Investor's Diversified Portfolio
Why do you need gold and silver bullion in your investment portfolio? Because of the above quote by Senator Daniel Webster almost two centuries ago. The US is “being overwhelmed with irredeemable paper money” by the Federal Reserve System, and it will result in “nothing but broken promises, bad faith, bankrupt corporations, cheated creditors and a ruined people.” The US is now the largest debtor nation in the world, and since the creation of the Fed in 1913 the US dollar has lost 98% of its purchasing power due to the monetary inflation of our paper money. Diversification in precious metals represents the solid foundation of an investment triangle.
Gold and silver have stood the test of time as a reliable and safe store of value for personal wealth and protection. Precious metals are an excellent way to hedge against risky capital markets and uncertain times, and also provides a low-profile asset for financial privacy. As an asset class precious metals can never go to zero, and they have the potential to reward contrarian investors with significant gains as global markets increasingly threaten conventional investment strategies. At IDP we only specialize in pure gold and silver bullion products with a purity of .999 or .9999 to assure the finest quality for our clients, and do not promote or recommend rare/semi-rare (numismatic) coins with excessive premiums. Payment terms are easy and simple and we promptly and discreetly ship all precious metals bullion orders within the continental US or provide professional storage accounts with a commercial depository.
The demand for gold and silver has been at record highs since 2001; and historic highs since the Financial Crisis of 2008 – a crisis that has been merely papered-over by the central banks. Despite this unprecedented demand around the world for gold and silver, the paper price index has been suppressed by the central banks in an effort to discourage mainstream interest in the precious metals complex. Why are they doing this? Investing in gold and silver represents a contrarian strategy that is despised and hated by central banks, Wall Street brokerage firms and their media pundits because any gains in the metals space suggests that central bank policies and Wall Street analysis is either fundamentally wrong or harmful. In other words, our debt-based monetary/financial system depends on the expansion of easy credit (QE), and commercial banks intervene to naked-short the futures exchanges, like Comex in NY, to artificially rig the pricing index lower. This fraud is becoming so desperate that it is estimated that for every ounce of gold at major warehouses they have more than 300 paper derivative contracts for delivery, and the same situation exists for physical silver. With extreme demand for metals, and increasing market volatility, many analysts believe that these trading platforms will experience “delivery defaults” and will be forced to settle in cash (force majeure) since they really don’t have the physical gold and silver. In this future scenario the upside for physical gold and silver could be explosive.
As noted in our Special Report on Investing in Precious Metals, there is an epic battle being waged between the forces of paper (fiat) money and the discipline of real money (gold and silver). From 1961 to 1968, the London Gold Pool was created between eight central banks to clandestinely suppress the price of gold at $35/oz., and it eventually failed with gold soaring to $800/oz. after Nixon decoupled gold from the US dollar in 1971. This is why the central banks hate the monetary discipline of gold and silver. Yet, since 2010 the central banks of the world have been net buyers of gold and this trend continues as sovereign nations aggressively repatriate their gold from NY and London. The Chinese have been acquiring most of the gold from the West to the East in order to hedge paper losses, and eventually they want to force genuine price discovery for the metals. Gresham’s Law states that “bad money drives out good money.” With the threat of currency collapse and bank failures many people are diversifying out of their bad paper money into the good money of gold and silver. Our fractional reserve banking system has been “cheating the laboring classes of mankind” for years, and it is nothing more than a huge confidence game. Global stocks and bonds have been pushed into an asset bubble of $200 trillion in total market capitalization. According to a study by the McKinsey Institute, total debt in the world (government, corporate and household) also exceeds $200 trillion, and it is still growing. With only $6 trillion available in gold coins and bars, and much less for silver, we think this is an excellent time to add gold and silver bullion to your investment portfolios.
A Precious Metals Foundation
Of all the contrivances for cheating the laboring classes of mankind, none has been more effective than that which deludes them with paper money….We are in danger of being overwhelmed with irredeemable paper money, mere paper, representing not gold nor silver; no sir, representing nothing but broken promises, bad faith, bankrupt corporations, cheated creditors and a ruined people.
- Senator Daniel Webster, Speech in the US Senate, 1833
Due to its relative scarcity, beauty, unique physical properties and enduring value gold has been prized by nations, central banks, individuals and smart investors throughout the history of the world. Gold represents a larger store of wealth than silver and is available in different bar and coin weights to be added to any investment portfolio.
Gold Bullion Coins & Bars
Introduced in 1986, the American Gold Eagle coins have become the best-selling gold bullion coins in the world and are available in one ounce (20 per roll), 1/2 ounce (40 per roll), 1/4 ounce and 1/10 ounce. American Gold Eagle coins are .999 pure gold (22 karat) and are considered legal tender by the US Mint with symbolic face values. The Canadian Gold Maple Leaf is .9999 pure gold (24 carat), and also comes in one ounce (10 per roll), 1/2 ounce (20 per sheet), 1/4 ounce and 1/10 ounce. Both of these coins are eligible for Precious Metals IRA Accounts.
The Royal Canadian Mint has introduced the fractional Maplegram25 (less than one ounce) that contains 25 individually serialized one gram coins in a protective assay sleeve for certification and convenience. Gold bars represent a great value with low premiums, and we recommend the Perth Mint one and ten-ounce gold bars that are packaged in tamper-proof display cards that guarantee both their weight and purity. We also recommend gold bars from the Sunshine Mint, Inc. (SMI), and these bars can affordably be added to Precious Metals IRA Accounts.
Silver is often referred to as “the poor man’s gold” and arguably has more upside potential than gold based on supply and demand fundamentals. As indicated earlier, there is record demand for silver and this shiny metal has been severely manipulated along with gold. In recent years, the silver to gold ratio has been around 70:1, and the historical norm is 15:1 suggesting a much higher price for silver. In addition, 70% of global silver production is a by-product of mining base metals like zinc, lead, copper which are in decline, and this too is very bullish for silver. It should also be noted that 90% of all the silver mined in the past 200 years have been used up in industrial applications adding to this scarcity. In fact, it has been estimated that $25 billion would buy all of the above ground supply of silver in the world. In addition to being an excellent hedge in uncertain times, silver is also a very practical barter item for individuals.
Introduced in 1986, the American Silver Eagles are the best-selling silver bullion coins in the world and are .999 pure silver (one troy ounce) with their weight and purity guaranteed by the US Mint. According to latest figures, the US Mint has sold more American Silver Eagles since the Financial Crisis of 2008 than in the previous 20 years! American Silver Eagles are shipped in a US Mint shipping box containing 500 coins (25 tubes each holding 20 coins) and weighs 42 pounds. The popular Canadian Silver Maple Leaf coins are .9999 pure silver (24 carat) and often trade for less than the American Silver Eagle. A box of Canadian Silver Maple Leafs contains 500 coins (20 tubes each holding 25 coins) and also weighs 42 pounds.
An excellent way to invest in pure silver is with “generic” silver rounds that are also .999 pure silver (one troy ounce) with much lower premiums than the American Silver Eagle and Canadian Silver Maple Leaf. The Buffalo Silver Rounds have become the new industry standard hallmark (the design is from the old Buffalo Nickel), and are available in any quantity and shipped in plastic tubes containing 20 coins each. Sunshine Silver Rounds are in limited supply due to heavy demand by the US Mint (SMI is the official supplier to the US Mint). For high-net worth silver investors, we suggest 100-ounce silver bars that are .999 pure silver (6.86 pounds) for Precious Metals IRA Accounts and commercial depository accounts held for safekeeping.
Silver Bullion Coins & Bars
Numismatics & Confiscation Hype
As indicated on this website, we do not promote or recommend rare/semi-rare (numismatic) coins with excessive premiums and mark-ups that are common in this industry. Numismatic coins are older US and European coins that are certified in various grades of mint condition and rarity with peculiar amounts of gold like .1867, .1947, .2354 or .9675 for an American Double Eagle or Liberty coin. Gold dealers in the US like to feature these gold coins because they are hard to price or compare in the marketplace, and they have premiums of 30-40% or higher. Apart from these obscene commissions, the rationale for acquiring “collectible” gold coins are to avoid any future confiscation by the US government (of gold bullion). But is this a valid argument today? We think not. This hype is based on actions taken by FDR back in 1933 during his early administration when he banned private ownership of gold coins. His Executive Order 6102 specifically exempted “gold coins having a recognized value to collectors of rare and unusual coins” and this old ruling is used by gold dealers to sell pre-1933 coins like the St. Gaudens, Liberty and various gold coins. In addition, these dealers stress that coins with a premium of “15% or higher” are considered collectible coins, and thus are exempt from the dreaded confiscation. This is an arbitrary figure, but it is used to provide a lucrative profit margin for these gold dealers who accordingly mark up their inventory much higher than 15%.
So why did FDR issue this Executive Order to call in the gold? In the early days of the Fed our currency still had a nominal gold-backing, and this was restricting monetary expansion (inflation) during the Great Depression Era. In other words, a gold standard was standing in the way of FDR’s socialist New Deal to expand the Welfare State. Sounds familiar right? At this time gold was $20.67 an ounce and FDR later raised the price to $35 an ounce for a 40% increase in the money supply, which served as an early version of QE! Privacy expert Mark Nestmann asserts that the confiscation hype is over-blown, and this is also noted in our book:
There remains legal authority for a future forced sale or confiscation of precious metals, but the government’s need for gold and silver is much lower than it was in 1933. Roosevelt’s emergency order was issued when gold and silver coins still circulated as currency, the U.S. dollar was backed by gold, and both individual citizens and foreign central banks could exchange U.S. dollars for gold. Today, none of these conditions exist. In addition, relatively few Americans own precious metals. (America’s Financial Reckoning Day, p. 292)
Nestmann also points out the obvious fact that there are much more lucrative targets, and there is implicitly no guarantee that collectible coins would be exempt by any government action. In fact, The Bullion Act of 1985 determined that even newly minted American Gold Eagle coins fall into the numismatic category since they sell for more than the symbolic $50 face value – so much for the bullion confiscation argument! Economist and monetary historian Milton Friedman documented that fully 78% of the American people did not comply with FDR’s order in 1933 despite the threat of heavy fines and imprisonment. Further, gold coins were not “confiscated” in the sense of a gold heist. Gold coins were “nationalized” and 22% of the American people were compensated at $20.67 an ounce. Even further, it is an historical fact that only one (1) person was ever prosecuted by Executive Order 6102 – a Mr. Frederick B. Campbell on September 27, 1933 who tried to sue Chase National Bank for refusing to return his gold on deposit. Finally, on December 31, 1974, President Gerald Ford issued Executive Order 11825 that repealed FDR’s Executive Order 6102 banning gold ownership. This was necessary because on that same day Congress restored gold ownership to the American people as it is today.
So there is some background on the gold confiscation hype and why you should avoid numismatic coins and stay with affordable gold and silver bullion products. In fact, this is yet another reason why we favor silver bullion as an investment vehicle and suggest 75% or more in your precious metals portfolio. At IDP, it is our goal to educate and assist clients with their investment opportunities and help them avoid the common mistakes in this industry. We invite you to download our Special Report on Investing in Precious Metals, Physical Storage & IRA Accounts on the sidebar. In this report we explain the evolution of money, Fed operations, the scarcity of gold and silver, market rigging and how US gold dealers exploit people’s fear about gold confiscation, and even confiscation of their IRA and retirement funds. If you already have gold and silver, we encourage you to stay the course despite the volatility in these markets. For contrarian investors diversification in precious metals is the ultimate store of value and represents a solid foundation for your investment portfolio in uncertain times.
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