Casey: Buying Physical Gold and Silver
by Doug Casey:
How to Prepare for When Money Dies
So Doug, gold has dropped from its $1,917.90 high last month down
to $1,540 yesterday and is currently hovering around $1,650. I know
you dont believe $1,900 was the top, but is this correction
good enough are you buying again?
Well, I hate to recommend buying anything thats gone up six
or seven times in the last decade, but for all the reasons weve
discussed in our recent
conversations, as we exit
the eye of the storm first and foremost of which being
the creation of trillions of new currency units I am convinced
gold is going much higher. So, yes, I do see the current correction
as a buying opportunity.
addition to the US roughly tripling its money supply in the last
couple of years, the EU just announced taking its bailout fund to
$2 trillion, so saying trillions is no exaggeration. But gold dropped
about 20% in a month thats a pretty impressive correction.
Its par for the course. Gold is a volatile commodity for the
time being although that will change when its reinstituted
as money. If you think about what the word correction
means, it suggests a price either dropping back when it gets too
far ahead of itself or catching up when it gets unreasonably low.
If you look at longer-term multiyear gold charts,
the surge this summer looked like gold was going vertical. Hyperbolic
curves are always danger signs. Gold has now reverted to the mean
its established over the last decade.
mean it cant go lower before heading higher, of course, but
it does make this a much more reasonable time to buy than a month
ago. The point to remember is that you dont want to try to
trade gold. You simply want to accumulate it, as an asset. Consistently,
and in quantity.
a line on a price chart doesnt explain anything; it just shows
us a result over time. Why do you think gold dropped in the face
of exactly the sort of economic fear that should send it higher?
We saw this in 2008 as well; when the global markets get whacked
and they just got whacked hard everything tends to
dip, as various individuals and institutions are forced to sell
whatever they can get a bid on to cover margin calls, redemptions,
and such. As gold became more volatile, exchanges naturally raised
margin requirements, which forced a lot of weak longs out of the
market. Some people say its because some bullion banks
are in a conspiracy to suppress the price of gold, but I find that
reasoning ridiculous. No bank no government even can
fight a decade-long secular bull market
entirely apart from
the fact that most US and European banks are dead men walking. Theyre
bankrupt, and only seem alive because of massive government bailouts
with newly printed paper money. Survival is the main thing on their
minds now, not trying to suppress the price of some commodity they
still believe is nothing more than a barbarous relic. And even if
some group of fools was trying to drive down the price of gold,
theyd only be giving the Chinese and the Indians a bargain
as they buy more.
heard that hedge funds are the big sellers, looking to lock in gains
on gold, which is still up for the year.
Very likely, in that the end of the quarter is coming up. Its
possible some of these types were trying to book some wins, while
building cash ahead of a possible wave of redemptions sparked by
the now rampant fear in the global marketplace.
thats right, the weakness in gold should dry up by the end
of this week. Also, it seems to me that investors will remember
that gold was the first thing to bounce back in 2008 I suspect
well see less correction and a quicker turnaround this time.
I agree. Plus you have all these developing economies, many of which
are ironically in better shape than the so-called
developed nations. The central banks of countries like China, India,
Russia, and Taiwan have relatively little gold, and dont want
to be caught holding the USD Old Maid card. I think
well see a lot of buying from them, taking advantage of relatively
low gold prices, and that will backstop the potential downside on
gold in the near term. These countries will be buying gold in ever-larger
amounts even at these prices just to get rid of their
excess hot-potato dollars. They are, in effect, offering gold buyers
a free put on the price of the metal.
so when you go shopping for gold, what do you buy? Bars? Bullion
I buy bullion coins, almost exclusively. American Eagles are now
probably the most widely recognized and readily accepted bullion
coin in the world theyre becoming mainstay of my stash.
But I also have a lot of Canadian maple leafs, Austrian philharmonics,
South African krugerrands, Mexican 50-peso coins, and the like.
coins usually have the lowest premiums, by the way, and theyre
also the largest common coin, in that they contain 37.5 grams of
gold, which is, not just coincidentally, equal to a Chinese tael
(which is in turn equal to 1.2 troy ounces). In the Orient, people
think of gold as much in taels as they do in grams or ounces. The
Mexican 50 peso is perhaps the most popular coin in Latin America,
especially in Argentina, where I spend a lot of time, because its
minted in grams. Krugerrands used to be the bullion standard, but
theyve fallen from favor.
sovereign is perhaps the most common gold coin, and there are several
hundred million out there. Its also got a low premium, and
is worth owning, since its only 0.2354 ounces of gold
its convenient having something about the size of a nickel
thats worth around $450.
Right now theres
a good opportunity in semi-numismatic gold coins too not
rare collectibles, but pre-1933 US bullion coins, like the Saint-Gaudens
and other double eagles.
I thought you didnt like rare coins for investment purposes.
I dont. Coin dealers will often try to steer buyers towards
rare coins because the premiums are higher if they sense
the buyer is an easy mark, they can and will mark the coins up as
much as 100%. Rare coins should only be bought by knowledgeable
collectors who enjoy collecting rare coins. They shouldnt
be purchased by amateurs but the same is true of stocks.
Just to be
clear, I have bought certain rare coins, particularly ancient Roman
and Greek coins. I used to collect them actively. But I buy them
as works of art that I find beautiful and interesting. Each one
is unique and full of history. The reason we have so many is that
people used to bury them, to keep them safe from government tax
collectors, common thieves, and invading barbarians but fate
prevented their retrieval. Even today there are lots of hoards from
ancient times discovered every year in Europe. But paying huge sums
to buy coins that were massed produced a hundred or two hundred
years ago make no sense to me; they have no history, and theyre
not usually art.
not what Im talking about. The Saint-Gaudens is a collectible
and that can be very important, if and when the government
starts confiscating bullion. Thats because such historic artifacts
are not considered the same way modern bullion coins are
at least, last time around, they were not confiscated. Plus, because
of their semi-numismatic value, they do attract a premium over the
price of the gold they contain. Historically thats been between
50% and 100%. I was talking with my friend Van Simmons at David
Hall Rare Coins, and as it happens, those premiums are currently
down to about 12%... historic lows. Now, normally Id rather
pay a 4-5% premium which is the current level for popular
modern bullion coins than a 12% premium. But in this case,
you get both a measure of protection from confiscation, and the
additional speculative upside from the potential for higher premiums
in the future.
actually a rather good guide on buying rare coins in the
September 2010 issue of BIG GOLD. We should also point
out that Vans outfit is not the only coin dealer we recommend,
and some offer special deals to Casey subscribers. Theres
a list of recommended bullion dealers in the July
2010 issue of BIG GOLD. For nonsubscribers, the list
of recommended coin dealers includes: Miles
Franklin, 800-822-8080; The
Coin Agent, 888-494-8889; Border
Gold, 888-312-2288, ext. 7 and Asset
Strategies, 800-831-0007 .
So, once you
buy your coins, what do you do with them? You cant stuff them
all in your mattress
I usually try to dodge that question, in part because I dont
want to publish the details of my own arrangements, and in part
because the answer is different for different people in different
circumstances. But first and foremost, I have to warn people not
to use bank safe-deposit boxes. They are typically not insured,
and they put your valuables on record the last time the US
government stole private citizens gold, the first thing they
did was seal all the bank vaults.
somehow doubt that other governments would be any better.
Certainly not in places like Argentina; Argentina is great for land
and living, but its a very bad choice for anything to do with
banks. Uruguay is much better in that regard, but idiotically, you
have to declare your gold when you take it into the country
which you dont have to do in Argentina. In the UK, they impounded
thousands of vault boxes a couple years ago, so I wouldnt
go there. The UK is on the slippery slope in many ways it
was prescient to have used it as the locale for V
for Vendetta. Switzerland is still good, but its tough
for Americans to get in the door there. Austria is okay. But for
larger amounts, the respected, private, insured bullion storage
companies are the way to go.
sign of the bad times were going into that almost nothing
is safe anywhere from governments. Your ownership
is increasingly uncertain whether you have someone store things
for you, or you store things yourself. It gives you an understanding
of how the Romans might have felt from the third century on.
for smaller amounts? The average safe in the closet is an obvious
target and wont stand up long to a determined thief with power
tools and sledgehammers.
Thats right. And in the future, home invasions are likely
to become more common in the US as well. In addition, houses can
burn down gold and silver have relatively low melting points.
As paranoid as it may sound, Id generally say that midnight
gardening may be the best way for the average individual to
store highly portable wealth securely on his or her own property.
Gold is nonreactive, but remember that silver tarnishes and corrodes
easily, so you want good, durable, water-tight containers to plant
in your garden.
what constitutes a smaller amount?
I might stash a handful of coins in really good hiding places around
the house for quick access in case of need a handful of gold
coins can take you almost anywhere in the world these days and pay
for months of frugal living, if necessary. At present prices, gold
is actually easier to transport than its value in $100 bills. As
for midnight gardening, your mileage will vary, but Id say
anything on the order of $100,000 is a reasonable amount to keep
under your own physical control. Its enough to do almost anything
you might need to do in various scenarios, but not so much that
your exposure to local risk is too high.
of confiscation risk, did you hear that Odyssey
lost its appeal on the Black Swan case?
Yes, its shameful. Its beyond me why the Spanish government
should have any right to a treasure trove of coins lost hundreds
of years ago and found by private entrepreneurs who put all the
time, effort, and money into finding it. Im especially sympathetic
in that I spent about three months in the early 70s on a treasure
hunt for sunken treasure blockade runners off Charleston,
and then in the Caribbean. I did a lot of wonderful diving, but
it was a financial disaster. On the bright side, even though I didnt
get the gold, I did get some great experiences.
Also on the
bright side, I read that Odyssey found another sunken treasure ship
off the coast of Ireland, sunk by a German U-boat in 1941. In that
case theyve apparently arrived at a deal to keep 80% of the
about international speculators Ive got to admire Odyssey.
So, back to buying physical precious metals, I think weve
covered the basics. Any additional thoughts?
Just remember that you buy physical gold and silver for prudence.
For speculative upside, you buy gold and silver stocks. And while
the precious metals have corrected, the stocks have overcorrected.
There are some bargains out there, and thats excellent news
given the still-high prices of the underlying commodities. Gold
and silver could correct another 20%, and the kind of profitable
producers Jeff Clark tracks in BIG
GOLD would still make a lot of money.
But let me
emphasize this as strongly as possible: Were headed into perhaps
the most tumultuous time in modern history. Its critical to
own a good amount of physical gold. If you, out there reading this,
dont have a sufficient stash, your very next action should
be to get on the phone and order some.
that. Thanks for your thoughts.
My pleasure. And Ill see you soon, I guess.
right our summit in Phoenix is this weekend. I wonder how
many of our readers will be there
Quite a few; we had to turn away about half of those who tried to
sign up, Im told. May they and you travel safely.
Doug. You too.
Casey (send him mail)
a best-selling author and chairman of Casey
Research, LLC., publishers of Casey’s
© 2011 Casey
Best of Doug Casey