Copyright © 2013 by Weiss Research

Published By: Weiss Research

Publication Date: July 2013

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Special Report …

GOLD BULLION BUYING GUIDE

Why Gold is Cheap Why Silver is an Even Better Value How to Buy Gold & Silver Bullion Expert Tips on How to Store Your Valuables

These are wild times in the economy and markets. The stock market soars even as economic data deteriorates … and the heart-stopping, roller-coaster-like swings from one day to the next leave even professional traders befuddled. Meanwhile, precious metals — normally a bulwark against economic chaos — have tumbled lower in price even as crises mount around the world. Many gold bulls are impatient and even disappointed. I think they’re missing an opportunity. Look at gold’s recent action in the first quarter of this year, compared to what it did back in the 1970s …

Wild swings in the price of gold don't mean the bull market is over. Far from it. From 1975 to 1978, the pullback was much-deeper than what we’re seeing now, and back then prices went higher again. We could easily see history repeat itself. The question now is, when?

One thing is certain … Wall Street is Selling Gold at the WRONG Time There is news on gold that you need to hear. First, the bad news. You know that gold recently pulled back to near three-year lows. Meanwhile, holdings in gold Exchange-Traded Funds recently fell to fresh four-year lows. The SPDR Gold Trust (GLD), the world's largest exchange-traded gold fund, said its holdings fell 0.15% to four-year lows of 1,018.57 tons. And in the bigger picture, gold holdings in all publicly reported ETFs, mutual funds and repositories are down almost 20 million ounces from the peak.

Source: Sharelynx.com Institutional selling of gold, more than any other factor, is driving the price lower. But remember, this is happening while gold does this …

¡Ay, caramba! Gold holdings tumble like a dead donkey down a mine shaft!

(Updated chart) As you can see from this chart, gold prices did plunge. But gold prices look like they are trying to put in a bottom — with bullish action in both momentum and volume. Most traders won’t turn bullish until gold convincingly closes above that resistance level marked on the chart — and it still has to get above the big downtrend. If you’re looking for a bottom in gold, anything can happen, as we’ve seen during the past few months. However, the ultimate direction for the yellow metal Sis up, and it’s likely that many of the weak players have already been shaken up … and shaken out. Importantly, while gold prices plunged with the initial selling by ETFs, gold prices have since firmed up even though ETFs continue to sell. Why is that? Why would gold prices level out even though the big funds are dumping gold? I’ll tell you why.

Because ETFs are just one type of potential gold demand. And other buyers are loading up like there’s no tomorrow. For example … Central Banks: In the first quarter alone, central banks acquired 109 tons of gold — the seventh-consecutive quarter of central bank gold accumulation. In fact, central banks are buying MORE gold because they believe the systemic and monetary risk is significant and RISING! The deputy governor of the South African Reserve Bank, Daniel Mminele, told Bloomberg that central banks are “buying bullion” “as prices fall” to reach a 10% ratio of overall foreign-exchange reserves. Jewelry Demand: Jewelry demand soared 12% year-on-year in the first quarter, driven in the main by Asian markets. Jewelry demand in China was up 19% on the same period last year and stood at a record 185 metric tons. If you add China’s gold jewelry demand (185 tons) and global central bank demand (109 tons) that is 294 tons — more than the ETF selling of 177 tons. And it’s not just China. Global gold jewelry demand in both India and the Middle East was up 15% respectively in the first quarter. In the U.S., gold jewelry demand jumped by 6%, for the first time since 2005. Bar and Coin Sales: Mom-and-pop investors can see the value that fund managers are ignoring. Bar and coin sales are up 22% year-on-year in China and 52% in India. In the United States, demand for bars and coins was up 43% compared with the same quarter in 2012. Globally, bar investment was up 8% while official coins (such as American Eagles and Canadian Maple Leafs) were up 18%. So, add it up, and I believe Wall Street is selling gold at just the wrong time — when lower prices are re-igniting consumer demand, and smaller investors stock up on bars and coins around the world. Silver Looks Hot, Too! Silver has all the things going for it that gold does, and then some. Sure, silver has sold off hard. That probably means the bounce-back will be even bigger. Let’s start with why … Silver is Too Cheap Compared to Gold The ratio of the price of gold to the price of silver is historically 16-to-1, closely mimicking the ratio of gold to silver in the Earth’s crust, which is 17-to-1. Recently, gold was trading at 61 times the price of silver.

(Updated chart) That ratio should come down to Earth. Either the price of gold could go a lot lower — which isn’t too likely — or the price of silver could go a lot higher. Here are a few more things to keep in mind … About 70% of silver mine production comes as a byproduct of mining other metals, primarily lead-zinc, and also copper. This makes silver supply very inflexible to increased demand. New mine deposit discoveries peaked at some point in the mid-1980s, with average annual discoveries declining more than 60% since then. Ore grades are falling. In fact, according to one expert, the average grade of mined silver ore has dropped 92% in the past 58 years. As the price of silver goes higher, it becomes more-economical to mine lower grades of silver. But the upward pressure on prices remains. Put all this together, and the next move in silver could be HUGE!

Some more good news for silver …

We have to remember that silver is an industrial metal as well as a precious metal. About 53% of silver is used in industrial products from televisions to batteries, according to the Silver Institute in Washington. We’ve seen industrial demand for silver drop for two years in a row as the global economy softened.

Silver fabrication demand fell 7% in 2012. Now, the economy is improving. And a recent study by Thomson Reuters forecasts that industrial use for silver will rise 7% this year to 484 million ounces and then another 6% to 511 million ounces next year, accounting for 57% of the world’s silver production. That would be a new record high.

Then there is the mom-and-pop demand, which is also up. Sales of the U.S. Mint's silver coins jumped 57% through April compared to last year, the Mint’s website showed.

One area of worry (for silver bulls) is China imports of silver, which fell 28% in April year-over-year. But that could change with an improving economy.

Like with gold, the short-term timing for silver can be tricky because there are bearish forces also at work alongside the bullish forces, including a stubbornly strong U.S. dollar. Also, silver production in South America is expected to rise this year and next. But even as silver breaks below recent lows, the cheaper it gets, the more consumers are likely to buy it. Where to Buy Gold and Silver Bullion

One of our favorite ways to hold gold and silver is by owning the physical metals themselves — gold and silver bars, coins and rounds. And one of the questions we are asked most-frequently is where to buy gold and silver coins online.

We don’t endorse any particular bullion dealers and strongly encourage you to do your own research on the companies as well as the prices they are offering or charging. But, we can tell you about some online merchants that we know about and that have a good reputation in the industry.

For the purposes of the next table, we checked the price of 1-ounce gold and silver Eagles, as well as 1-ounce silver rounds at each merchant. We’ve also included the spot price of gold at the time of this writing (which was $1,389.60) and the spot price of silver (which was $22.60).

Gold and Silver Online Merchants

Online Merchant

1-oz Gold Eagle

Premium

Total cost for 10 1-oz Gold Eagles plus shipping,

insurance, etc

1-oz Silver Eagle

premium

Total Cost for 20 1-oz Silver

Eagles plus shipping,

insurance, etc Kitco 4.5% $14,574.55 $5 over spot Need larger

order Bullion Direct 4.7% $14,558.32 16.9% ($3.81

over spot) $571.76

Golden Eagle 5.2% 14,651.51 22% ($4.99 over spot)

$583.58

APMEX 5.3% $14,659.85 22% ($4.99 over spot)

$571.55

* Prices @ noon 05/24/2013 based on gold spot price of $1,389.60

We recently compared prices and services from four reputable online bullion dealers. (Again, we urge you to do your own due diligence before making any moves.) You can buy U.S. gold and silver Eagles from all of them, but each has its own quirks.

You have to sign up for memberships at each one; it takes five minutes and usually requires your e-mail, billing and shipping address, and credit card number. However, Bullion Direct also requires a Social Security number.

For our research, we chose the cheapest shipping option available from each dealer. For any of these dealers, you can buy 20 silver Eagles with a credit card, but buying 10 gold Eagles will require a personal check, cashier’s check — or cash, if you’re walking into their showroom.

You can find any of these by typing in their name and adding a “dot-com” (example: “Kitco.com”). Here’s what we learned …

Kitco — We talked to Tudor Matei at Kitco. He had no problem selling $14,500 worth of gold Eagles. But when we wanted just 20 silver Eagles, he said the minimum fee is $2,500, with a flat shipping rate of $30. You can’t use a credit card for orders over $5,000. If you buy gold Eagles with a money order, there is a shipping fee of $24.95.

“Thanks to the price drop recently, we have seen a buying frenzy,” Mr. Matei said. “It has lately leveled off a little bit, but we are still trying to restock.”

Mr. Matei adds that Kitco offers discounts when you buy more coins, but that didn’t kick in at just 10 gold Eagles.

Golden Eagle Coin — We could reach Golden Eagle in Maryland by phone, but the gentleman who answered the phone couldn’t give any information on premiums. Anyway, it’s easy to place an order online, and signing up takes less than 5 minutes. Golden Eagle offers bigger discounts the more you buy.

When it comes to the silver Eagles, the company’s shipping and fees ranged from $14.95 for a check, money order or cashier’s check to $32.58 for credit card or PayPal. In the table above, we used the credit card fee.

Bullion Direct — When you sign up for a membership at Bullion Direct, along with your e-mail, billing and shipping address, and credit card number, you also have to provide a Social Security number. Bullion Direct cannot be reached by phone (at least, not when we tried to call during office hours), but their office is in Austin, Texas.

APMEX — This company offers a nice “instant chat” window on its website. Through the web chat, we spoke to Paul Stevens, who was able to answer all our questions quickly.

For all these companies, if the mailing address on your credit card and your shipping address don’t match up, that’s another red flag.

Whenever possible, it’s a good idea to buy from your friendly neighborhood gold dealer. But sometimes for convenience’ sake, you want to buy online.

If you do buy from someone other than a major supplier, here are some more tips to keep in mind:

1) DO NOT buy on eBay — it’s too easy to get ripped off.

2) Don’t be snookered by underweight coins. 1 troy ounce is equal to 31.103 grams.

3) DO NOT buy from China, as some expert counterfeit gold coins have come out of there recently.

Keep these things in mind, and you should be fine.

Expert Tips to Keep Your Bullion Safe

So you’ve bought gold and/or silver bullion. Now what do you do with it?

We’ve asked some of the world’s smartest precious metals investors their ideas on storing treasure. While they insist on remaining anonymous (of course), they were willing to share the pros and cons of different choices …

Home safe. Make sure your safe is bolted to the floor, or otherwise secured, and it’s much better if it’s concealed. Our experts recommended keeping a “small amount” of gold and/or silver in the safe, with the rest stored elsewhere.

For that matter, if you have a gun vault, you can also use it for gold storage. If big trouble arrives on your doorstep, you might be going for both your guns and your gold at the same time.

Secret cache. This is a concealed hiding spot in an ordinary wall, which anyone with even the most rudimentary skills (yes, even you) can construct. It works in typical wood-frame houses with sheet-rock walls.

1. Pick a section of wall in an interior bedroom where a mirror wouldn’t look out of place. Locate the wiring in the wall. It typically runs through the wall about one foot up from the floor. Do not choose a section of wall with vertical wiring in it.

2. Use a magnetic stud finder or otherwise locate the studs in the wall. Make small holes to confirm where the studs are. You also want to avoid sections of walls that contain fire stops — building materials installed to slow the free passage of flame through concealed spaces.

3. Buy a vertical mirror that is at least 16 inches wide and three or four feet tall. It works best if you can find a mirror the same width as the distance between the studs in your wall. These mirrors usually come with a set of L-shaped mounting clips that attach to the wall with screws.

4. Cut a hole in the wall between two 2×4 studs. This hole is your cache. Don’t rest anything heavy directly on wiring. Mount the mirror over the hole. You can access it by twisting the L-mountings, or by smashing the mirror if you’re in a hurry to “Get Out of Dodge.”

What’s the point of all this work? A determined thief will sometimes steal a safe even if it’s “secured” to the floor. (“Hello, Mister Sledgehammer.”) You not only lose your safe, but your floor is busted up as well.

But most thieves who find a mirror attached to a wall won’t bother investigating further — they’re in a hurry, too.

Bank safe-deposit box. This is the old standby, and it’s safe unless someone actually robs the bank vault and takes the time to crack open the safe-deposit boxes.

It is best if you use a small, local bank with no investment portfolio that could sink it, a la Wall Street banks. However, in the event of a “bank holiday,” you will not have access to your gold or silver.

Many of the more-paranoid gold and silver collectors (and that’s a lot of people nowadays) will remind you that President Roosevelt confiscated gold in 1933, and gold in a bank vault would be an easy target if that happened again.

Private non-bank depository. Make sure it’s close to home for quick access, and 24-hour access is a plus. Larger cities have these, especially overseas. And a private depository which is not a bank will not be affected by a banking crisis.

Segregated storage at a professional gold vault or mint. The Perth Mint in Australia offers this service, as do others.

The Perth Mint is one of the most trusted names in the business, and it is owned by the government of Western Australia. Some Swiss banks offer this service as well.

But do your own due diligence — do not store your money with some outfit just because you read about it on the Internet.

Something else to keep in mind …

In segregated storage, specific bars are yours. In non-segregated (pooled) storage, the client does not have title to specific bars or coins. If you’re storing gold bars at some location other than your home or local bank, you’ll probably want to go the full mile and get segregated storage as well, even if it’s more expensive.

Because if you’re really paranoid, you know that if there is a run on gold or silver from that particular pool, then the pool management may be hard-pressed to supply enough gold to cover all physical deliveries.

Low-Tech, Little-Effort Ways to Hide Gold

Underneath the silverware. As in, taped or glued to the bottom (or top) of the drawer that the silverware is in. If thieves are using a metal detector, they’ll assume that it was set off by the silverware and not look any further. For the same reason, the back of your tool cabinet can also a good place to hide gold.

Hidden in your car. If you do this, make it a place that you need at least a screwdriver to access. The advantage is that if you’re racing for the border, you already have some gold in the car.

The disadvantage is that if you’re in a car accident severe enough to rip up your car, you might lose your gold, too.

Also, remove the gold before you have any work done on the car, or else your mechanic could get one heck of a tip!

In your attic, in the insulation. Most thieves are A) not looking in the attic and B) too lazy (or, more likely, not bright enough) to go crawling around in fiberglass insulation.

If you have a hanging ceiling with removable panels, you can also tape gold coins to the opposite (hidden) side of the panels. Just be sure not to put so much up there that it comes crashing down.

There are pros and cons for all of these hiding places. For one thing, the safest way to hide gold or silver is to NOT TELL ANYONE WHERE IT IS.

And yet, supposing something happens to you next week … an accident, an illness or your untimely demise. If you hide your gold too well, your family may not be able to find it … especially if they don’t know to look for it! Perhaps you may want to leave them a treasure map in your safe-deposit box in case you are unable to speak or otherwise lead them to these hidden stores of value in your home.

That’s it. We hope you find this information useful and interesting. And best of luck in your gold-buying adventure.