particularly from China and India, as well as across the whole Asian continent. Gold coin sales broke records. None of this escalating demand appears to have been expected by Western central banks, which by elimination had to be the principal source of maintained liquidity.

  6. In July, I discovered that in the four months following its February 28th year-end, the Bank of England appeared to have delivered up to 1,300 metric tons of gold from its vaults. This amount tied in with record Asian demand in the wake of the April price drop, far greater than can have been satisfied from other known sources such as ETF liquidation.

  7. The new governor at the Reserve Bank of India, Raghuram Rajan, who was once the chief economist at the International Monetary Fund, blamed India's gold imports for its trade deficit and introduced severe restrictions. This overturned official policies which had led to the liberation of the gold market in the early 1990s, fueling suspicions that this move was orchestrated by Western central banks.

  8. Premiums in India rocketed and smuggling escalated to meet demand.

  9. Ben Bernanke in his testimony to Congress in mid-July said, "No one really understands gold prices, and I don't either." Was he admitting to a policy failure over gold management?

  10. In October, both the Swedish and Finnish central banks announced the location of their gold reserves. Additionally, the Finnish central bank's Head of Communications added further information in a blog run on his bank's website, to the effect that all 25 metric tons held at the Bank of England were "invested" (i.e. leased or swapped), and that "Gold investment activities are common for central banks." This appears to be an admission that significant amounts of monetary gold have been sold into the market. Question: How do they get it back when Asian demand alone absorbs the equivalent of all global mine and scrap supply?

  11. Chinese public demand through the Shanghai Gold Exchange and Hong Kong rose to 2,668 metric tons over the whole year. Add in 50 metric tons of coin and it amounts to 2,718 metric tons in total. We know this because these are firm figures issued by the SGE and the Hong Kong government, not the result of surveys aiming to identify end-users.

  12. We can assume that China's own mine production of 430 metric tons is not in these figures, on the basis that the government buys all domestic mine production and is unlikely to put gold production from mines it controls through commercial brokers on the SGE. This being the case, Chinese mine production should be added to total demand figures, raising the total to 3,148 metric tons. Furthermore, available statistics do not include gold bought outside China by the government and wealthy citizens and either imported or held in vaults abroad. So we can probably regard this figure as a minimum, even though the SGE deliveries include scrap of a few hundred metric tons.

  13. Meanwhile, the China Gold Association reports gold "consumed" of 1,100 metric tons, and the World Gold Council identifies Chinese demand at 1,066 metric tons. These are the figures commonly accepted by Western analysts as total demand.
In Conclusion

The events of 2013 persuaded investors in Western capital markets that gold's bull market had definitely been broken and that gold would probably go lower or at best move sideways in 2014. The underlying reality is very different. In particular, China managed to corner the physical market, catching trend-following Western analysts unawares.

So far, instead of continuing to fall, the gold price actually bottomed on December 31st at $1,195, and since then has rallied over 11% to $1,337. The position today is that some hedge funds that were short have closed their positions, and there are more yet to do so. There is growing evidence for the trend-chasers that the price is entering a new bull phase, with the 50-day and the 200-day moving averages both rising and about to complete a golden cross.

Central banks appear to be facing a problem of their own making. The lesson from Germany's attempt to repatriate her gold appears to have provided prima facie evidence that central banks have little or no physical liquidity left. Minor central banks, such as Finland's, must now be wondering if gold out on lease will ever be returned to them, so they may be increasingly reluctant to make their gold available for further leasing. Instead, they are likely to end current leasing agreements as they mature rather than extend them.

In 2014, there is likely to be a growing realization that the vaults in the West are very low on stock.

2014 should be an interesting year.

Alasdair Macleod is Head of Research at GoldMoney and publishes the website FinanceAndEconomics.org. For most of his 40 years in the finance industry, Alasdair has been de-mystifying macroeconomic events for his investing clients. The accumulation of this experience has convinced him that unsound monetary policy is the most destructive weapon governments use against the common man. Accordingly, his mission is to educate and inform the public about what governments do with money and how to protect themselves from the consequences.

Which Are the Better Investment - Coins or Bars?

We like to keep precious metals investing fairly simple, which is why we only sell the most popular bullion products in the world. This still leaves a pretty big and important question: are coins or bars a better investment?

The answer depends on your investment priorities.

Bars are generally a little cheaper per ounce. If you just want to place your gold or silver in a vault and forget about it, bars are probably your best bet. They will ultimately save you money.

If you think you might want to barter with your gold or silver someday, or sell it off a little bit at a time, then coins offer greater liquidity. Liquidity refers to how easily an asset can be bought or sold in the marketplace.

A well-known coin like the American Eagle or Canadian Maple Leaf is easily recognized and authenticated. This makes it easier to sell or trade. A gold bar, however, does not necessarily have all the recognizable characteristics of a coin. A buyer might want to get a larger bar professionally assayed and authenticated before purchase.

No matter which you choose - bars or coins - we can offer among the lowest prices in the industry. If you want the very lowest prices on gold, go with bars. If you want a good price with better liquidity, go with coins.

If you have questions about a particular product or how to compare products, give our Precious Metals Specialists a call at 1-888-GOLD-160 (1-888-465-3160), request a callback, or click here to chat online right now.

Gold Hits 16-Week High
Bloomberg - In the last week of February, gold and silver hit a 16-week high, driven by concerns of weak US economic growth and Ukrainian political turmoil. The Chicago Federal Reserve's measurement of US economic activity in January was nearly twice as bad as predicted, indicating below-trend growth. Meanwhile, the interim government of Ukraine is asking for $35 billion of financial assistance to avoid default. Gold is seen as a safe-haven investment in light of these problems. By the end of February, gold had risen 11% from its December lows. UBS AG has raised its 2014 forecast for gold, stating that the metal has "started to shed its stigma."
Read Full Article>>

2013 Silver Coin Sales Hit Record High
Silver Institute - Global sales of 1-ounce silver bullion coins hit a record high in 2013. The US Mint sold 26% more American Eagle silver coins in 2013 year-over-year. Totaling 42.675 million ounces (Moz), this was a single-year record for the US Mint. Austrian Silver Philharmonics, Canadian Maple Leafs, and the Perth Mint's Silver Kookaburra sales increased 62%, 60%, and 41% respectively last year. Robust investment demand drove the strong sales, which also extended to silver bars and silver-backed Exchange Traded Funds (ETFs). As of February 14th, 631 Moz were held in silver-backed ETFs, compared with just 314 Moz at the end of 2008.
Read Full Article>>

Gold Consumption Data Suggests Chinese Stockpiling
CNBC - The latest gold consumption, importation, and production data suggest that China may have consumed more gold than its citizens bought last year. Some analysts claim the difference is being stockpiled by the Chinese central bank, though the PBOC claims its gold reserves remain at the 2009 level of 1,054 metric tons. In 2013, China imported 1,158 tons of gold from Hong Kong and produced 428 tons. The amount of gold imported directly through Shanghai has not been published. Chinese gold demand data measures only final consumption, and one analyst estimates China's total gold consumption exceeded 1,700 metric tons - 500 more than reported. "It's not only about increases in official holdings. It's more accurate to say that every level of society, from individuals up to banks, has been allocating more to gold," said Liu Su, a capital futures analyst in Beijing.
Read Full Article>>

Indians Exploit Gold Import Loopholes
Wall Street Journal - Indian jewelers and gold traders are avoiding strict gold import regulations by asking citizens returning from migrant work to import extra gold. After living abroad for 6 months, Indians are allowed to return with as much as 2.2 lbs of gold, on which they pay a 10% duty. More than 4K lbs of gold were declared at the Calicut airport alone last December, compared to 518 lbs in November. This legal loophole and growing illegal smuggling rings are two ways Indians are getting around new gold import regulations. Due to the strict regulations, a kilogram of gold selling for about $40,300 elsewhere in the world can fetch $48,400 in India. Indian officials raised the import tax from 2% to 10% last year, but are now considering lowering it to between 6% and 8%.
Read Full Article>>

Bitcoin Exchange Loses $480 Million of Customer Assets
Bloomberg - Mt. Gox, one of the world's largest bitcoin exchanges, announced that it lost 750,000 of its customers' bitcoins - about $480 million worth. It has filed for bankruptcy protection with the Tokyo District Court. Mt. Gox claims its bitcoins were stolen by hackers exploiting security weaknesses in its software systems. While there are methods of keeping bitcoins safe from hackers, Mt. Gox's failure has spooked many speculators in the nascent market for crypto-currencies.
Read Full Article>>
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In This Issue
Gold Scams Revisited
- Peter Schiff
We're Still #1!.
- Lampoon the System
Gold in 2013: The Foundation for 2014
- Alasdair Macleod
Questions From Our Customers
This Month in Gold
Quick Links