Land of Gold

Im in Asia now, recovering from jet lag, and watching gold soar up another $6 just yesterday.

This will be a long trip with visits to Singapore, Hong Kong, Shanghai and Mumbai or New Delhi.

And no matter how often I visit, Im always amazed by one single phenomenal sight: People buying gold loads of it.

And I dont mean gold funds, gold certificates or gold exchange-traded funds (ETFs).

They buy cold-to-the-touch gold. Gold jewelry … gold coins … gold bullion … gold bars.

Its hard to walk down a street without seeing at least one gold shop. Often, there are two or three to a block. Almost all of them are packed with buyers.

This is particularly true of Bangkok, where I am right now.

On an earlier trip here, I toured the temples, where lavish displays of gold continually bombard the consciousness of Thai citizens the Temple of the Golden Buddha, the golden domes, the golden walls.

I got a private history lesson of gold in Thailand.

We were absolutely surrounded in gold.

This is also where Prime Minister Thaksin Shinawatra may soon be ousted due to political dissent another reason for Thais to buy gold hand over fist!

But its not just Thailand.

Gold demand is rising rapidly in China, India, and Japan. Its surging all over the Middle East. Everywhere, the rush for gold is gaining momentum, and soon it could become a veritable stampede.

No surprise. You can see the upward pressure on gold in the charts. Over the past two weeks, the price of gold has soared nearly $30 an ounce, almost 6%.

As a result, its pierced through a recent downtrend line, indicating unusual strength.

This gold market is more powerful than almost anyone is ready to admit. Gold is headed much higher. I fully expect to see $618 an ounce this year, and quite likely as high as $740 my next major target.

If Youre a Real Wealth Subscriber, You Know
I Think Most Investors Should Allocate a
Total of 20% of Their Net Worth to Gold

And you also know that I recommend the bulk of those gold investments should be in a combination of a gold ETF, a good gold fund, and shares in the right gold companies.

In other words, the bulk of your gold investments should be in gold-related securities. More on those in a minute.

First, what about physical gold? Thats a great question so lets get right to it …

How to Buy and
Safeguard Your Gold

In the last 36 years, a whole series of new gold bullion coins have hit the market: The South African Krugerrand in 1970 … the Canadian Gold Maple Leaf in 1979 … the U.S. Gold American Eagle in 1986 … and, most recently, the Singapore Lion in 1990.

And thats just a sample list.

Are gold bullion coins a good investment? Sure. But if you buy coins, youre going to pay for the fancy design and the rarity of the coin itself. And that can add up to a hefty premium over the actual value of the gold content, as much as 7%.

Put another way, the price of gold would have to rise 7% just for you to break even on the investment.

Buy Small Gold Bars

Instead, if youre interested in physical gold, I recommend you invest in small gold bars. You can buy them in a wide range of weights, from one to a thousand grams.

They contain a minimum of 99.5% fine gold and dont carry the premium that gold coins do. You can buy small gold bars or ingots for as little as 1% over the price of gold.

Right now, there are 50 accredited manufacturers of small gold bars that produce a staggering 338 different gold bars among them.

Which to choose? Any one of the 50 accredited manufacturers is fine. But to help you narrow down your choices, I like Engelhard, Johnson Matthey and Pamp.

But when buying gold, keep these rules in mind …

Rule #1
Dont store your gold with the dealer you bought it from.

Sounds simple enough, doesnt it? But the fact remains that countless investors have been burned when their gold dealer went bankrupt:

Ruffco … National Bullion … North American Coin … and Bullion Reserve are just a few gold dealers that went belly up.

And mark my words, as the price of gold continues to skyrocket, youll likely see more bankruptcies, not less, down the road. In gold bull markets, the buying frenzy seems to attract the least prudent and least ethical players to the bullion industry.

Rule #2
Take possession of your gold using one of these alternatives.

Look at it this way: When you purchase physical gold, the farther you remove your bullion legally and physically from the dealer, the safer it is from the claims of that dealers creditors.

Alternative A. Cash & Carry. In terms of getting what you paid for, buying your gold and taking it with you is the ultimate solution. You go to your dealer, inspect what youre buying, fork over the money, and walk out the door with your gold. Simple. (But remember: Driving around town with a bag of gold has its own security risks.)
Alternative B. Consignment Method. The dealer sends the bullion to you for your inspection and then you send the money. Its a great choice and gives you plenty of leverage. If you can find a dealer to go for it, youre golden. Just have them send the metal to you and then you respond with a check the minute youre satisfied youve got what you were promised.
Alternative C. Sight Drafts. You make an arrangement with your bank to act as an intermediary between you and the gold dealer. The dealer sends the gold to the bank. The bank then holds it for your inspection. When you give the OK, the bank issues a cashiers check and you take possession of the metal.

Rule #3
Use a major, independent depository to safeguard your gold.

My Real Wealth subscribers already know that Wilmington Trust and Iron Mountain Depository are two of the best independent depositories around. They charge about 1% of the market value of your metal per year to keep an eye on it.

Rule #4
Use nonfungible storage.

When you put your gold in nonfungible storage, it means its stored in your name and its not pooled with bullion from other customers. This keeps your gold nice and tidy and its really the best way to go.

However, just because your dealer says your bullion is nonfungible and completely segregated doesnt necessarily make it so. And even if your metal is segregated, that doesnt mean the segregation agreement will automatically stand up in court. The best way to make sure is to have your attorney review the firms paperwork.

Either way, always specify that you want nonfungible storage. It may cost a bit more but its worth every single penny.

Rule #5
Consider Offshore Purchases and Storage

If youve spent any time reading my thoughts here or in my Real Wealth publication, you know I dont trust gold dealers, politicians and government bureaucrats. And there are also bankers I dont trust.

Nor do a lot of other people. Thats why so much gold is stored in Switzerland and Australia. I especially like the Gold Certificate Program at the Perth Mint of Australia http://www.perthmint.com.au/gc

Features …

The worlds only government-guaranteed certificate program
Insured by Lloyds of London at the Perth Mints expense
Low minimum purchase requirements of $10,000 to get started
Segregated storage available
Gold, silver, platinum and palladium available, in coin or bullion
Storage in a government vault, not a foreign bank
Permitted in Individual Retirement Accounts (IRAs)

What happens when you want your gold? Simple. Present your certificate by mail or in person to the Perth Mint, pay some related charges, and then tell them where you want your gold shipped. Simple and easy.

Real Wealth Portfolios Soaring!

The Real Wealth gold portfolio is up nearly 41%, with every position in the win column, including one position up over 100%.

For those of you not in some of these gold investments, I recommend my two favorite gold share funds the Tocqueville Gold Fund (TGLDX) and the Scudder Gold and Precious Metals Fund, now called the DWS Gold & Precious Metals Fund (SCGDX).

Those are nice core positions. But the bigger leverage is in the individual gold shares. For more details, see my latest edition of the Real Wealth Report. With gold starting to take off again, the time is now.

And for many times more profit potential, also consider my colleague Sean Brodricks new service, Red-Hot Asian Tigers. Asia is the source of much of the demand thats driving natural resource prices higher.

His service, as the name implies, concentrates on buying undiscovered Asian natural resource plays with exploding profit potential. The first set of four powerful plays with up to 43-to-1 leverage goes out Monday, April 3. So to participate, you have to be on board by this coming Sunday.

Best wishes,

Larry Edelson

For more information and archived issues, visit http://legacy.weissinc.com.

About MONEY AND MARKETS

MONEY AND MARKETS (MAM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Larry Edelson, Tony Sagami and other contributors. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MAM. Nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MAM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical inasmuch as we do not track the actual prices investors pay or receive. Contributors include Jennifer Moran, John Burke, Beth Cain, Amber Dakar, Michael Larson, Monica Lewman-Garcia, Julie Trudeau and others.

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