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Why Are You Buying Gold?

By Jeff Clark
Tuesday, March 8, 2011

"You're buying the wrong gold," Hector chastised me after examining my collection of premium-quality collectible gold coins.
"How can that be?" I asked. "These are mint condition collectibles – the best quality you can buy. How is that the wrong gold?"
"Think about why you're buying gold," Hector said. "And then answer the question yourself."
Hector is an economist and a philosophy professor at the University of Buenos Aires in Argentina. He's visiting me in California this week. Since Hector has some experience with bankrupt governments, I asked him his opinion on my colleague Porter Stansberry's "End of America" video.
Then I proudly showed him my prized collection of MS65 Saint-Gaudens gold coins, and I bragged about how much money I've made off them since True Wealth editor Steve Sjuggerud recommended them several years ago.
"I'm sure they're wonderful investments," Hector said. "But they're a very poor currency."
"Think about it," he continued. "Will the baker know the value of your coins? What about the lady who sells vegetables at the farmers market? Can she tell the difference between quality gold and cheap junk?"
"If it gets to the point where you have to use gold as a currency, the average person isn't going to know the difference between premium and scrap. Everybody will assume the gold you offer is scrap, and it'll be valued as such. A handful of mint-condition gold coins will buy about as much milk and eggs as a handful of your grandmother's beaten-up gold jewelry."
In other words, for the past eight years, I've been buying the wrong gold.
It has been a profitable mistake. After all, the MS65 Saint Gaudens are worth about four times what I originally paid for them. But I can kiss those gains goodbye if I ever have to use the coins for bartering... if the End of America scenario plays out.
Scrap gold is a better currency.
Hector knows what he's talking about. He lived through the currency crisis in Argentina. He's been on the short end of the gold stick.
Keep your premium quality gold coins as investments. But when the dollar finally collapses and everything hits the fan, scrap gold will appreciate much more. So don't send your unwanted jewelry and trinkets to outfits like "Cash4Gold." Instead, bundle them up and toss them into your survival kit, next to the packs of cigarettes and bottles of booze. They'll come in handy down the road.
Follow Hector's advice and think about why you're buying gold in the first place.
Best regards and good trading,
Jeff Clark

Further Reading:

"Your typical one-ounce Silver Eagle coins produced yesterday at the U.S. Mint sell at a premium of about 10% to 12% over their melt value," Steve Sjuggerud wrote. He's got a way to pay a 4% premium. Read Steve's advice on a great way to buy "poor man's gold" here: The Cheapest Way to Buy Silver.
In December, Jeff warned readers about the U.S. dollar index. "If the index breaks below 78.5, all bets are off," he wrote. Three months later, the dollar is down nearly 4%. That's good news for gold owners, and another sign the End of America scenario may be around the corner. Learn why here: Is the Dollar Rally Over?

In The Daily Crux
Market Notes
Dividend-paying tobacco stocks continue uptrend... Philip Morris and Reynolds American touch all-time highs.
Automaker uptrend breaks... Ford and General Motors fall 20% in two months.
"Fracking" specialist Carbo Ceramics hits fresh high... up 73% since August.
Volatility fund VXX jumps more than 10% in a week.
Market Watch
Symbol Price
S&P 500 1310.13 -0.8% +15.1%
Oil (USO) 42.37 +0.1% +6.3%
Gold (GLD) 139.72 +0.3% +26.1%
Silver (SLV) 35.23 +1.6% +107.1%
U.S. Dollar 76.38 -0.1% -5.0%
Euro 1.40 -0.1% +2.6%
Volatility (^VIX) 20.66 +8.4% +18.6%
Gold Stocks (^HUI) 568.39 -0.9% +32.6%
10-Year Yield 3.50 +0.3% -4.9%

World ETFs
Symbol Price
USA (SPY) 131.43 -0.8% +16.8%
Canada (EWC) 33.53 -1.3% +23.9%
Russia (TRF) 24.38 +0.0% +21.5%
India (IFN) 30.06 -1.3% +6.0%
Israel (ISL) 16.59 -1.4% +5.7%
Japan (EWJ) 11.22 -1.9% +11.4%
Singapore (EWS) 13.18 -0.5% +20.2%
Taiwan (EWT) 14.87 -1.8% +23.4%
S. Korea (EWY) 58.91 -2.0% +22.1%
S. Africa (EZA) 69.28 -0.8% +22.3%
China (FXI) 43.10 -0.8% +6.3%
Lat.America (ILF) 52.13 -1.9% +13.4%

Sector ETFs
Symbol Price
Oil Service (OIH) 160.83 -1.0% +29.1%
Big Pharma (PPH) 65.38 -0.8% +3.8%
Internet (HHH) 70.67 -1.3% +22.3%
Semis (PSI) 17.63 -2.4% +30.8%
Utilities (XLU) 32.13 +0.4% +10.8%
Defense (PPA) 19.68 -1.4% +9.0%
Nanotech (PXN) 9.86 -1.6% -1.1%
Alt. Energy (PBW) 10.31 -2.3% +5.1%
Water (PHO) 19.32 -1.7% +12.2%
Insurance (PIC) 16.80 -0.4% +16.6%
Biotech (PBE) 20.91 -1.3% +10.2%
Retail (PMR) 19.69 -1.1% +15.1%
Software (PSJ) 26.15 -1.4% +20.5%
Big Tech (QQQQ) 57.19 -1.4% +24.1%
Construction (PKB) 13.56 -1.9% +16.7%
Media (PBS) 14.97 -1.5% +16.8%
Consumer Svcs (IYC) 69.82 -0.8% +20.2%
Financials (IYF) 59.04 -0.7% +9.8%
Health Care (IYH) 68.36 -0.9% +5.5%
Industrials (IYJ) 69.12 -1.0% +25.5%
Basic Mat (IYM) 78.02 -1.8% +26.0%
Real Estate (IYR) 58.43 -0.7% +27.9%
Transportation (IYT) 90.83 -0.8% +21.3%
Telecom (IYZ) 22.76 -0.3% +22.1%

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