Foster Publishing, Coin & Stamp

The first thing people usually consider when buying gold is its price, but unfortunately, they are grabbing the wrong end of the stick. Price is of secondary importance. To explain why, one has to examine the reasons for buying and holding gold.

The motivation to buy gold is usually driven by the pursuit of some defensive financial strategy. For example, gold is a proven and time-tested inflation hedge, so people acquire gold if they believe inflation is likely to worsen. This defensive strategy aims to protect your purchasing power because with gold you hold sound money instead of some inflating national currency.

Another defensive motivation to acquire gold is its unique attribute of being money with no counterparty risk. This significance of this risk was highlighted by the bank-run at Northern Rock in the UK last year and more recently, Bear Stearns in the US. People withdrew their money from those banks because they recognized that their ‘money’ was only as good as the financial capability of those banks to make good on their promise. In contrast, gold is not dependent upon a promise because it is the only money that is a tangible asset, and not an I.O.U. of some financial institution.

Another reason people focus on the price of gold is because they consider it to be an investment, but it’s not. Investments generate rates of return because you put money at risk, for example, by lending it or buying equity in a company. If the investment is successful, you will generate a return, increasing your wealth. But gold doesn’t do this. Gold preserves wealth; it doesn’t increase it.

For example, one ounce of gold purchases approximately the same amount of crude oil today as it has at anytime over the past 60 years. Who would want an investment like that? Gold hasn’t generated any rate of return. It hasn’t given its holders the opportunity to buy more crude oil. But because you can still buy essentially the same amount of crude oil, an ounce of gold has done exceptionally well at protecting wealth by preserving purchasing power, which is what money is supposed to do.

Money is a temporary store of value where we place a portion of our wealth while we decide whether to spend, invest or save (hoard) it. So when we hoard gold, we are in fact saving money until that moment in time when we decide to spend or invest it, which brings me back to my basic point.....

Click here to finish the article

"Inflation adjusted, going back to 1980 prices, gold today should be over $2,300 an ounce, so making the statement that gold could go to $2,000 is not irrational," Frank Holmes, CEO of U.S. Global Investors told CNBC.

John Williams of ShadowStats warns of an inflationary depression ahead and has this advice to give.

"You want to be liquid. You want to be safe. And I'd hold a little bit of gold as a hedge against inflation." 

Spot prices for gold reached $995.20 during the New York market, hitting a fresh high for the yellow metal. Gold jump $35 today on news of a surprise drop in US oil supplies. When will we break $1,000/oz? Only the market knows.

Another noteworthy article. Ken Gerbino says there’s no credit crisis and no recession. Inflation is what we should be worried about. Good news for metals.

The dollar will continue to go down as the Fed has decided to save the banks and flood the country with as much money as is needed to handle their crisis (the banks).

Gold is going up because this “crisis” handling means inflation is going to come back, possibly at the highest levels we have ever seen in modern times.

When Wall Street comes to it’s senses and realizes that the economy is now being flooded with money and none of the old money has disappeared and the Fed is indeed going to keep interest rates as low as possible, the U.S. stock market should not crash. The banking system will not collapse. Unfortunately what will happen is an explosion of inflation and that will be a crisis. Every lower and middle income earner in this country will pay for this bail out because their paychecks will now buy less and less in the future. Their standard of living will decrease. As usual the insidious paper money system will rob the poor and the lower and middle income earners (via inflation) and redistribute that wealth to the rich (the banks and the Wall Street firms that are being bailed out). There is no free lunch. But whenever one shows up, know that someone is paying.

The authorities have no choice but to inflate or have some major institutions go down. Eventually this will be an inflationary disaster. Gold will most likely go to $1500 within a few years. If one takes $850 gold and allows for only a 7% increase a year for 5 years – the price is $1200.

Read full article

Gold hits new record with further rises expected

Compare today's market prices with those in 2000, the Dow Jones buys:

35% less milk
40% less wheat and corn
50% less gold
65% less silver
70% less oil
80% less copper
90% less uranium

It's nice to hear a bit of honesty these days on television. Too late for some, Jim Cramer's unfiltered rant on CNBC shows how the public is being mislead by big business and the media working in cooperation to profit from false information.

I was happy to see Gold rising as the market fell on Friday. That's a good sign that Gold will decouple from the overall markets when things get worse.

In response to the Sub-prime mortgage woes, Solari has made their audio seminar Navigate the Housing Bubble available as a free download. I listened to it months ago and highly recommend it to anyone interested in the subject. Here is a summary:

As Assistant Secretary of Housing during the first Bush administration and the lead financial advisor to the Federal Housing Administration under President Clinton, Catherine Austin Fitts has worked to reduce mortgage fraud and to promote policies which reduce mortgage, consumer, and government debt. But, in the position of a Washington insider she witnessed the decision to increase debt as leaders across the US financial system engineered today’s spectacular housing bubble.

When the dot com and telecom bubbles burst and Enron hit the skids, people all over the world lost their jobs and life savings. Still, the economy stayed "afloat" as the housing bubble continued to finance a “first-world” lifestyle based on debt growing far beyond our means.

So what’s ahead for housing -- Status Quo, Crash or Slow Burn? Being able to evaluate the risks will be important to your financial health and peace of mind. Now you have access to one of the country's foremost experts to help you do so. This two-part seminar is a guide for protecting one of your most important assets -- your home. It provides a rare opportunity to learn from one of America’s most knowledgeable insiders about the most dangerous housing bubble in American history.

A customer sent me this email.

18k Gold-Plated iPod shuffle Signals Downfall of the Civilized World

Solari and The Moneychanger have created a handy tool for calculating the rate of exchange between dollars and ounces of silver or gold. It helps those wanting to put their metals to work as transactional alternatives to the dollar. With the dollar losing value against currencies and commodities across the board, more people are becoming interested in precious metals to maintain their wealth and purchasing power. The timing for this kind of tool couldn't be better.

---------------------------------------

Want to start a community currency by "just doing it?" As more and more of us buy silver and gold coins, there are increasing opportunities to use our coins to transact.

Whenever I travel, I bring back coins from around the world to give to the children and young people in my life. I am hoping to interest them in far away places and the role of currency in networking us together. For Christmas and birthdays, I also give them gold and silver coins. Increasingly, I wanted a tool that would make translating between US dollars and precious metal coins effortless.

One day I was talking with Franklin Sanders about how to make this easy for me. He said that he thought there were many folks who would transact with gold and silver coins if they had a simple calculator. So we decided to build a web site to provide one -- www.silverandgoldaremoney.com. We called it that because, in fact, silver and gold are money. If we use our coins to transact in our daily lives, then the value of the currency in our pockets is going up rather than going down like the US dollar.

- Catherine Austin Fitts