Gold Coin & Bullion

Why You Should Acquire Gold

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 history. And it is also important to point out that central banks of the world today hold significant gold reserves, but it is not for the purpose of backing their fiat currencies. According to the World Gold Council the central banks of the world claim that they have approximately 32,000 tonnes. But according to the Gold Anti-Trust Action Committee (www.gata.org), the actual figures are closer to 16,000 tonnes. Why is this? The answer is simple. The bankers have devised several schemes to suppress the price of gold on world markets.

In a process known as “gold leasing” (lending/borrowing) the bankers transfer a portion of their gold assets to private bullion banks that pay the banks a positive interest rate (1-2%) and this gold is then dumped on the open market. This “carry trade” allows central banks to profitably report the gold in their inventories while also creating a derivative short position among the bullion banks. In more recent days, we have seen a price suppression scheme dating back to the financial crisis of 2008. In July of that same year Wall Street giants JP Morgan Chase and Goldman Sachs moved to short the gold market on the NY COMEX by holding 7,787 gold contracts. Within a month these same banks increased their short positions by 86,398 gold contracts. This was a whopping 11-fold increase and 46% more gold than COMEX had in its vaults that drove the price of gold from $975 down to $725!

This blatant market manipulation was brought to the attention of the Commodity Futures Trading Commission (CFTC) in early 2010. Unfortunately, the CFTC is staffed by Wall Street executives and the entire case was suspended in early 2011. According to www.gata.org, and the 2010 BPR (Bank Participation Report), US banks anticipated this investigation and they have lowered their gold short positions while non-US banks have increased their gold short positions by 200%.

These facts and figures should not discourage you as an individual investor in gold. In fact they should only prove that you need to have gold in your investment portfolio as a hedge against fiat paper currencies and market manipulations. As Thomas Jefferson said, “Paper money is liable to be abused, has been, is, and forever will be abused in every country in which it has been permitted.” Unlike the abuse of paper currency, gold is a reliable “store of value” and is a low-profile portable asset that has a low-to-negative-correlation to conventional stock and bond indexes. In other words, you can expect significant gains in gold while other asset classes decline.

Gold investors would be well advised to consider gold bullion coins in their investment portfolio like the American Gold Eagle coins and the Canadian Gold Maple Leaf coins. Introduced in 1986, American Gold Eagle coins have become the best-selling bullion coins in the world and are available in 1 oz (20 per roll), 1/2 oz (40 per roll), 1/4 oz and 1/10 oz. American Gold Eagle coins are 22-karat and are considered legal tender by the US Mint which classifies these coins as “numismatic” since they sell for more than their symbolic face value. Canadian Gold Maple Leaf coins are 24-karat and are available in 1 oz (10 per roll), 1/2 oz (20 per sheet), 1/4 oz and 1/10 oz.

Another popular gold bullion coin is the Vienna Philharmonic coins that are also 24-karat and available in 1 oz (10 per roll), 1/2 oz (10 per roll), 1/4 oz and 1/10 oz. Minted by the Austrian Mint these beautiful coins reflect the image of the world famous Vienna Philharmonic Orchestra and the great organ of the Golden Hall. Other ways to invest in gold are the 1 oz Chinese Panda (24-karat), Australian Kangaroo (24-karat) and the South African Krugerrand (22-karat). For investors who prefer lower premiums, gold bars are available in 1 oz, 10 oz and kilo weight (32.15 troy oz). These gold bars, or ingots, are 24-karat and are ideal for placing in Precious Metals IRA accounts.

Most Americans are not aware that private gold ownership was banned from 1933 until 1974 due to an Executive Order issued by FDR. Prior to this EO, gold coins were considered legal tender and actively exchanged in daily commerce as mandated by the US Constitution (Art. I, Sec. 8 & 10). This EO carried heavy fines and imprisonment. But it must also be remembered, according to Milton Freidman, that fully 78% of the American people did not surrender their gold in 1933. This means that only 3.9 million ounces were actually confiscated while 13.9 million ounces remained in the hands of the American people. I mention this historical fact because most, if not all, coin dealers like to promote semi-numismatic (rare) and numismatic (extremely rare) gold coins to “avoid” any future confiscation by the U.S. government since the original EO exempted “gold coins having a recognized value to collectors.” But is this a valid argument today? Privacy expert Mark Nestmann asserts that this concern is “overblown” and irrelevant:

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 (emphasis added). 

Nestmann also points out the obvious fact that there are much more “lucrative targets” for the U.S. government, and there is implicitly no guarantee that numismatic coins would be exempt in any future prohibition since any government can act arbitrarily (as they did in 1933). The Industry Council on Tangible Assets (ICTA) sought an IRS ruling in 1984 to determine that any gold coin with a “15% premium over bullion” would be considered numismatic, but this ruling was never adopted. And it hardly matters since The Bullion Act of 1985 determined that even American Gold Eagle bullion coins fall into the numismatic category. The only reason to purchase professionally graded minted from 1877-1933 (Liberty/St. Gaudens series) is for the upside potential in an active gold market so that these coins can be later exchanged for more bullion coins, and then held in your private possession. The only gold coins we recommend are the fractional French/Swiss Francs and British Sovereigns since they trade close to the bullion price. For more information please contact our office.

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 James Turk, The Coming Collapse of the Dollar, p. 196. For more information read chapter eight in AFRD.
 Mark Nestmann, The Sovereign Individual Newsletter, Vol. 8, No. 6, June 2006, p. 15. See www.nestmann.com.
 This proposed regulation can be found at CFR 26, 1.6045-1 on pages 647-648 of the Federal Register, Vol. 49, No. 3, dated January 5,
 1984.
  The Gold Bullion Act of 1985, U.S.C.Title 31, Section 5132 (a) (1).