Take a good look at this chart, and you’ll see two important things: In dollar terms, gold has been flat, but in Sterling it is hitting new highs...
In March of 2008, the price of gold hit an all-time high of US$1,032.00. This was driven up by a rational desire by investors to put their wealth into something solid... and this move reflected gold’s value.
In short, this gold price was not inflated.
Then take a look at what happened...
From its all-time high, gold proceeded to lose 30% of its value, eventually closing out the year up 3.4% year on year.
This is certainly not what you’d expect given the metal is in short supply and investment demand is so strong, so what happened?
And more importantly, how can Zurich Club members benefit?
How you can stand back and profit while others panic
There’s nothing like a stock market crash to cause panic...
And 2008 saw the mother of all stock market crashes.
As a result, there was an indiscriminate sell-off across the board: one that affected all asset classes. Nearly everything that wasn’t nailed to the floor was sold in favour of holding cash.
And that included gold. As soon as one investor jumped ship, a whole mob of lemming investors did likewise and sold up.
Moreover, the historic worldwide deleveraging of banks and financial institutions we saw was, in many cases, settled in US dollars. Thus, we’ve also seen an emergence of the powerful, short-term uptrend in the dollar, despite its significantly weaker long-term fundamental. (As the unwinding continues, I actually see further deflation in the short term, which helps explain gold’s curiously low price.)
But this low price doesn’t actually reflect gold’s true value...
The demand for gold is so huge, the price should go up, taking your profits with it
Imagine having customers the world over clamouring for your product, but having virtually nothing in inventory to sell them – that’s exactly what’s happening in the market for gold right now.
Buyers worldwide have been banging down dealer doors to get their hands on gold for the better part of a year now. Everything that is available for delivery is being snatched up.
Mints and refiners worldwide haven’t been able to keep up with the unprecedented demand.
By the end of the third quarter of last year, most mints and refiners had simply stopped taking orders. In fact, they decided to fulfill all existing orders before promising to deliver on any new ones.
Once those orders are filled, however, you can bet the minters and refiners will begin production of 2009-dated products to get a jump on investors. Many are also reducing their product lines to concentrate efforts (and their limited capacity) on the products that are most in demand, such as the one-ounce gold coin.
But prices simply aren’t reflecting how favourable the supply and demand dynamics are – but that will change. It’s not a question of IF, it’s WHEN.
Sooner or later the masses will wise up to this discrepancy and BUY.
So start accumulating now and continue to average in on any short-term weakness throughout the year. Then, sit back and let the supply/demand dynamics and inflation push prices back up to where they belong.
Here’s how to get in...
A good way to profit from gold
There are many ways to buy gold, but in this market, with short-term supply shortages of small coins and bars, and with the high premiums that materialize in such a scenario, the two best options have a common thread...
They both focus on the purchase of larger bars versus investor-grade coins and bars.
And with my direct experience of the gold market, I’ve narrowed down the choice to these two specific recommendations:
• Buy contracts for larger gold bars directly from the exchanges
• Buy unallocated gold, silver and platinum Perth Mint Certificates and store the metals at the Perth Mint in Western Australia.
Both options have been immune to the increase in the premiums as there is no shortage of large bars (The shortages are in the small, fabricated bars and coins).
Gold is not subject to VAT in the UK (although silver and platinum bars and coins are subject to the 15% tax) The Perth Mint Certificates are the best way to buy gold, silver and platinum bars or coins. There is small premium paid, 21⁄4% over the spot price of gold in Perth.
It is the safest way to store unallocated gold, the only government guaranteed programme in the world. Plus, there is no storage charge for storing unallocated gold.
