Gold Investors Manual

FROM STANSBERRY RESEARCH
THE STANSBERRY RESEARCH
GOLD
INVESTORS
MANUAL
Published by Stansberry Research
Edited by Chris Reilly and Sia Georgandis
Copyright 2015 by Stansberry Research. All rights reserved. No part of this book may be
reproduced, scanned, or distributed in any printed or electronic form without permission.
ABOUT STANSBERRY RESEARCH
Founded in 1999 and based out of Baltimore, Maryland, Stansber-

ry Research is the largest independent source of financial insight
in the world. It delivers unbiased investment advice to self-di-
rected investors seeking an edge in a wide variety of sectors and
market conditions.
Stansberry Research has nearly two dozen analysts and research-

ers including former hedge-fund managers and buy-side finan-
cial experts. They produce a steady stream of timely research on
value investing, income generation, resources, biotech, financials,
short-selling, macroeconomic analysis, options trading, and more.
The companys unrelenting and uncompromised insight has made

it one of the most respected and sought-after research organizations
in the financial sector. It has nearly one million readers and more
than 400,000 paid subscribers in over 100 countries.
ABOUT THE CONTRIBUTORS
Porter Stansberry
Porter Stansberry founded Stansberry Research in 1999 with the firms

flagship newsletter, Stansberrys Investment Advisory.
Prior to launching Stansberry Research, Porter was the first American

editor of the Fleet Street Letter, the worlds oldest English-language
financial newsletter.
Today, Porter is well-known for doing some of the most important

and often controversial work in the financial-advisory business. Since
he launched Stansberrys Investment Advisory, his string of accurate
forecasts has made his advisory one of the most widely read in the
world... and has helped his readers both avoid catastrophe and make
incredible gains.
Dr. Steve Sjuggerud
Dr. Steve Sjuggerud is the editor of True Wealth,

which focuses on safe, unique, alternative investments
overlooked by Wall Street. He is also the editor of
True Wealth Systems, which has distilled decades of
Steves investing experience into three dozen computer trading models.
And he is the main contributor to Stansberry Researchs free e-letter
DailyWealth.
Prior to joining Stansberry Research in 2001, Steve was a stockbroker,

vice president of a global mutual fund, and head of a hedge fund. He has
been quoted by the Wall Street Journal, Barrons, and the Washington
Post. He also co-authored Safe Strategies for Financial Freedom, a
bestselling book on investment strategies. He holds a doctorate in
finance.
Matt Badiali
Matt Badiali is the editor of The Stansberry Resource

Report, a monthly advisory focused on investments in
energy, metals, and other natural resources. Over the
years, Matt has recorded an incredible list of triple-
digit winners, like Northern Dynasty Minerals (322%), Silver Wheaton
(345%), and Jinshan Gold Mines (339%), among many others.
Matt takes a boots on the ground approach to his research. His work
has taken him to Papua New Guinea, Iraq, Hong Kong, Singapore, Haiti,
Turkey, Switzerland, and many other locations around the world. He has
built a huge Rolodex of the most influential people in the industry from
private financiers, leading geologists, and natural-resource analysts to
billionaire hedge-fund managers.
Prior to joining Stansberry Research in 2005, Matt was a geologist for a

drilling company and a consultant to an environmental company. He has
appeared on Fox Business, Stansberry Radio, and other business news
programs. He is a regular contributor to The Energy Report and Growth
Stock Wire. And his work is featured in the book Secrets of the Natural
Resource Market.
Dr. David Eifrig, Jr.
Dr. Eifrig is the editor of three Stansberry Research

newsletters... His largest monthly publication, Retirement
Millionaire, shows 100,000-plus readers how to live a
millionaire lifestyle on less money than youd imagine
possible. Retirement Trader shows readers a safe way to double or triple
the gains in their retirement accounts with less risk. Income Intelligence
shows investors how to analyze the income markets to maximize their
income and total returns.
Doc has one of the best track records in the financial-newsletter business.
From 2010 to 2014, he closed 136 winning positions in a row for his
Retirement Trader subscribers.
Before joining Stansberry Research in 2008, Dr. Eifrig worked in

arbitrage and trading groups with major Wall Street investment banks,
including Goldman Sachs, Chase Manhattan, and Yamaichi in Japan.
After retiring from Wall Street, Dr. Eifrig attended medical school to
become a board-eligible ophthalmologist. He has also published peer-
reviewed medical research. At Stansberry Research, he shares his love for
empowering people with his finance and medical knowledge.
He is also the author of four books: The Doctors Protocol Field Manual,
High Income Retirement, The Living Cure, and Dr. David Eifrigs Big
Book of Retirement Secrets.
Dan Ferris
Dan Ferris is the editor of Extreme Value, a monthly

investment advisory that focuses on the safest stocks in
the market: great businesses trading at steep discounts...
Dan joined Stansberry Research in 2000. In 2002, he became the editor

of Extreme Value. His strategy of finding safe, cheap, and profitable
stocks has earned him a loyal following... He counts more than 20 major
financial firms and well-known fund managers as subscribers. And he has
built one of the most impressive track records in the industry.
Longtime Extreme Value readers have enjoyed a long list of double- and
triple-digit winners thanks to Dans diligent research, including Gateway
(124%), Blair Corp (111%), KHD Humboldt Wedag (249%), International
Royalty (248%), Portfolio Recovery Associates (104%), Alexander &
Baldwin (201%), and Encana (171%), among many others.
As a result of his work in Extreme Value, Dan has been featured several
times in Barrons, the Value Investing Letter, and financial radio
and TV programs around the country. He is also the author of World
Dominating Dividend Growers: Income Streams that Never Go Down.
Brian Hunt
Brian Hunt is the Editor in Chief of Stansberry Research.
Since 2007, he has managed dozens of Stansberry Researchs

investment newsletters and trading advisories, helping make
the company one of the largest financial publishers in the world.
Brian is a successful private trader and frequently contributes to Growth

Stock Wire, DailyWealth, and The Stansberry Digest. He is the co-
founder of DailyWealth Trader, one of the worlds most popular and
highly regarded trading advisories.
Brian is the author of Dividend Millionaire: How You Can Earn

Inflation-Proof, Crisis-Proof Income Streams in the Stock Market. He is
also the co-author of High Income Retirement: How to Safely Earn 12%-
20% Income Streams on Your Savings.
GUEST CONTRIBUTORS
Van Simmons
Van Simmons is the president of David Hall Rare Coins, one of the
nations largest rare-coin dealers.
Van is one of the most knowledgeable minds in the world on coins,

stamps, and just about any other collectible you can think of. He has
been a rare-coin collector since age 12 and a rare-coin dealer since 1979.
As one of the founders of Professional Coin Grading Service (PCGS), the
largest rare-coin grading service in the world, he has helped revolutionize
the rare-coin market.
Tom Dyson
Tom Dyson is the publisher of Common Sense Publishing,

which provides useful advice about building wealth, living
well, and investing.
Tom graduated from the University of Nottingham in the United

Kingdom. Hes a member of the Chartered Institute of Management
Accountants, one of Britains top accounting bodies. He has also worked
for bond-trading desks at Salomon Brothers and Citigroup.
Prior to joining Common Sense Publishing in 2010, he wrote The 12%
Letter investment advisory for Stansberry Research.
Jeff Clark
Jeff Clark is the editor of Casey Researchs BIG GOLD

investment newsletter, one of the best precious-metals
advisories available for prudent investors.
In BIG GOLD, Jeff takes a big-picture view of the gold and silver markets
and the implications of daily market moves on the underlying fundamentals.
He focuses on mid- to large-cap precious metals, ETFs, mutual funds,
and bullion. Jeff is known for helping readers make sense of the frequent
changes in the price of gold and silver, the direction of metals and mining
equities, and what place precious metals have in an investors portfolio.
Jeff is a regular speaker at the industrys top investment conferences,

such as the Vancouver Resource Investment Conference, the Silver
Summit, and the Sprott Natural Resource Symposium. He is also
regularly quoted in notable business press, including MarketWatch,
TheStreet, Kitco, Hard Assets Investor, and the Washington Post.
Amber Lee Mason
Amber Lee Mason is the managing director at Bonner

& Partners, a publishing company designed to help its
subscribers build long-term wealth.
Prior to joining Bonner & Partners, Amber studied investing and trading
for nearly a decade under acclaimed analysts like Dr. Steve Sjuggerud,
Dr. David Eifrig, Jeff Clark, and Dan Ferris. She was a founding editor of
DailyWealth Trader one of the worlds most popular daily advisories
and the executive editor of Stansberry Research.
John Doody
John Doody is the founder and editor of Gold Stock

Analyst, which features his proprietary gold-stock valuing
system. From 2001 to 2010, his Top 10 list of gold
stocks returned 1,360%.
Prior to launching Gold Stock Analyst, John received a BA in Economics
from Columbia University, an MBA in finance, and a PhD in economics from
Boston University. He was an economics professor for almost two decades.
But for the past 40 years, John has been studying and analyzing gold
stocks. His opinion on these stocks is so respected, he has been profiled
by Barrons several times, quoted in The Financial Times, and is
frequently interviewed on CNBC. He counts several of the worlds best-
known gold funds and investment managers among his subscribers.
Doug Casey
Doug Casey is the chairman of Casey Research, a financial

publishing firm specializing in commodity and natural-
resource investing.
Dougs book on profiting from periods of economic turmoil, Crisis

Investing, spent multiple weeks as No. 1 on the New York Times
bestseller list and became the bestselling financial book of 1980. Doug is
also the author of Strategic Investing and The International Man, one
of the most well-known books on financial and personal opportunities
outside America.
He has been a featured guest on hundreds of radio and TV shows,

including David Letterman, Merv Grin, Charlie Rose, Phil Donahue,
Regis Philbin, Maury Povich, NBC News, and CNN. And he has been the
topic of numerous features in periodicals and newspapers such as Time,
Forbes, People, and the Washington Post.
ACKNOWLEDGEMENTS
Before we get started, wed like to offer special thanks to the guys at
Casey Research. They do some of the best natural-resource research you
can find anywhere... and theyre always plugged into whats happening
with gold.
In the following pages, youll find commentary from their own Jeff Clark,
senior editor of BIG GOLD. If youre interested in profiting off the move
in gold with high-quality precious-metals stocks, we highly recommend
you check out Jeffs work. To learn more, visit www.caseyresearch.com/
premium-publications/big-gold.
Wed also like to thank our friend Van Simmons... If youre looking to
preserve your wealth and even make a few hundred percent in gold coins,
Van Simmons is someone you need to know. And hes always glad to talk
with Stansberry Research readers to help them with the right collectible
investments.
Weve found that Vans coin advice is excellent... and his advice on most
other things is just as good. You can reach Van directly at (800) 759-7575
or (949) 567-1325, or e-mail him at info@davidhall.com.
Finally, thanks to Michael Checkan, head of Asset Strategies

International. ASI is one of the largest private gold-bullion dealers in
the world. Michael has been helping investors use precious metals and
foreign currencies for 30 years. Hes extremely knowledgeable and has
offered to answer any questions for Stansberry Research readers. Visit
his website at www.assetstrategies.com or call (800) 831-0007.
TABLE OF CONTENTS
Foreword i
Part I
What Everyone Should Know About Gold
The Ultimate Form of Real Money 1
What You Dont Know About Gold 3
Heres What Poor People Dont Know About Gold 8
Why You Should Hold Gold 11
The Gold Buyers Toolkit 15
Part II
The Best Ways to Buy and Own Gold
The Right Amount of Gold Investors Should Own 21
The Gold Investors Biggest Risk 23
The Best One-Click Ways to Own Gold 26
Get Paid to Protect Your Savings 29
How to Keep the Governments Hands Off Your Gold Profits 31
You Can Hold Gold in Your Bank Account 34
How to Buy and Store Physical Gold 36
What My Most Trusted Gold Insider Is Buying 41
My Favorite Ways to Own Gold Bullion 46

How to Buy Bullion with No Markup 49
How to Legally (and Easily) Hold Gold Offshore 52
How to Legally Smuggle Gold 54
What You Need to Know About Counterfeit Gold 56
Why Value Investors Should Buy Gold 60
A Common-Sense Guide to Buying and Selling Gold 63
Dont Believe the Gold Myths 69
Worried About a Financial Crisis? Buy This Very Risky Investment 79
How to Make the Biggest, Safest Returns Possible in Royalty Companies 82
A Rational Reason to Own Gold 88
The Easiest Way to Protect Yourself From the Next Financial Disaster 91
Doug Casey on Gold Stocks 96
Part III
How to Know When to Sell Your Gold
The Ultimate Gold-Bubble Test 108
Watch for This Signal to Sell Your Gold 111
Part IV
Chinas Influence in the Gold Market
How the Chinese Will Establish a New Financial Order 114
The Largest Gold-Accumulation Plan of All Time 118
How and Why China Came to Dominate the Market for Gold 122
How China Plans to Change the Way Gold Is Traded 127
Appendix: Recommended Reading 132
If Youre Interested in Learning More 134

FOREWORD by Porter Stansberry
founder, Stansberry Research
Our politicians propensity to spend money they dont have goes

back a long, long time...
In 1690, the colonial government of Massachusetts faced a fiscal

crisis. Its soldiers were returning, defeated, from a raiding expe-
dition to Quebec. It had no funds to pay the soldiers, as the colony
expected the campaign to be profitable: The soldiers were to loot the
French. Angry and hungry soldiers are dangerous.
The Massachusetts politicians had promised to pay them, despite

the fact that the Treasury had no money. (Similar to our federal gov-
ernments current schemes, that all of the money had already been
spent didnt worry them.) Unfortunately, the colonys credit was
tapped out. No one would lend the government the funds it required
7,000 British pounds.
So, pioneering a tradition in U.S. politics, the leaders of the colo-

ny simply printed up 7,000 paper notes. On behalf of these notes,
the politicians made two solemn promises: The notes would be
redeemed in gold or silver from tax revenue in a few years... and
absolutely no more paper notes would be put into circulation. Trust
us, the politicians explained, gold is only a barbaric relic.
You can guess what happened to these promises.
Less than six months later, the colonys leaders decided the first is-
sue of paper money had gone so well and had such a positive impact
on the local economy that they issued an additional 40,000 notes.
Once again, they promised the notes would be redeemed in gold or
silver and that no further notes would be put into circulation.
i
As this second, much larger wave of paper hit the market, mer-
chants began to significantly devalue the paper versus genuine
bullion, leaving the paper with only about 60% of its previous
purchasing power.
When the market began to reject the fiat paper as a fraud, the col-
ony moved to buttress its value by force a tactic copied later by
such illustrious leaders as Zimbabwes president Robert Mugabe.
The government decreed its paper was legal tender at par for
all debts and granted a 5% premium on the notes for all tax pay-
ments.
Such tactics worked... for a time. But as always happens when one
currency is artificially propped up over its intrinsic value, the bad
money forced out the good. Spanish silver coins, which had circu-
lated widely in the colonies, began to disappear. (The same thing
would later occur in the 1960s, as the U.S. dollar declined to well
below the value of a silver dollar.)
Meanwhile, the politicians treated each of the following crises with

more of the same money medicine. In 1716, they issued another
100,000 notes these backed by a land bank. Then in the 1740s,
they more or less turned on the printing presses for good. Paper
money in circulation soared from around 300,000 notes to more
than 2.5 million.
All this money sloshing around the world helped power one of the
greatest speculative manias in history the South Sea Bubble. It
also caused the price of precious metals to soar. The free market
price of silver, which had once stood at par with the notes, ended
up 10 times higher. In about 60 years, the Massachusetts colony
had turned its promise to repay in specie (gold and silver coins)
into a farce: Its notes were now worth 90% less than face value.
Fed up with the constant economic booms and busts of a paper

standard (always followed by yet another, still-larger issue of pa-
per money), the King of England in 1751 outlawed the issue of any
currency not backed by gold or silver.
Given our exit from the gold standard roughly 40 years ago, the
constantly increasing money supplies in the United States, and the
ii
relative financial standing of our government (about $50 trillion in
debts and obligations) not to mention the private sectors im-
mense piles of bad debts (perhaps $1 trillion in subprime mort-
gages) a decline in the purchasing power of the dollar is a sure
thing. Higher precious-metals prices are a lock.
In the Stansberry Research Gold Investors Manual, youll find sev-

eral unique strategies to profit off this trend... and protect your wealth
and your family in the years ahead. Youll get tips on anything and
everything you need to know to profitably buy, hold, and sell gold.
If you already own gold, congratulations. I encourage you to con-

tinue to put a portion of your savings into the only money that isnt
someone elses liability.
If you havent yet bought gold, I urge you to get started now. Today.
In the following pages, youll find the simplest, safest ways to own
and hold gold. There are no more excuses.
Good investing,
Porter Stansberry
iii
PART I
What Everyone Should
Know About Gold
T H E S TA N S B E R R Y R E S E A R C H G O L D I N V E S T O R S M A N U A L
THE ULTIMATE FORM OF REAL MONEY

By Brian Hunt, Editor in Chief,
Stansberry Research
For the past few thousand years, gold has seen a lot of competitors
try to become the ultimate form of real money. Folks have used
everything from cigarettes to butter, stones, livestock, salt, and
seashells to store their wealth and trade for goods.
But when crisis hits... when war breaks out... when bank runs grip
a nation... when its really time to just grab the money and run,
humans keep coming back to gold as the ultimate form of money.
Gold beats the competition so easily for six reasons...
1. Gold is easily transported. Land is a good store of wealth,

but you cant take it with you if you have to get out of Dodge.
2. Gold is divisible. If I owe both Peter and Paul and I have

just one piece of gold, I can split it in half.
3. Gold does not rust or crumble. Folks have used cattle

as money, but cows dont survive long in a locked vault.
4. Gold is consistent all over the world. Ill accept the

pure gold you mined in China just as easily as Ill accept the
pure gold you mined in South Africa.
5. Gold has intrinsic value. Gold has wonderful conductivi-

ty, its super malleable, and it doesnt break down... so it has
lots of industrial uses. Seashells lose big on this one.
6. Gold cannot be created by the government. People who

saw their wealth disappear in the great inflation of the 1970s
know that holding lots of paper money can be disastrous.
Most of the requirements of money were laid down by Aristotle
1
more than 2,000 years ago. The great investor Doug Casey is the
worlds best at reminding us why gold is still the ultimate form of
real money.
And now that America is inflating its money supply in an attempt

to pay for all kinds of wars, mortgage bailouts, social programs,
infrastructure build-outs, and green-energy boondoggles, its vital
to own a chunk of real wealth.
2
WHAT YOU DONT KNOW ABOUT GOLD:

THE BIGGEST MYTHS ON THE GOLD MARKET
An Interview with Brian Hunt
Stansberry Research: Brian, as you know, we probably get

more questions and reader feedback on gold than on any other
subject here at Stansberry Research... And weve noticed there are
quite a few myths and misconceptions about gold out there. Can
you go over some of the big ones for us?
Brian Hunt: Sure. Probably the biggest misconception investors

have toward gold is they see it as an investment.
Theyll listen to the folks on CNBC pick apart and analyze every
$30 move in the metal, just as a move in crude oil or stocks or
bonds would be analyzed. Theyll check the price quote every day...
to see how their investment in gold is performing.
This just isnt the way to view gold.
Gold isnt an investment. A thousand shares of health care compa-

ny Johnson & Johnson is an investment. J&J pays a dividend. Its
a business thats going to grow its cash flows and pay a portion of
those cash flows out to its shareholders.
An income-producing rental property is an investment.
Bought at the right price, a rental property will return all of your
original capital in the form of rent checks... and the rest is gravy.
Gold isnt like those two examples at all. Gold is money.
Its been used for money for thousands of years because its easily
divisible, its easily transportable, it has intrinsic value, its du-
rable, and its form is consistent around the world. And as Doug
Casey reminds us, its a good form of money because governments
3
cant print it up on a whim. You cant Bernanke your way to

wealth with gold.
Gold doesnt pay interest or a dividend. It doesnt have profit mar-

gins. Your gold holdings amount to lumps of metal held in storage.
The sooner the investor realizes that gold is money... and not a
conventional investment, the better off hell be. Its just a timeless
form of money. Thats it.
Stansberry Research: People can also view it as insurance, right?
Hunt: Right. Since gold is real wealth that you can hold in your
hand, its also crisis insurance... or wealth insurance. Like reg-
ular insurance, you buy gold and hope you dont have to use it.
Gold is insurance against governments doing foolish things with

their finances. Its going to hold its value if governments do crazy
things that lower the value of their paper money, like the United
States is doing with the dollar.
A currency is sort of like the share price of a country. Over time,

if a country manages its finances well... if it produces more than it
consumes, saves plenty of money, and maintains a modest amount
of debt, its currency will rise.
If a country consumes more than it produces... if it spends lots of

money, and borrows a lot in order to do all of that spending, its
currency will fall in value. While currencies fluctuate for all sorts
of reasons in the short term, over the long term, countries that
manage their checkbooks will enjoy strong currencies. Countries
that mismanage their checkbooks see their currencies plummet.
The U.S. dollar lost around 33% of its value between 2000 and
2012. This decline is because the world is waking up to the awful
situation America has borrowed and spent its way into.
During the same time, gold climbed from below $300 per ounce to
over $1,790 an ounce.
4
The U.S. dollar fell by that amount because our chief central banker
basically told the world that hed print lots of money in order to allow
our current political regime to spend lots of money... and to bail out
every American who cant balance a checkbook or show up for work.
My friend Porter Stansberry calls our current dollar situation a

full-blown crisis. Hes probably right.
And gold is demonstrating its value as crisis insurance.
I wish I lived in a country that produces more than it consumes...

that values personal responsibility and saving money. That has a
government that believes in fiscal responsibility. But I dont.
About half this country is on the government dole in some form

or another. Over 40 million people are on food stamps. People are
being paid by the government not to work. The people employed
by the government enjoy huge, outsized salaries for what they do.
This situation is a crisis. Thats why I own gold... and recommend

people keep at least 5% or 10% of their wealth in gold.
But heres where I differ from the average gold owner: Id love
to see gold fall down to $300 or $400 per ounce. Id love it if the
value of my crisis insurance would fall, rather than skyrocket... just
like I dont want my familys house to burn down... or why I dont
want someone to T-bone my car in an intersection.
But I look at the gang of clueless college professors, career politi-

cians, and other types who have never held real world jobs occupy-
ing the White House and Congress... And when I consider that half
of this country is on some form of government dole, I know there
is no political will to rein in spending and borrowing.
Stansberry Research: Yes... we all need insurance from that.

Do you think at least large institutional investors, like mutual fund
companies, understand gold?
Hunt: Absolutely not. They are just as ignorant about gold as the
5
average Joe on the street. They might even be worse.
From the early 1980s to 2000, nobody worried about insurance.

Stocks and the economy boomed for nearly 20 years. Gold lan-
guished for a long time.
Its importance as real money as a crisis hedge was forgotten

by most people... even by the supposedly smart folks who run big
investment funds.
They learned their trade during a period of rising stock prices and
falling gold prices, so they think gold is something right-wing nuts
stockpile alongside canned food in a bomb shelter. Its amazing
how a few decades of smooth sailing will make folks forget golds
importance as insurance against disasters.
Ive heard lots of supposedly smart institutional investors pooh-

pooh gold because it didnt perform well during the 1980s and
1990s. Theyll post charts showing how it lagged behind stocks and
real estate.
Its a silly comparison, because gold isnt an investment like stocks

and real estate can be. Gold is just gold. Like I said, you own it and
hope to never have to use it. You dont get it confused with a stock
like Johnson & Johnson.
Stansberry Research: We think youve made your point. Any

parting shots?
Hunt: Just one more. It involves another myth about gold... The belief
that anyone knows where the heck its going over the coming years.
Every day, you hear some guru claiming gold is going to $2,000
or $4,000... or even $10,000. Those kinds of price projections
are just hot air. Nobody not Warren Buffett or Ben Bernanke or
George Soros knows how high gold will go in the coming years.
Its tempting to make comparisons to other wild periods like the

1970s or the 1930s. But those historical comparisons arent worth
6
anything. And Im going to catch hell for saying this, but they ar-
ent worth anything because this time is different.
I know this time is different is a dirty phrase in the investment

business but given the U.S. debt situation, our runaway entitle-
ment spending, Europes massive debt problems, and the emer-
gence of Asia as a wealthy gold accumulator this is a different
gold market than any market weve ever seen. I dont place any
value on any past price action here... or any price projections... or
any attempts to value it.
You cant value gold like a stock... where youd say Ill pay 10
times earnings for gold. You cant value it like a rental property
and say Ill pay eight times annual rent for gold.
The important thing for investors is to forget about the noise you
hear on the Internet and television, and just steadily accumulate
ounces of gold. Try to buy a little more each quarter or each year.
Dont see it as an investment. See it as money... as real wealth you

can hold in your hand. Thats how its been seen for thousands of
years. It will eventually be re-discovered by the general public in
the coming years.
Stansberry Research: Thanks for your time.
Hunt: My pleasure.
7
HERES WHAT POOR PEOPLE DONT

KNOW ABOUT GOLD
By Dr. David Eifrig, editor, Retirement Millionaire
When gold falls more than $100 in one month, do you react like a
wealthy man or a poor man?
The difference between the two reactions is huge.
If you picked the right one, chances are good youll make money as a
long-term investor...
For many years, Ive urged people to own gold and silver. Ive
helped thousands of Retirement Millionaire readers make the right
precious-metal investments. But Im an unusual owner of gold and
silver.
You see, I think 99% of gold and silver owners are all wrong in the
way they view their holdings...
Most folks buy gold and silver and hope theyll make a fortune on
it. They listen to doom and gloom gurus who claim gold prices are
about to explode. Or while watching right-wing television shows,
they see commercials promise to make them rich in gold and silver.
So when gold and silver decrease in value, the average pre-

cious-metals owner stresses out. His big trade isnt working.
Again, I own gold and silver... and I urge you to do the same. But I
take an unusual approach to my holdings. I hope I lose money on
them.
I look at gold and silver the way a homeowner looks at his insurance
policy. A homeowner buys insurance against disaster and hopes
disaster never comes. He hopes he never has to cash in his policy.
8
Similarly, I hope I never make money on my gold and silver.
If I dont make money on my gold and silver, that means econo-

mies and markets are behaving relatively normally. It means Im
making money on my regular investments, like stocks, bonds, and
real estate.
If the world economy goes haywire and gold skyrockets to $5,000

an ounce, sure, Ill make money on my gold... but Im sure to have
a lot of problems along with those profits. Id rather make money
in stocks, bonds, and real estate. Id rather live in a world where
the U.S. dollar isnt plunging in value every month.
For many years, my job at Wall Street bank Goldman Sachs was to
develop and implement advanced hedging strategies for wealthy
clients and corporations. The goal with these strategies was to pro-
tect jobs, wealth, and profits from unforeseen events.
During those years, I learned a big difference between wealthy

people and poor people... Wealthy people almost always own plen-
ty of hedges and insurance.
They consider what could happen in worst-case scenarios and

take steps to protect themselves. Poor people tend to live with
blinders on. They play the lottery with their paychecks every
other Friday. They keep their retirement funds in just one or two
stocks... or they put all their money in a neighbors crazy business
idea, which is incredibly risky.
And they tend to load up on things like gold and silver. They
place way too much of their portfolio into precious-metal in-
vestments. And even worse, they base their decisions on their
emotions (usually fear). Dont do that... Instead, think rationally.
Think of gold and silver as insurance...
I like to keep 4%-8% of my investable assets in what I call cha-

os hedges. Gold and silver are great for this purpose. I keep the
rest in stocks, cash, bonds, and real estate. When gold and silver
plunge in value, I dont worry. I dont lose sleep.
9
If you dont own these sorts of hedges yet, I encourage you to buy
some... just like a homeowner buys insurance... or just like youd
buckle your seatbelt before driving your car.
Take the wealthy investors approach, buy gold and silver... and
hope the time never comes for you to have to cash in the gains.
10
WHY YOU SHOULD HOLD GOLD

An Interview with Doug Casey, chairman, Casey Research
Editors note: Gold is one of the most popular topics in the

newsletter world.
But despite the attention, gold is still grossly misunderstood by

most people.
To learn why gold is so valuable and why its so important to

own we sat down with Doug Casey, chairman of Casey Research
and one of the worlds best-known experts on gold and resource
investing.
If you still dont own any gold, this interview is required read-
ing. And if you have family or friends who think gold is only for
fringe types, be sure to pass this along...
Stansberry Research: Doug, can you explain why the idea of

gold is important? Why have we humans used gold as money for
thousands of years?
Doug Casey: Well, the truth is, theres nothing magical about
gold. Its just uniquely well-suited among the 92 naturally occur-
ring elements for use as money... in the same way aluminum is
good for airplanes or uranium is good for nuclear power.
But first we should ask: What is money? Its simply a medium of

exchange and a store of value. So lots of different things can and have
been used as money for periods of time.
Cows have been used for money. Thats where we get the word pe-
cuniary, from the Latin word for cow, pecu. Salt has been used for
money, thats where we get the word salary, from the Latin word
for salt. Sea shells and cigarettes have been used for money. And of
11
course, paper has often been used for money because its convenient
for governments and political purposes.
But gold is ideally suited because it possesses all five characteristics of

good money that Aristotle pointed out back in the fourth-century B.C.
First, its durable. Money needs to be durable for obvious reasons. It

needs to last and not disintegrate in your pocket or in a bank vault.
This is why you cant use a commodity like wheat as money... It rots,
it can be eaten by pests, and just wont last very long.
Second, gold is divisible. Good money must be divisible to pay for

items of different value. Its why you cant use diamonds or famous
artwork as money... You cant divide them up without destroying their
value.
Third, its convenient, which is why other elements like copper or lead
arent good money... it takes too much of them to be of value. Can you
imagine carrying around hundreds of dollars worth of copper or lead
to make a purchase?
Fourth, gold is consistent. This is why you cant use real estate as
money. Every piece of real estate is different from another, whereas
one piece of gold is exactly like every other piece of gold.
Finally, and perhaps most importantly, gold has value in and of itself.
Paper has next to no intrinsic value of its own, which is why paper is
such terrible money.
For all these reasons, I suspect that within a generation and prob-
ably much sooner at this point gold will again be used as money in
day-to-day transactions.
Stansberry Research: You mentioned paper money has little

intrinsic value. Can you elaborate on why this is so important?
Why is paper money in particular so terrible?
Casey: Well, theres actually a sixth reason that Aristotle didnt

mention, because it wasnt relevant in his context, but it explains
12
why paper money is so dangerous: a government cant create gold

out of nothing.
Not even the worst kings and emperors of Aristotles time who
routinely clipped and diluted their coins would have dreamed it
possible to pass off worthless paper, which can be created without
limit, as money. No one would have accepted paper money for
trade.
Yet, thats precisely what the United States started doing when
Richard Nixon removed what was left of the dollar gold standard
in 1971. Up until then, the U.S. Treasury promised foreigners it
would redeem $35 with an ounce of gold, so the dollar was, the-
oretically, a warehouse receipt for gold. Since 1971, its literally
become an IOU nothing. And weve been treated to a real time
case study in the dangers of paper money ever since.
Having no real money gold in the system allows politicians to

come up with all sorts of ridiculous spending programs. There are
only three ways a government can get money: taxing which no
one likes; borrowing which is just putting taxes off to the future,
with interest; and inflating the money supply which drives up
prices, but can be blamed on oil companies, farmers, merchants,
and anyone else who actually supplies goods and services.
Inflation causes the business cycle, which results in recessions,

and eventually depression. It discourages saving, which is how
wealth is accumulated. It encourages borrowing, which allows
people to live above their means. Inflation makes it easy for gov-
ernments to finance unpopular wars, like those in Vietnam or Iraq.
And inflation will eventually destroy the dollar itself, which will be
the ultimate economic catastrophe.
A strictly observed gold standard prevents all these things.
Stansberry Research: Weve heard why gold is the ideal money.

Should it also be viewed as an investment?
Casey: Well, an investment if we want to define the word is an
13
allocation of capital to produce more capital. For this reason, gold

is not an investment and has never been an investment.
Gold has been an excellent speculation which is defined as an

allocation of money to profit from politically-caused distortions in
the economic system from time to time over the past four de-
cades. But its never been an investment.
Gold shares can be an investment because youre allocating capi-

tal in a mine to produce more wealth in the form of gold. But gold
itself is not.
I consider gold to be cash in its most basic form, much more so

than the U.S. paper currency we currently call money.
So in the same way its always good to keep some savings in U.S.
dollars or whichever paper currency youre currently obligated
to use its always good to keep some savings in gold.
Stansberry Research: Thats great advice. Thanks for talking

with us, Doug.
Casey: Youre welcome. It was my pleasure.
Summary: Gold is money... because it is durable, divisible,

convenient, consistent, valuable, and cannot be created out of
thin air by the government. Just as its always a good idea to
keep some savings in your local currency, its also a good idea
to keep some savings in gold.
14
THE GOLD BUYERS TOOLKIT

By Amber Lee Mason, former editor, DailyWealth Trader
Editors note: This essay was originally published in July 2014 in

DailyWealth Trader. In it, Amber shares her gold buyers toolkit
and shows the different ways to profit on gold. You will want to
keep this toolkit handy, as it covers a variety of ways to add gold to
your portfolio. Keep in mind... The exact numbers Amber used in
this essay are dated. But the lessons are timeless.
Golds getting interesting again...
So today, Im going to share my gold buyers toolkit. Youll find

a list of ways to profit on gold, along with a brief look at their pros
and cons.
I cant go into all the nuances of every different asset... But you
can get to know a few of your options. And if youre interested in
betting on a higher gold price, theyre all worth knowing about...
Lets start with the most popular gold trade...
Gold Producers
A handful of large producers mine most of the worlds gold. They

have the money to hire most of the best people, they manage the
biggest projects, they buy the most equipment, and their capital
spending sets the tone for the rest of the industry.
A few of the large U.S.-traded names here are Goldcorp (GG), Bar-
rick Gold (ABX), Newmont Mining (NEM), Yamana Gold (AUY),
and Agnico Eagle (AEM). These are all major holdings in the pop-
ular gold-mining fund GDX.
15
The biggies typically have been around a long time and have fair-
ly stable businesses. They have a mix of assets around the world.
Their market caps are in the billions of dollars. This means they
are less volatile than smaller companies.
They are not without risk, however. Mining is a tough business...

and getting tougher. These stocks make bad long-term holdings.
A big fall in the price of the commodity they produce can send
their shares lower. Likewise, shares might stall if increases in their
costs of production outpace increases in the price of the commodi-
ty they produce.
Gold Explorers
If gold producers rally, gold explorers could go bonkers.
Unlike gold producers, gold explorers generally dont have an

operating mine. Theyre somewhere on the path from being a stock
promoter with a dream to being a team of geologists with some
leases and a dream.
They burn cash, dilute their shareholders, and often shut their
doors within a few years. But occasionally, they turn out to be
10-baggers. That keeps speculators coming back for more.
And when folks get enthusiastic about gold stocks, theyll send
these junior gold stocks way up. From the start of 2010 to early
2011, GDX rose 40%. GDXJ a fund that holds a basket of small
and medium-sized gold stocks rose more than 70%.
These stocks fall harder, too. After the 2010-2011 rally stalled,
GDX fell about 65%. GDXJ fell 80%.
Bullion
On the other end of the risk spectrum is real, hold in your hand
gold bullion...
16
Some of the most popular one-ounce coins include South African

krugerrands, American gold eagles, and Canadian maple leaves.
You can expect to pay a little over the current price of gold (maybe
5%) when youre buying and to receive a little under that when
youre selling.
This can get costly if youre trading large quantities of gold... But
its actually one of the pros of bullion: Its dicult and expensive
to buy and sell. So youre less likely to buy it on impulse (when
prices are high) and sell it in despair (when prices are low).
Another pro: Its no one elses liability. If cash becomes worthless,

the banks close, and the global monetary system collapses... gold
will still be gold. And its likely gold will still be money.
But that makes it a liability for you. If you own physical gold, you
need to figure out a safe place to store it.
Collectibles
If youre looking for hold in your hand gold with a little more
upside potential, consider collectibles...
My colleague Steve Sjuggerud has done more work on this idea

than anyone I know. He likes the idea of owning semi-numismat-
ic gold coins.
These are abundant enough that theres a liquid market for them...
but rare enough to have some collectible value. And his favorite is
the Saint-Gaudens, which were minted before 1933.
You can pay anywhere from 7% over the current gold price for
beat-up coins to twice the gold price for coins that are in excellent
condition. If folks get enthusiastic about collectibles, your upside
on these higher-quality coins could be hundreds of percent.
Of course, you run into the same storage problems as you do with
regular bullion... Plus, you want to make sure you know what
17
youre doing and youre working with a reputable dealer.
Paper Gold
A cheaper, more convenient alternative to physical gold is paper

gold...
The biggie in this category is the popular gold-tracking fund GLD.

I prefer the Central GoldTrust (GTU), which also tracks the gold
price... And because its a closed end fund, it occasionally trades
at a discount.
GLD and GTU both charge about 0.5% a year in fees. And your
broker will charge the regular commission for buying and selling
shares.
In terms of safeguarding your assets in a meltdown, these options

dont match hold in your hand metals. But theyre easy ways to
profit on a bounce in the gold price.
Royalty Companies
This is the steadier, safer way to add gold-stock exposure to your

portfolio... and one of my favorite ways to profit in gold.
The two biggest names in this space are Royal Gold (RGLD) and
Franco-Nevada (FNV). These companies dont mine any gold of
their own. Instead, they finance lots of early-stage mining projects,
then earn royalties on mine production if things work out.
Rather than owning a company focused on one big strike, you own
a diversified and growing portfolio of claims on lots of different
mines. These companies dont have any of the operating risks and
expenses of gold mines... But they do give you leverage to the gold
price.
So theyre volatile... But over the long term, their results look a lot
better than the gold miners.
18
Take a look at the chart below. You can see that gold miners (mea-
sured by the HUI index) have underperformed gold, while Royal
Gold has outperformed.
As with gold miners, it has been hard to get the timing right with
royalty stocks over the past two years. But if the gold price rises,
these stocks could soar.
If youre thinking about investing in gold, make sure you keep this
toolkit handy.
19
PART II
The Best Ways to Buy
and Own Gold
THE RIGHT AMOUNT OF GOLD

INVESTORS SHOULD OWN
By Dr. Steve Sjuggerud, editor, True Wealth
You often hear, You need to own gold! But how much is the right
amount?
You dont want to own too little gold and have the purchasing
power of all your savings shrink dramatically. You cant afford
that. But you dont want to be an end-of-the-world nutcase, either.
Well, one of the worlds shrewdest investors Jean-Marie Eveil-

lard has 8%-10% of his extremely successful investment fund
allocated to gold and gold plays...
Jean-Marie Eveillards First Eagle Global Fund beat the stock

market every year this decade. Whats more, hes done it conserva-
tively... He doesnt take big risks. Over 30 years, hes proven to be
one of the most successful mutual fund managers ever.
When I got into investing nearly 20 years ago, Jean-Marie was

already a legend. After doing my homework, his First Eagle Global
Fund was one of the very first investments I ever bought. (Back
then, it was called the SoGen fund... it still uses its old symbol,
SGENX.)
Jean-Marie started managing the fund in 1979. If you had invested

$10,000 in the fund back then, it would have grown to a little more
than 1 million. (Heck, I should have kept my money in there!)
His big idea now is very simple. Gold pays no interest. And mon-
ey in the bank pays nearly no interest. You can print money. But
you cant print gold. If the Fed keeps interest rates low, the obvi-
ous outcome is that it will take more slips of paper (dollar bills) to
buy an ounce of gold.
He believes his clients money should be about 10% or so allocat-
21
ed to gold and gold investments. Whats right for your situation?

Thats up to you. But if youre substantially under or over the
legendary investors gold allocation, you ought to consider getting
more in-line with him...
You can learn more about Jean-Marie Eveillards First Eagle

Global Fund here: www.feim.com/article/global-fund.
22
THE GOLD INVESTORS BIGGEST RISK

By Jeff Clark, editor, Big Gold
What do you suppose is the biggest risk gold investors face? An-
other 2008-style selloff? Gold stocks never breaking out of their
funk? Maybe a depression that slams our standard of living?
Though those things are possible, I dont see that as your greatest
threat. Master speculator Doug Casey summed it up well:
Your biggest risk is not that gold or silver may fall in price.
Nor is it that gold stocks could take longer to catch fire than
we think. Not even the prospect of the Greater Depression.
No, your biggest risk is political.
As bankrupt governments get increasingly desperate for

revenue, any monetary asset held domestically could be a
target. It is absolutely essential that every investor diversi-
fy themselves politically. In fact, at this point, it is the one
action that should be taken before anything else. Doug
Casey, September 2011
I know many reading this are prudent investors. You own gold and
silver as solid protection against currency debasement, inflation,
and faltering economies. You set aside cash for emergencies. You
have strong exposure to gold stocks, both producers and juniors,
positioned ahead of what is likely the next-favored asset class. You
feel protected and poised to profit.
Yet, despite all this preparation, you remain exposed to one of the
biggest risks.
Similar to holding a diversified portfolio at a bank without check-

ing the institutions solvency, many investors keep their entire
stash of precious metals inside one political system without con-
sidering the potential trap theyve set for themselves. While stor-
ing some of your gold outside your home country is not a panacea,
23
it does offer one important thing: another layer of protection.
Consider the exposure of the typical U.S. investor: 1) systemic risk,

because both the bank and broker are U.S. domiciled, 2) curren-
cy risk, as virtually every transaction is made in U.S. dollars, 3)
political risk, because he is left totally exposed to the whims of a
single government, and 4) economic risk, by being vulnerable to
the breakdown of a single economy.
Viewed in this context, the average U.S. investor has minimal

diversification.
The remedy is to internationalize the storage of some of your pre-

cious metals. This act reduces four primary risks:
Conscation: I dont know the likelihood of another gold con-

fiscation. But I do know that things are working against us par-
ticularly for U.S. citizens. With over $100 trillion of unfunded
liabilities, the U.S. government will likely pursue heavy-handed
solutions. Under the 1933 FDR gold confiscation in the U.S. (the
executive order was actually a forced delivery of citizens gold in
exchange for cash), foreign-held gold was exempted.
Capital Controls: Many prudent analysts, including my col-

leagues at Casey Research, believe some form of capital controls
lie ahead, limiting or eliminating a citizens ability to carry or
send money abroad. If enacted, all your capital would be trapped
inside the U.S. and at the mercy of whatever taxing and regulating
schemes the government might concoct. Although you might be
able to leave the country, your assets could not travel with you.
Administrative Action: There are plenty of horror stories of

asset seizure by a government agency without any notice or due
process, possibly leaving the victim without the means to mount a
legal defense. Having some gold or silver stored elsewhere pro-
vides what could be your only available source of funds in such a
scenario.
24
Lack of Personal Control: Having gold and silver stored

elsewhere adds to your options. You will have a source of funds
available for business, entrepreneurial pursuits, investment, or
pleasure.
Notice above I said these risks can be reduced, not eliminated.

There is no perfect solution. U.S. persons could, for example, be
compelled to pay a wealth tax on assets held worldwide, or even
repatriate them in a worst-case scenario. But absent a crystal
ball, the political diversity of asset location is an essential strategy
against an uncertain future.
Foreign-held assets also require greater awareness and planning...
Access to your metal or sale proceeds may not be quick. There-

fore, this option is for those with some gold and silver stored at or
near home. I do not recommend storing all your precious metals
overseas. That defeats one of its purposes: to have it handy for an
emergency.
While I think the U.S. poses the greatest threat, a foreign govern-
ment could move to control certain assets as well. The risk varies
by country and is generally greater within the banking system than
with private vaulting facilities.
Understanding and complying with reporting requirements is

essential.
The bottom line, though, is that foreign-held precious metals can

mitigate risk and give you more options. And as your metal hold-
ings grow, diversification becomes more crucial.
Given our current rapacious climate, its likely that simply buying
gold wont be enough. I strongly suggest every investor diversify
their bullion storage outside their current political regime. The op-
tion may not be available someday, leaving you vulnerable without
a secondary source of bullion.
I advise taking advantage of the opportunity before it is gone.
25
THE BEST ONE-CLICK WAYS TO OWN GOLD

By Matt Badiali, editor, Stansberry Resource Report
The gold-fund universe has exploded with opportunities.
Today, we have more than a dozen different one-click ways to

play gold. Take a look:
Market Value
Investment Fees* Type
(USD)
SPDR Gold Shares (GLD) 0.40% $31 billion Bullion
iShares COMEX Gold Trust (IAU) 0.25% $7 billion Bullion
Central Fund of Canada (CEF) 0.00% $3.4 billion Bullion
Sprott Physical Gold Trust ETV (PHYS) 0.35% $1.7 billion Bullion
ETFs Physical Swiss Gold Shares (SGOL) 0.39% $994.2 million Bullion
Central GoldTrust (GTU) 0.00% $886.2 million Bullion
ETFs Physical Prec Metals Basket Shares (GLTR) 0.60% $875 million Bullion
ETFs Asian Gold Trust ETF (AGOL) 0.39% $57 million Bullion
PowerShares DB Gold (DGL) 0.75% $146.8 million Futures
PowerShares DB Gold Double-Long ETN (DGP)** 0.75% $158.4 million Futures
ProShares Ultra Gold (UGL)** 0.95% $308 million Futures
RBS Gold Trendpilot ETN (TBAR) 1.00% $56.3 million Futures
UBS E-TRACS CMCI Gold TR ETN (UBG) 0.30% $13.2 million Futures
iPath DJ-UBS Prec Metals TR Sub-Index ETN (JJP) 0.75% $9.1 million Futures
iPath Pure Beta Precious Metals ETN (BLNG) 0.75% $1.8 million Futures
*Does not include brokerage fees **Designed to return twice the annual return of gold
All these funds match the short-term performance of gold well

enough: From December 31, 2012 to December 31, 2014, the
price of gold fell about 28%. The largest bullion fund, GLD,
fell about 29%. The largest unleveraged futures fund, DGL, fell
about 31%.
But the differences start to show in the long run. From Decem-
ber 31, 2008 through December 31, 2014, the price of gold rose
about 36%. GLD rose about 32%, but DGL only rose about 23%.
26
In general, the bullion funds track

Store Your Gold
the actual gold price much better
with One of the Most
than futures funds over the long
Reputable Firms in
term. Canada
Futures contracts expire, so the One of the safest paper

funds that use gold futures are gold investments is the
forced to sell their old ones and buy Central Fund of Canada
new ones... Each time they do it, it (CEF). This company holds
costs a little bit. Thats why these a mix of actual gold and
funds consistently underperform silver bullion to back its
the commodities they track. shares.
And each futures fund tracks a But you have to be sure to

different basket of futures, based on buy CEF at the right time.
a unique index. The subtle differ-
You see, its a closed-end
ences in the indexes can mean a big
fund, meaning there are
difference in your account.
a finite amount of shares.
Those shares can trade at a
Over 2009, for example, there was
premium or a discount to
a 23% spread between the best-
the net asset value (NAV)
(UGL) and worst-performing (UBG)
of CEFs bullion.
gold futures funds. And thats just
the unleveraged funds... Keep an eye on this num-
ber. Try to buy when the
DGP offers the ability to speculate premium is at or below
on gold with leverage: It tries to 5%, which is about what
return twice the rise in the spot price. youd pay to buy a real gold
But from its February 2008 launch bullion coin. (As of January
through December 2014, it was down 2015, CEF shares traded
about 8%. Meanwhile, gold was up around a 5.7% discount to
roughly 27% over that period. NAV.)
What does this all add up to, be- You can find out how high
sides a lot of confusing choices? the premium is here: www.
Well, these funds are there to make centralfund.com/Nav%20
the banks money... not you. So if I Form.htm. Or you can call
were adding a precious-metal fund the Central Fund of Canada
to my own account, I would stick at (403) 228-5861.
27
to the big bullion funds. They track the spot price well and are
liquid enough to buy and sell easily.
Theres no substitute for real gold. But if you cant or wont go

out and buy bullion, the bullion funds are the next best thing.
Store Your Gold in a Private Swiss Bank Vault
In September 2009, ETF Securities launched Physical Swiss

Gold Shares (SGOL). SGOL holds real gold stored in Swiss
vaults, rather than futures or mining stocks.
SGOL is a $916.2 million fund with a modest 0.39% fee.
Each share represents about 1/10 of an ounce of physical gold. So,

if gold is $1,250 per ounce, you shouldnt pay more than $125 per
share. Take care not to buy these shares at a premium.
28
GET PAID TO PROTECT YOUR SAVINGS

By Dr. David Eifrig
Investing in gold comes with two problems.
First is where to store it... Gold is heavy, and it needs to be put

some place safe. Some gold bugs even bury it in their backyard.
The other problem is gold doesnt generate any income. Unless

you own a well-run mine that passes on cash flow to you, gold is
just a boring hedge with no income.
Ive found an investment that solves both of these problems.

Heres how it works...
You can buy the New York-based SPDR Gold Shares (GLD). GLD
is an exchange-traded fund that buys and owns gold bullion. By
owning shares in this trust fund, you own actual gold... and the
trust stores it for you. That solves the first problem: storage.
But simply investing in this fund doesnt fix the income problem.
The gold just sits in the trusts vaults, gathering dust. The trust
doesnt pay a dividend.
So in order to get some income from your pile of gold, you can
sell covered-call options on the shares. If youre not familiar with
trading options and find the idea uncomfortable, rest assured: this
call-option strategy is easy and safe. The upfront income this trade
generates makes it safer than simply buying shares in GLD.
Selling a call option simply gives someone else the right to buy
your GLD shares at a specific price (the strike price) before a
specific date (the expiration date). In exchange for that right, the
investor pays you money up front (called the premium).
Heres one way to think about it...
29
Selling these covered calls is like owning a rental house... and

giving your tenants the right to buy your house at a predetermined
price, which is higher than the current value.
You collect rent no matter what. And if the price goes up, you get
the gains up to a predetermined price. In other words, its a very,
very safe investment. Heres how it can work out:
If your GLD shares never trade for more than the strike price, you
keep the premium and the shares. You can continue to sell call
options against your shares.
If the share price exceeds the strike price on or before the expira-
tion date, your shares are automatically sold for you, you book any
profit up to the strike price, and you still keep the premium.
If gold is in an uptrend, I expect you can make a safe 10%-15% a

year with this strategy.
The best calls to sell have a strike price 5%-10% above the current
price and expire in six months or so. Those will give you plenty of
cash up front and still leave you some upside on your gold.
You can also follow this strategy with other gold funds, like the
iShares COMEX Gold Trust (IAU).
If you havent sold options before, you should talk to your broker
about the best way to take advantage of this opportunity. Please
dont rush out and do anything you dont understand.
But as I said, this trade is one of the safest, easiest ways to own
gold. Its a fantastic hedge against calamity and the collapse of
the dollar. Plus, with 10%-15% annual gains, you can earn more
income than the best dividend-paying stock in the marketplace.
30
HOW TO KEEP THE GOVERNMENTS

HANDS OFF YOUR GOLD PROFITS
By Brian Hunt
Before you sock your money into a gold exchange-traded fund

(ETF), theres something important you should consider:
The IRS has a crazy view of gold ETFs... and it could cost
you a lot of the gains you plan on making in gold and silver.
You see, the IRS doesnt view gold as a normal financial asset like
a stock or a bond. The IRS views gold as a collectible. And the IRS
taxes the gains made in collectibles at a higher rate than conven-
tional assets.
If you buy a stock and hold it for over one year, and make a profit
on it, the tax rate on your gains is typically 15%. This greater-than-
one-year rate is called the long-term capital gains.
If you buy a stock, hold it for less than a year, and make a profit
on it, the gains you make will be taxed at your ordinary federal
income tax rate. This less-than-one-year rate is called short-term
capital gains. The higher your income, the higher your ordinary
income tax rate. Most Americans with investible assets (and a job)
are taxed in the 25%-35% range.
Collectibles like art, stamps, and gold coins are in a different boat.
The IRS assesses a tax rate of 28% on collectibles like these. And
despite a precious-metal ETFs stock-like attributes, it is backed by
gold bullion, so the IRS calls it a collectible. This means, even if youre
a buy and hold for the long term investor in a gold ETF, youll still
get hit with a tax rate of 28% versus the lesser 15% tax rate for normal
financial assets like stocks and bonds.
Thats why an investor should consider a gold and gold stock

strategy to minimize taxes. Heres what I mean:
31
Shares in large gold-producing com-

Another Twist in
panies fall under the long-term capi-
the IRS Code
tal gains tax rate of 15%. An investor
looking to keep his hard-earned gold The IRS does not allow
returns away from the taxman should
folks to hold collectibles in
consider a gold stock for his taxable ac-
their IRA accounts. This
count... rather than buying a gold ETF.
rule is to keep folks from
The savings can be significant...
placing their life savings
Lets say you buy $50,000 worth into a Picasso or something

of a gold ETF. You hold it for three like that. But for whatever
years. Gold goes on a bull run during reason, the IRS does allow
your holding period, doubling in you to place gold ETFs into
price. Your gold ETF stake is worth your IRA.
$100,000, meaning youre sitting on
Thats right. Repeat after
$50,000 in profits. If you decide to
sell your gold ETF stake, youll have us, The IRS sees gold
to hand over $14,000 (28% tax rate x ETFs as collectibles. The
$50,000) to Uncle Sam. IRS does not allow you to
place collectibles into your
Now lets say you put that same IRA... But the IRS will al-
$50,000 into the large gold stock low you to place gold ETFs
fund GDX. This is an investment into your IRA.
fund that diversifies your dollars into
a basket of the worlds biggest and So if you want a low-tax bet
best gold-mining companies. on straight gold bullion,
put a conventional gold
Lets say you make the same profit of ETF into your IRA. Your
$50,000 over a few years. Youll only tax-advantaged IRA will
have to hand over $7,500 (15% tax shield your gold profits
rate x $50,000) of profits to Uncle from the government.
Sam.
I dont know about you, but the less I have to pass onto Uncle Sam
to finance bank bailouts, welfare handouts, wars, and other ridicu-
lous boondoggles, the better.
Now, before you get excited about tax-advantaged gold, be aware

that gold stocks are more volatile than gold itself. These compa-
32
nies are sensitive to borrowing costs, fuel prices, and wild swings
in profit margins caused by the ever-changing gold price.
As with all tax-related questions, its best to consult with your own
advisor before taking any major action. But if you want a low-tax
way to get into gold and you dont mind a little volatility, consider
the gold-stock fund GDX.
33
YOU CAN HOLD GOLD

IN YOUR BANK ACCOUNT
By Dr. Steve Sjuggerud
Your cash in the bank earns you next to nothing...
Meanwhile, the government has the ability to print all the money it
wants to. In short, your wealth in the bank is steadily eroding. Your
dollar is losing purchasing power year after year.
What can you do to protect your savings? My friend Frank Trotter of

EverBank has an innovative solution Hold some of your sav-
ings at the bank in gold.
Frank and I go way back. I like him a lot, and I like his firm. His
team has taken good care of my readers over the years. (And in case
youre curious, I have no business relationship with EverBank, and
neither does my publisher, Stansberry Research.)
Over dinner one night, he explained to me that, through EverBanks

Metals Select Gold accounts, you can keep a portion of your sav-
ings at the bank in gold instead of in dollars.
So, Frank... I could keep my everyday money in my regular check-

ing account... and then I could keep my longer-term savings split
between a regular savings account and gold?
Yes.
But what if I need to convert my gold at the bank into cash to pay
for a big expense?
No problem.
How long will it take to get my cash? A day or two?
Yes.
34
OK. How do you hold my gold?
However you want. You can have gold with your name on it, so to
speak, which has a storage fee. Or we can hold it for you as unallo-
cated gold, where theres no storage fee.
Will you send me my gold if I want it?
Absolutely. Its your gold.
I hadnt heard of U.S. banks offering gold as an account option. But

EverBank does. And its a pretty convenient way to hold gold...
Imagine your house needs a new roof, and you need to get the mon-
ey out of savings. If your savings are in gold coins in a safe deposit
box, you have a serious hassle...
You have to go to your bank and get your gold coins. Then you have
to find somebody to buy them from you at close to full price... Either
take them to a local dealer or mail them off to a reputable dealer.
Youre taking a bit of a risk, having them on you or putting them in
the mail. Then you have to wait on a check. Then you deposit that
check in your bank. Then let it clear. Then you can write a check for
a new roof. What a pain!
With your gold at EverBank, you tell them you need to convert your
gold to cash and move that cash to your checking account. Itll take
a day or two from when you say sell my gold. Then you can write
that check for the roof.
Now, if you hold your account in gold, its value is not guaranteed by
the FDIC. Your checking and savings accounts are, of course. But
if the price of gold goes down, the value of your gold account goes
down the FDIC isnt going to help you out there.
But with the bank paying next-to-no interest and a government

with the ability to print money at will it makes sense to hold a
portion of your savings in gold. Holding gold in your bank account
keeps your life simple. EverBank offers a hassle-free way to do it.
For more details, go to www.everbank.com/investing/metals.

35
HOW TO BUY AND STORE PHYSICAL GOLD

An Interview with Jeff Clark
Editors note: Many folks are interested in buying and storing

gold.
Thats why we sat down with Casey Researchs Jeff Clark to talk
about the best places to buy and store physical gold. As the editor
of Big Gold, Jeff is one of the most knowledgeable gold investors
in the world.
We think youll find his tips on buying and storing gold extremely
valuable over the coming years...
Stansberry Research: Lets get right to how to own gold... What

forms of gold do you encourage people to buy?
Jeff Clark: The average Joe may not be aware of it, but gold is very
mainstream these days... Meaning its easy to invest in, and there
are plenty of choices. You can buy GLD and the ETFs that have been
in the news over the last several years, which are reasonable op-
tions. But physical gold should be where your first dollar goes.
What I recommend everyone buy is the one-ounce gold coins. Bars

are fine, and people with significant wealth should use them. But
Id rather have 100 gold coins than a 100-ounce bar of gold. The
one-ounce coin is easily recognizable and easy to sell if you need
to. If you have it in smaller denominations, you can sell only what
you need if it comes to that. And gold is easily transportable. You
can literally hold $50,000 worth in your hands. And no one has to
know about it.
As far as the rare and numismatic coins, theyll certainly rise in an

inflationary environment. But you have to be a little more careful
here because values are based on their rarity and their condition,
36
and the average investor cant judge those things.
There are good rating services out there now, predominantly the
Professional Coin Grading Service (PCGS). But its a tricky area for
the novice, and you can lose money if you dont know what youre
doing. I only buy from Van Simmons of David Hall Rare Coins. I
trust him, and he actually helped create the standards for PCGS.
Stansberry Research: Who else do you trust when it comes to

buying gold, particularly the one-ounce coins you mentioned?
Clark: For online buying, I like Kitco [877-775-4826], which

charges a set dollar amount over spot, versus a percentage as
most dealers do. This can work in your favor as the gold price
moves up, although Kitco does change its prices from time to
time. You can also buy gold and silver in their pool account at
just pennies over spot.
The Coin Agent [1-888-494-8889, thecoinagent@gmail.com] is

a small shop and the prices cant be beat. I really like him, and I
trust him, too.
Border Gold [888-312-2288] is in Canada and sells primarily the

Maple Leaf. If I wanted Leaf, thats where Id go.
Another one I like and trust is Asset Strategies International [1-

800-831-0007].
When youre shopping, keep in mind that you want a fairly com-
mon coin such as an Eagle, Maple Leaf, Krugerrand, or Philhar-
monic. You dont want an obscure coin and have someone ques-
tion if its real if you sell it someday. Other than that, youre just
looking for the best deal from a reputable dealer.
Stansberry Research: Do you have a rule of thumb where you

never pay 5% or 10% over the spot price of gold?
Clark: Sure, but that rule of thumb is a floating number. In late

2008, that number was 9%, and if you could get that you had to
37
grab it. Generally, you shouldnt have to pay more than 5% or

5.5%.
The way to avoid paying too much is to shop around, and that only
takes a couple calls or clicks.
Stansberry Research: So we should go to the dealers you rec-

ommend and shop around for the best price?
Clark: Thats what I do. If you want to buy online, Id go to Kit-

co. If you want to talk to a dealer, Id call one of the other places I
mentioned.
What you want to avoid are the large houses you see advertised
on TV or online. Youll occasionally see a low premium advertised
say 5%, or maybe even less. But quite frankly, thats usually an
enticement to get you in the door.
They make a much higher commission on numismatic coins.
So if you buy from them, some day youre likely to hear, You
know, my friend, we have a great deal right now on this rare coin.
Let me tell you about it...
Stansberry Research: Something where the uniformed novice

can get taken advantage of.
Clark: Yes, it happens regularly. Save yourself some hassle and

avoid those guys.
Of course, you can go to your local shop, too. But at times, my local
shops are more expensive than the other places we just talked
about, even after shipping. One of my local guys could charge a 9%
premium. I may like him, but thats unacceptable in an environ-
ment where premiums have come way down.
Stansberry Research: How about paying for physical gold with

cash? For the completely hypothetical person who doesnt want to
leave a paper trail?
38
Clark: You can certainly pay with cash. In that scenario, youll be
going to your local coin shop.
Stansberry Research: Once youve bought it, where do you

store it?
Clark: The easiest way to store gold is in a safe deposit box at the
bank. But you can only get to the gold when the bank is open, and
youre not insured if the bank gets robbed. If you do decide to use
a safe deposit box, make sure you use a local bank. You want to be
able to get it in an emergency.
Another option is to hide it in your house, which is good for small

amounts of gold. Avoid jewelry boxes or cookie jars. The risk here
is fire or flood. You could consider a safe, bolted to the floor. Talk
to a bonded safe company. Or look for safes online with tags like
floor safe or personal safe or home safe. Sentry is probably
the leading brand. And safes dont have to be expensive they
start around $150.
If you get a safe, put it somewhere you can place something over it,
like a refrigerator, because you dont want it visible to strangers or easy
to find if youre robbed. And for obvious reasons, you should install it
yourself. Some of the kits make it easier than you might expect.
Stansberry Research: What about midnight gardening?
Clark: This got its name from people burying their gold at night so
their neighbors wouldnt see them digging. If you bury your gold in
the daylight, find another reason to dig like fixing a pipe or remov-
ing a stump.
The advantage to burying your gold is that you dont have to worry
about it getting stolen or losing it if your house burns down. But make
sure you store it in something airtight and waterproof, like a hikers
water bottle or a bit of PVC pipe with capped ends.
Find somewhere on your property that youll remember but that isnt
easy to guess if someone learns youve buried something valuable.
39
Stansberry Research: Right. What if you cant remember where

you hid it?
Clark: You should definitely let one person know the details
someone you trust. They need to be able to access the gold if you
get hurt or die. If you use a safe deposit box, put that persons
name on the registration. And make sure to tell him or her where
you put the key.
But dont tell more than one person. And most of the time, your
kids arent going to be a good choice. Kids talk, and you definitely
want to keep quiet about your gold...
Stansberry Research: Would you ever sell your gold holdings?
Clark: Well, since gold is insurance, you cash it in when calamity

hits either you personally or the economy. That said, I would
only sell my gold if I absolutely had to if I lost my income or if
the world came to an end Mad Max style.
Stansberry Research: Thanks for your time and insight, Jeff.
Clark: My pleasure.
40
WHAT MY MOST TRUSTED

GOLD INSIDER IS BUYING
Editors note: In May 2010, Steve spoke to collectibles expert Van

Simmons and put together a two-part series for Stansberry Researchs
free e-letter DailyWealth on buying gold. Van told him how and where
to buy gold and gave him three must-own gold investments.
By the time you read this research, a few time-specific numbers

may be out of date. That doesnt matter in the slightest. What mat-
ters is the outstanding thinking contained in this piece
How to Buy Gold, Part I:

A Famous Dealer Explains
I spoke with Van Simmons recently...
Van is a legend when it comes to gold and gold coins and hes
one of my good friends.
(A few things from his resume... In 1986, Van was a founder of

PCGS the Professional Coin Grading Service which revolution-
ized the gold-coin industry. As a dealer, he has possibly bought and
sold more dollars worth of rare coins than anyone on the planet.)
Van is a mentor of mine. I give him a call and ask him his opin-
ion when Im considering buying an alternative investment (even
beyond gold and coins). Having collected and bought and sold so
many different things over decades, his experience is priceless.
This time, we kept it simple... I asked him:
Whats the best way for the typical American to own gold?
Bullion is where you start which usually means modern gold
41
coins. The most widely traded gold coin is the U.S. Gold Eagle,
Van said. If youre new to gold, and you want to physically own
gold bullion, the U.S. Gold Eagles are the way to go.
(Its easy to buy Gold Eagles. Ill show you where and how at the end
of this essay.)
I asked Van why we should want these in particular... For example,

my parents owned Krugerrands (which are gold coins from South
Africa). I asked Van why we shouldnt own Krugerrands or Canadi-
an Maple Leafs.
Well, you can own those you mentioned... But when a customer
sells a Krugerrand or a Maple Leaf, a dealer has to fill out a 1099
Form about who bought and sold and mail it to the government. We
dont have to do that for Gold Eagles.
All things being equal... the less reporting requirements, the better.
(You can also hold these coins in IRA accounts.)
Also, importantly, theyre the most liquid coins... so while you

might not find a full-price buyer for a Mexican Peso gold coin,
theres always a buyer for an American Gold Eagle you can always
get a good price.
How much should people hold in gold bullion like Gold Eagles ver-
sus stocks or rare coins?
Right now, personally, Im about equally split between those

three... I might have a bit more in gold stocks. For customers, its
their decision. If you want to have a speculative element to it, you
should have gold stocks and rare coins. Some people dont want rare
coins. And some people just want bullion. Its your call.
How should people store the stu?
Once again, its your call... You can put it in a safety deposit box, in
a home safe, or bury it in the backyard. One thing, I do not recom-
mend having a dealer store or hold it for you.
What about shipping? Any concerns?

42
Its no big deal. We typically send coins by registered mail, insured.

We also use FedEx. The only complaint we hear is when registered
mail takes more time to deliver than the customer expects, and they
start to get antsy. But buying coins is as easy as when you order a
book on Amazon.com and it shows up at your house.
As for how much to pay, expect it to cost around 5% to 6% over the

current gold price, plus shipping (which is typically around $25).
For where to buy... In my nearly two decades writing investment

letters, Ive dealt with a handful of dealers that have handled thou-
sands of our readers and have proven to treat them right. These
dealers include:
- Camino Coins in the San Francisco area (www.caminocompany.

com)
- Asset Strategies in the D.C. area (www.assetstrategies.com)
- American Gold Exchange in Texas (www.amergold.com)
- And of course, Van Simmons in Southern California (www.da-
vidhall.com)
I dont receive any compensation for mentioning these guys. And

youre welcome to call around or buy locally. Im just letting you
know these dealers have handled thousands of orders each from
my readers over the years. And Ive had few complaints about them
(and never anything serious). They each have decades of experience.
In sum, if you want to get started owning gold bullion, the best
starting point is U.S. Gold Eagles.
Dont worry if youve never bought gold before. If you buy from one
of the dealers above, its as easy as ordering a book on Amazon and
having it show up on your doorstep!
My talk with Van didnt end there
Van doesnt have all of his gold investment in bullion. He thinks of

his gold holdings in three buckets. I like that approach. I asked
Van to explain how it works
43
How to Buy Gold, Part II:

Three Must-Own Gold Investments
The three buckets Van holds gold in are: gold bullion, rare
coins, and gold stocks. You choose the mix thats right for you,
based on how much risk you want to take and how much you want
to juice your portfolio to take advantage of a big move in gold.
For your bullion bucket, Van suggests U.S. Gold Eagles, as we

just discussed.
For your rare coins bucket, you need expertise. In the last major
bull market in gold, coin prices soared. The entire market (as mea-
sured by the PCGS 3000 Index) rose 1,195% from 1976 to 1980.
We havent seen anything like that this time around. You can learn
all you want from books and doing your own research (which you
should do). But Van is my go to guy.
I always say, You and I cant call Warren Buffett about stocks, or
Bill Gross about bonds... but we can call Van about gold and gold
coins. Hes accessible. You can reach him through www.davidhall.
com, e-mail info@davidhall.com. Dana Samuelson and his team at
American Gold Exchange (www.amergold.com) also do a nice job.
At the end of the day, I think youll do great relying on Van and
Dana. Theyve proven to be trustworthy, they know their stuff, and
their prices are reasonable.
For your gold stocks bucket, a great starting point is shares of

the Market Vectors Gold Miners Fund (GDX). GDX is an
exchange-traded fund that holds the top 36 names in gold stocks.
You make one investment, and youve got it all.
If you want to juice your returns in gold stocks, you might

consider junior mining stocks. The simplest way to buy them
is through the Market Vectors Junior Gold Miners Fund
(GDXJ). This one investment gets you exposure to 69 junior gold
stocks.
44
If youre just starting out in gold, or if youd like to add more mon-
ey to your gold position, Van laid out your path...
1. Hold bullion rst. U.S. Gold Eagle gold coins are a

great starting point. To juice your portfolio from there...
2. Hold rare coins. They soared 1,195% in the last gold

bull market. And also...
3. Hold gold stocks. GDX (major gold miners) and GDXJ

(junior gold miners) get you exposure to more than 100
gold companies.
Choose your mix of these three based on your risk tolerance.
45
MY FAVORITE WAYS TO OWN

GOLD BULLION TODAY
By Tom Dyson, publisher, The Palm Beach Letter
This is not an essay about gold.
Its about the best way to own gold bullion.
You have many choices when it comes to buying gold bullion. You
can buy gold jewelry. You can buy gold bars. They sell them in
one-ounce, 10-ounce, or even 400-ounce bars. Or you can buy gold
coins. There are thousands to choose from from ancient Roman
coins to coins issued by the U.S. Mint this year.
When I buy gold bullion, I need to know I can trade my gold any-
where in the world, whenever I want. I need to know Ill get full
value for my gold when I sell it. And I dont want the government
knowing about my transactions.
The $20 Saint gold coin meets these three requirements better
than any other gold bullion investment I know.
America became the largest economy on earth in the early 20th

century. Americas $20 gold piece became the worlds most im-
portant coin. You might say it was the early 20th century equiva-
lent of the $100 bill today.
The U.S. Mint produced 70 million of these $20 gold coins be-
tween 1907 and 1933. The proper name for this coin is a $20
Double Eagle gold coin. But coin experts call them $20 Saints
because Augustus Saint Gaudens designed them.
For the last 100 years, collectors have spread the $20 Saint all
over the world. There are hundreds of thousands of these coins in
North America, Asia, South America, and Europe. Everyone recog-
nizes them. Everyone will trade them with you at a fair price.
46
I like the $20 Saint in brilliant uncirculated condition.
To give you some history, in the late 19th century people used gold
coins as currency. They bought steamboat tickets with them. They
purchased houses with them. They even paid bills with them.
The vast majority of the gold coins from this era that exist today
are in junk condition, like most of the coins in your pocket. Few
uncirculated gold coins exist from this era.
By the early 20th century, people used paper money for day-to-day
transactions. Gold coins became a savings instrument. Savers kept
these coins in sock drawers, safety deposit boxes, and bank vaults.
There are hundreds of thousands of uncirculated gold coins still in

existence from this era, especially the Saint Gaudens $20 piece.
A few of these uncirculated $20 Saints are so beautiful and rare,

collectors pay tens of thousands of dollars for them. These are
called graded mint condition coins. I am NOT talking about
mint-condition collectible coins here.
Brilliant uncirculated (BU) coins are neither mint condition nor

junk coins. They are simply coins that look shiny and new, but
theyre still common enough that they dont have any rarity or
collectible value.
BU Saint Gaudens are free of any government reporting require-

ments... and the government is unlikely to confiscate them.
In 1933, the U.S. government outlawed gold ownership. It de-

manded Americans turn in their holdings of gold coins. But it
made an exception of collectible coins.
If the government decided to confiscate gold again some-

thing we consider unlikely you would have to turn in your
holdings of Krugerrands and American Eagles. But your pre-
1933 Double Eagles in BU condition would likely receive an
exemption as collectibles.
47
Finally, BU Double Eagles have more upside potential than any

other gold bullion investment.
Over the last 40 years, these coins have commanded a significant

premium over gold bullion coins.
For example, during the 1960s when gold was trading at $32 per
ounce, BU $20 Saints sold for almost $65 per coin... a 100% pre-
mium over gold.
In 2001, when gold was trading at $300 an ounce, BU $20 Saints

traded for $710-$750 each... as much as a 150% premium.
With the run-up in gold prices in recent years, investors are buying
up modern gold bullion coins like the American Buffalo and Eagle,
and even one-ounce gold bars. And so inventories of these BU
vintage gold bullion coins have built up. The premiums have fallen
to all-time lows.
Today, you can buy a pre-1933 brilliant uncirculated Saint Gaudens

for just a little more than a Krugerrand or an Eagle costs today.
In sum, BU $20 Saints offer three practical advantages over com-
mon gold bullion coins: better liquidity, insurance against confis-
cation, and more upside potential. But they only cost slightly more
than a Krugerrand or Eagle.
This is the bargain of all bargains. Take advantage of it while gold

investors concentrate on modern bullion products.
The Palm Beach Letter is a corporate aliate of Stansberry Research.
48
HOW TO BUY BULLION WITH NO MARKUP

By Stansberry Research
The New York Mercantile Exchange (NYMEX) is the worlds

largest physical commodity futures exchange.
The futures exchange is a market like any other, where sellers

and buyers agree on a price. The only difference, really, is that
they dont settle up right away. They lock in the price for a
future date.
One of its two principal divisions of the NYMEX is the Com-

modity Exchange (COMEX), where you can buy gold.
When you buy a gold futures contract on the COMEX, you agree
to buy gold at a particular price on a particular date.
Unfortunately, you cant buy just a few ounces of gold on the

COMEX. Each gold contract covers 100 ounces of gold in a
100-ounce good delivery bar.
So if you dont have the capital to cover 100 ounces of gold, try
a couple of the other sources of cheap gold listed in this book. If
you do have the capital, heres how it works...
Very little gold actually changes hands on the COMEX. Most

buyers and sellers of gold futures contracts are speculating on
changes in the price of gold. But every participant who buys a
gold futures contract can request actual delivery of the gold.
To buy physical gold on the COMEX, you need to open an

account with a futures broker. You can do this through a U.S.
Futures Commission Merchant like www.rjofutures.com.
These brokers may ask you to prove a minimum net worth and
a minimum income. If you can put down enough cash for 100
ounces of gold, you should clear these requirements no problem.
49
The most active months for trad-

Buy Cheap Gold
ing gold futures contracts are the
Bullion in 10 Minutes
current month, the next month, and
the month after that... along with or Less
every February, April, June, August,
Option No. 1:
October, and December. In other
Bullion Direct
words, you have lots of choices for
when to get your gold. Headquartered in Austin,
Texas, Bullion Direct is
But if you want to get your gold an online service that
as soon as possible, buy a futures offers trading, clearing,
contract for the current month.
purchasing, and storage
That contract will close (settle)
of precious metals.
on the third-to-last business day of
the month. Buy your contract and As of January 2014, you
deposit the full amount into your could buy a 32-ounce
account. In less than a month, youll kilo gold bullion bar or
be the proud owner of 100 ounces
a 10-ounce bullion gold
of gold.
bar from the catalogue
for about a 2% markup.
Now, you dont have to deposit the
(The more gold you buy
whole amount right away.
at one time, the smaller
Youll probably have to put down the markup.)
something like 10%. But if gold de-
To get started, go to
clines in price, youll be required to
www.bulliondirect.com
deposit more or risk getting kicked
and click on the New Ac-
out of the contract at a loss.
count tab located on the
On the settlement date, your ac- top right-hand corner.
count will be charged for an amount
equal to the settlement price (what-
ever the contract price was when you bought it) multiplied by
the exact weight of the particular bar thats been assigned to
you. (A standard COMEX bar weighs roughly 100 ounces.)
You wont pay any markup on the gold, but you will pay a com-
mission ranging between $30 and $80. (These rates are paid
per contract, so thats not even one-tenth of one percent.)
50
When you buy gold off the COMEX,

Option No. 2:
it is stored in one of the five desig-
nated COMEX depositories, all of Bullion Vault
which are in or near New York City.
Another way to buy gold
The average storage fee is $15 a
month per bar. cheaply and quickly is to
buy from BullionVault.
Ask your broker to mail you the
warehouse receipt, which includes At BullionVault, you can
all the details on your specific bar. buy gold and have it held
Dont lose this receipt.
in good delivery form.
You can get your bar delivered to BullionVault charges a

your home, but you have to pay a maximum commission
$25 to $30 delivery fee to get the rate of 0.5%, which falls
bar released. Then youll have to
progressively to 0.05%
add shipping charges on top of that.
depending on how much
If you leave your bar in the COMEX you invest. The more you
vaults, you know its safe. And its trade, the less you pay. And
easier to sell this way. (A prospec-
the system remembers how
tive buyer will not question the au-
thenticity of your gold if it has been much you have traded in
locked away in a monitored facility each year starting from
since you bought it.) the day you first register.
To get started, go to www.

bullionvault.com and click
Open Account located on
the top right-hand corner.
51
HOW TO LEGALLY (AND EASILY)

HOLD GOLD OFFSHORE
Michael Checkan has been a reliable contact for me in the gold

world since I started writing investment newsletters in the 1990s.
He runs a firm called Asset Strategies International. Along with
my late friend, Glen Kirsch, he helped pioneer a few interesting
products, including one called the Perth Mint Certificate Program.
Ive known about Perth Mint Certificates for many years... I

know theyre a simple, safe way to hold gold. But I never actually
thought of these certificates as legally owning gold outside the
U.S. However, thats exactly what they are... and that makes them
extremely interesting.
You see, the government really wants to know if you have mon-
ey in a foreign bank account. When you mail in your taxes, you
have to report if you have one. The fear is that by reporting those
accounts, youve made it easy for the government to confiscate the
money someday, even if its held overseas.
But (and you might get a laugh out of this one) the government
doesnt count gold as money.
It doesnt consider gold a financial asset, so holding gold in a

foreign country doesnt count as owning a foreign bank account.
There is no reporting requirement. This puts it out of the imme-
diate grasp of the government. If it cant see what you have... it
cant take it!
This loophole has been around for a long time. But to me, the
idea of shipping a bunch of gold bullion overseas doesnt seem
practical. Where would you store it in a garage or a bank some-
where?
52
You can buy Perth Mint Certificates. Its the easiest, most practical
way to hold gold overseas.
Buy a certificate, receive it in the mail, and boom! You now own
gold offshore.
Specifically, with a Perth Mint Certificate, you own physical gold

held at the Perth Mint in Australia. Its guaranteed by the govern-
ment there, its fully insured by Lloyds of London, and it has both
internal audits and independent audits. Ive personally been to the
Perth Mint and have seen the gold.
I wanted to verify the specifics, so I got in touch with Glen... Glen,

can a Perth Mint Certificate be redeemed through you [at Asset
Strategies International] in the States? Can someone get their cash
through you?
Glen replied, The answer to both questions is YES!
Now thats convenient: Your gold is in Australia, out of reach of the

U.S. government. But you can easily cash it in right here in the States.
Many people prefer to hold physical gold themselves, believing

that the safest place for it is in their possession... And thats fine,
too. To each his own. But Perth Mint Certificates are probably the
easiest, safest way to buy gold and hold it overseas.
You are in full compliance with U.S. law. But at the same time, by
holding gold offshore, you have made it more dicult for the gov-
ernment to reach into your account and take your wealth.
For more on Perth Mint Certificates, call Michael or Rich Checkan at

Asset Strategies (800-831-0007) or e-mail info@assetstrategies.com.
53
HOW TO LEGALLY SMUGGLE GOLD

Did you know the president confiscated all the gold of American
citizens in 1933?
Its true... all in one quick swoop of the pen:
UNDER THE EXECUTIVE ORDER OF THE PRESIDENT
Issued April 5, 1933
All persons are required to deliver ON OR BEFORE MAY 1,

1933 ALL GOLD COIN, GOLD BULLION, AND GOLD CER-
TIFICATES now owned by them to a Federal Reserve Bank,
branch, or agency, or to any member bank of the Federal
Reserve System.
It was the height of the Great Depression. And the U.S. government
desperately needed to shore up its financial position. So in a dra-
matic move, it took everyones gold.
Could it happen again? Well, put it this way: Who could have imag-
ined it would happen the first time around?
Every day on the radio, I hear ads about buying gold as a store of
wealth. But folks who held gold as a store of wealth in the Great
Depression had that wealth confiscated by the government.
I brought up the subject over lunch one day with my longtime friend
Michael Checkan. Michaels business is called Asset Strategies Inter-
national. He finds legal ways to protect and diversify your wealth.
Michael told me about a neat little idea he came up with.
I thought the idea was worth sharing with you... When the U.S.
government confiscated gold back in 1933, Michael told me, you
were allowed to keep your gold jewelry. The president didnt ask for
Grandmas wedding ring.
54
For example, if you wanted to, you could carry 100 24-karat gold
necklaces each piece weighing one to five ounces out of the
country, and you wouldnt run afoul of the currency laws. And then
you could convert them to money at most gold dealers in the world.
Its like legal gold smuggling.
Now, I dont recommend doing this on any scale. First off, youd
look like Mr. T. going through customs. And secondly, its just not
cost-effective... Most 24-karat jewelry is handmade and costs a
premium over the price of gold. But a gold dealer will only pay you a
discount to the gold price.
Finally, Im not a lawyer, but Im sure that if you tried to bring a

load of high-end jewelry across the border, someone would decide
youre somehow breaking a law.
However, for a small portion of your gold, jewelry is an interesting

idea...
My friend and publisher of The Palm Beach Letter Tom Dyson,

was also at the lunch, and he was considering buying jewelry for his
wife for this same reason.
My wife would like some jewelry... If I bought this, my wife would

get something she wants to wear... and Ill be confident that its not
worthless. It has real gold value.
With this idea, you can keep your significant other happy while
youre confident you own something with real value. And in the ex-
treme case, if we see another 1933 again, your gold should be safe.
Its an interesting idea. For a small portion of your gold holdings,

jewelry is worth considering...
To learn more about jewelry and other asset diversification strat-

egies, we recommend you talk to Michael. He is extremely knowl-
edgeable and has offered to answer any questions for Stansberry
Research readers. Visit his website at www.assetstrategies.com or
call (800) 831-0007.
55
WHAT YOU NEED TO KNOW

ABOUT COUNTERFEIT GOLD
An Interview with Van Simmons,
president of David Hall Rare Coins
Editors note: In late 2012, reports surfaced of counterfeit gold

appearing in New York City. Chinese companies were also openly
advertising fake gold coins. Many folks began to worry about the
authenticity of the gold coins and bullion they were buying.
To get the facts on this story, we sat down with Van Simmons. Van
is the president of David Hall Rare Coins and co-founder of the
highly-respected Professional Coin Grading Service (PCGS), which
revolutionized the rare-coin market.
Longtime readers know Van is one of the worlds foremost experts

on the gold-coin market, and hes our go-to source of information
on the industry.
In this exclusive interview originally published in November

2012 Van explains why you should be concerned about the au-
thenticity of your gold... the best way to avoid this problem... and
how to tell if the gold you already own is legitimate.
Stansberry Research: Van, there have been several recent re-

ports of counterfeit gold popping up in the U.S. Is this something
most readers need to be concerned about?
Van Simmons: Yes, it definitely is... but with a caveat.
Gold counterfeiting is nothing new, but reports of counterfeit

bars turning up in New York have brought new attention to it. Of
course, its not just China... but much of the counterfeit gold these
days does come from there.
These items typically contain tungsten, which has a similar mass
56
as gold but trades for only a few hundred dollars an ounce.
As for the counterfeit bars, its usually a case of real gold bars
being drilled out and refilled with tungsten. Coins and ingots
things like rounds, small bars, and non-denominated coins minted
by private companies are smaller, so theyre typically tungsten
with some type of gold plating.
The fact is, its not even against the law in China to counterfeit
American coins, so there are many companies over there in that
business.
Fortunately, Ive never seen or heard of any problems with coun-

terfeit bullion coins like Gold Eagles, Krugerrands, or Maple Leafs.
There probably are some out there, but theyre extremely rare.
Dealers trade in these coins all day long and are very familiar with
them... so any potential counterfeits wouldnt stay in circulation
long. Like I said, Ive been trading them for decades and havent
encountered them.
Where counterfeiting is a problem is in ingots and more impor-

tantly rare coins. Because these items are not widely traded and
dealers are much less familiar with them, theyre a much bigger
and more profitable target for counterfeiters.
We see these coins at PCGS every so often. But its usually a case
where someone will call us and say they have some rare date
coin thats worth a great deal of money... when the reality is they
bought it off eBay or someplace similar, paid cash for it, and its
counterfeit.
I had a complete set of Barber half-dollars, trade dollars, and

Morgan dollars that were all counterfeit. A customer came in with
them and was surprised to discover they were fakes. Of course, it
turned out he bought them off Craigslist.
If I showed you some of these Morgan dollars, youd think they

were some of the best-looking coins youve ever seen. But they
57
dont look quite right if you know what youre looking for... And
its pretty easy for a professional to spot them as counterfeit.
So theres definitely counterfeit stuff out there, and it can be a big

problem if you dont know what youre doing.
Stansberry Research: Whats your best advice for avoiding

these problems?
Simmons: Its simple.
First, dont buy ingots.
They were popular in the past, but once coins like the Krugerrand,
Maple Leaf, and the U.S. Eagle began trading in the U.S. in the late
1970s and 1980s, these coins have dominated the bullion market.
These are what everyone trades... theyre super-liquid... and the
premiums are reasonable compared to most ingots. So its simply
not worth the risk to buy ingots to try to save a little money.
Second, I suggest buying your bullion through a reputable dealer.

The risks with Eagles, Maple Leafs, or Krugerrands are quite low,
as I mentioned. But why take on unnecessary risks?
Third, if youre going to purchase rare and relatively expensive

coins, its even more important to buy them from a reputable
dealer, and only buy those graded by PCGS. I cant emphasize this
enough.
If youre going to spend a lot of money on an item, you owe it to

yourself to ensure you get what youre paying for. Naturally, as a
founder of PCGS, Im not unbiased here. But theres a reason were
the most trusted grading service in the world.
I talk to people all day long who have sought out really good
deals and end up hurting themselves. Its a clich, but its partic-
ularly true in the rare-coin market: If a deal sounds too good to be
true, it probably is.
58
Counterfeit gold is a serious problem, but it doesnt have to be a

serious problem for you if you take a few common-sense precau-
tions.
Stansberry Research: Great advice... Finally, if readers are con-

cerned they may already own some counterfeit gold, what would
you recommend?
Simmons: Well, as I mentioned, if they own ingots especially

ingots they purchased from a third party, or got a really special
deal on its a valid concern.
If theyre worried about coins, its a different story. If theyve

owned the item for more than five years or so, chances are they
have nothing to worry about. These realistic-looking counterfeits
are relatively new. And of course, if you bought PCGS-graded
items from a reputable dealer, your risk is quite low.
But in any case, they can call up a local coin dealer and most would
be happy to take a look.
Of course, any readers with specific concerns about rare coins can
also contact us at David Hall Rare Coins, and wed be happy to help.
Stansberry Research: Thanks so much for talking with us, Van.
Simmons: My pleasure.
Editors note: Van would be happy to speak with Stansberry Re-

search readers about making coin and collectible investments. You
can reach him at (800) 759-7575 or (949) 567-1325, or by e-mail at
info@davidhall.com. (We receive no compensation for mentioning
Van. We have been working with him for several years now. Van
has always treated our readers well.)
59
WHY VALUE INVESTORS SHOULD BUY GOLD

By Dan Ferris, editor, Extreme Value
For all the gold thats ever been mined, you could buy every acre
of farmland in the U.S. and 10 companies the size of ExxonMobil...
and still have $1 trillion left over.
Would you rather have a shiny cube of metal, 67 feet on a side... or

trillions of dollars of assets that actually produce wealth?
Thats essentially what Warren Buffett, the worlds most successful

and famous investor, wondered in a 2010 interview with Fortune.
Buffett doesnt like gold because it has no intrinsic value.
In a way, hes right. Most of the gold in the world just sits around
collecting dust. Very little of it is used for industrial purposes.
With the high price an ounce, industrial gold users will likely use
as little of the stuff as possible.
But heres what hes not seeing...
In 2010, in my Extreme Value newsletter, I wrote:
Never forget whats at the bottom of the banking system:

the Federal Reserve as lender of last resort, with its unique
ability to print as much money as it wants in order to have
enough to lend into the banking system.
The money-printing I worried about is well underway... and is

unlikely to stop any time soon.
The Fed pretends its a sophisticated operation with an array of

complex, surgical-grade financial tools. But its really an imbe-
cile with a hammer. The hammer is money-printing, and every
economic problem is a nail.
60
So you should always own gold.
Im not saying gold and silver are cheap, though relative to dol-
lars, I believe they are cheap. Im saying the worlds most well-
known, well-liked, and widely held standard of value (the U.S.
dollar) is a poor standard of value. In fact, its a phony standard
of value.
Its easily created at the touch of a button nowadays. Does that

make sense to you? Have you ever in your life created anything of
value without putting effort into it?
Value isnt created easily, on a whim. Value is created by employ-

ing capital productively... the way gold and silver are made. You
should own gold and silver because theyre the ultimate standard
of value.
Gold is the asset that cant be inflated, yields nothing, and is no

ones liability. Its real wealth... pure wealth... the most enduring
form of wealth in history.
Lets be clear. Im not talking about exchange-traded funds,

precious-metals mutual funds, gold-mining stocks, silver mining
stocks, gold- or silver-indexed preferred shares, or paper certif-
icates of any kind. They have their place, but thats not what I
want you to buy.
Im talking about physical gold in the form of bullion coins. Im

not talking about speculating on the price of the commodity. Im
talking about exiting paper dollars and putting your savings in
real money.
For gold-bullion coins, I buy and recommend Krugerrands. The

premiums are usually low. Theres plenty of supply. And its the
most widely circulated gold bullion coin in the world.
For silver bullion, I buy whatever one-ounce, 0.999 fine silver

rounds my coin dealer suggests. Ive been going to the same guy
for years. He knows me when I come in, and he knows I like the
61
coins with low premiums.
I recommend putting 10% of your investable assets in both gold

and silver bullion. Buy it. Hide it somewhere youll always have
access. Buy physical gold and silver to preserve the purchasing
power of the wealth youve created. Do it to protect yourself from
the Feds war against the dollar. Do it because gold is the ulti-
mate standard of value.
The only reason most value investors dont like gold is that War-
ren Buffett doesnt like gold.
Believe me, Im only human. Ive fallen under the spell of a big-
name money manager a time or two.
But if Buffett and his followers want me to believe that paper

makes better money than gold that paper keeps mischievous
men from degrading my wealth better than gold that gold isnt
a more enduring standard of value than anything else thats ever
been tried... theyre going to have to keep talking because Im not
anywhere near convinced.
62
A COMMON-SENSE GUIDE TO
BUYING AND SELLING GOLD
Editors note: The content youre about to read veers from our
normal format. Many of the key, timeless ideas on gold that weve
published over the years have been featured in The Stansberry
Digest, our excellent e-letter for paid subscribers. Weve compiled
some of our favorite excerpts below
We believe physical gold is the best way to protect your mon-

ey from the governments treachery... Your gold is no one elses
liability. So weve been telling our readers to buy gold coins since
at least 2003, and we get more questions on the topic than almost
any other. Below are the whys, hows, and wheres of buying gold
that clanks.
On gold and nancial turmoil: Gold has a unique and timeless

role in the worlds markets. It is the ultimate store of value. Thus,
while it might not be an investment, it is the ultimate form of
savings.
Additionally, in a world awash in paper money, where debt forms

the basis of most commerce, an ounce of gold is no one elses lia-
bility. This makes it uniquely attractive during periods of financial
turmoil.
Porter, March 14, 2008
On bullion vs. rare coins: Buying collectible coins or collect-

ibles of any kind is a specialists game (Steve Sjuggerud is our
specialist). If youre not a specialist, or if youre not working with a
specialist you can trust, youre very likely to get burned meaning
youll pay far too much for the coins you buy, and youll end up
selling your coins at a dumb price.
63
I collect wine, not gold coins. And I can tell you the price of the wine
I collect has absolutely nothing to do with the price of grape juice.
Prices for fine, collectible wines have soared in the last eight years,
simply because drinking wine has become very popular recently.
In the past, the same thing has happened in the rare coin market
most recently in the late 1980s. Coin manias can be extraordinary...
The prices for certain coins can become completely unhinged.
If you want to invest in a very liquid, easy-to-buy, and easy-to-sell

monetary commodity, you should buy bullion. When I buy gold, I
buy bullion because I want to protect my savings against inflation
and I have no interest in becoming a coin collector.
On the other hand, coin collectors can make money whether the
price of gold goes up or down. Gold-coin collecting is a good hedge
against inflation. Its a non-correlated asset (meaning it doesnt
follow the value of the stock market). From time to time, rare gold
coins will make you a tremendous amount of money and theyve
done pretty well since 2003 when we began recommending them.
But rare-coin investing is a completely different art than simply
buying gold.
Porter, March 12, 2008
On coins vs. the gold ETF: Its awfully dicult to make an

ETF-security disappear. Gold coins, on the other hand, are very
easy to buy with cash and to hide. Porter, March 12, 2008
On scarcity: We received this note from our own Matt Badiali:
Just got off the phone with Van Simmons (an executive
with David Hall Rare Coins). He said there is a shortage of
both Silver Eagle coins and 100-ounce bars. He cant get
them. He said that, for the first time in his career, a supplier
that guaranteed delivery simply couldnt make good on the
promise. He also told me that platinum eagles are in serious
short supply. I guess that means someone out there is buy-
ing up the physical metal in a big way.
64
The U.S. Mint has run out of one-ounce American Eagle gold coins.
And its been rationing Silver Eagles because of the high demand.
The U.S. mint sold 60,000 one-ounce gold coins this month, up
from 47,000 in July and 13,000 in June. When gold fell from the
$900s to the $700s, small buyers didnt sell the way they usually
do. They bought.
Abraham Lincoln may have been an even worse president than

FDR, but he had one thing right: You cant fool all of the people
all of the time. People know the government is destroying their
currency, so theyre turning it in for gold, which is exactly the right
thing to do.
Dan Ferris, August 23, 2008
On buying gold: Pick up the yellow pages. Look up Broker,

Gold or try looking under Bullion or Gold Coins. Call the
numbers you find. Ask them what their price is on gold bullion.
Buy from the guy with the best price, assuming hes been in busi-
ness in the same location for a long time.
If youre nervous about whether or not its real gold, ask a jeweler.
If you dont have a local gold dealer, call the folks we know: David
Hall (www.davidhall.com), Camino Coin (www.caminocompany.
com), or Asset Strategies International (www.assetstrategies.com).
On selling gold: Im no expert when it comes to coins. So far,

Ive only bought them. I havent sold any yet... and I doubt I ever
will. I buy bullion coins, and I keep them as my preferred form of
savings (it seems a lot smarter to save gold instead of paper cur-
rency). But Ive been told that selling on eBay is relatively easy.
And my coin dealer regularly quotes buy prices, so I could sell
back to him if I wanted.
Porter, February 27, 2008
On where to keep your gold: The property inside a safety

deposit box belongs only to you. And the bank cant go inside your
box unless its complying with a search warrant. (At least, that was
65
true before the Patriot Act... Im not so sure now.)
But heres my question for you. Do you really think the govern-
ment is going to let you access that box in the event of a real
currency crisis? No way. No way in hell. Theyll make owning gold
illegal overnight. And theyll instruct the banks to open every box
and seize all of the gold.
Think itll never happen? It already did. The best way to own gold
bullion is to keep it someplace safe, where no one will know any-
thing about it.
Porter, July 23, 2008
The one indicator to watch when buying gold...
Everywhere you turn today, you see another talking head discuss-
ing currency wars when countries around the world race to
devalue their currency. And you see countless headlines asking if
golds run is over.
I (Porter) wouldnt pay any attention to what the politicians or

the pundits say. I would watch what central banks are doing. And
right now, central banks are buying gold particularly Russia and
China. To a lesser extent, almost every central bank in the world is
buying gold.
When central banks are buying gold, the price of gold will rise.
Only when central banks stop buying, for whatever reason, will the
price of gold go back down.
Interestingly, the best time to buy gold is when central banks are
selling. And I mean the ideal time to buy gold is when central
banks are selling.
But today, central banks are buying... And they have been buying
for the last five or six years. So gold is going up. If you have the
luxury of owning plenty of real property and having plenty of gold,
you just wait and enjoy the ride. Because you know that whatever
66
happens, central banks will do the wrong thing.
In the long run, all paper-currency regimes fail. And at some point
in the future, gold will become the basis of international trade. We
cant know when that will be. But when it happens, the price of
gold will go much higher than it is today.
But you want to buy gold as cheaply as possible... And thats

dicult to do when central banks, with their trillions of dollars in
reserves, are buying gold.
My advice has been the same for many years... If you dont own
any gold, please buy some. Its expensive, but its necessary insur-
ance against todays fiscal policies. If youre trying to speculate in
gold, you want to do it in a contrarian way... And you want to be
contrarian to central banks.
Porter and Sean Goldsmith, Digest Premium, March 18, 2013
The best way to judge the value of gold...
As I (Porter) have said in the past, asset valuation is a tricky thing. Its
not always easy to know the real value of something...
That goes double when it comes to valuing gold. Its only true utility is
as a universally recognized asset that isnt anyone elses liability. While
gold is a value touchstone, its intrinsic value is very dicult to judge.
Then again, the price of anything is impossible to measure in the short

term. Thats because short-term markets act as voting mechanisms. As
youve seen in American politics, people will vote for damn near any-
thing. In the market, people cast their votes and act irrationally because
of margin calls and fear and greed and so on.
In the long run, of course, markets are weighing mechanisms. And in

the long run, the stability of gold... its universal acceptance... and its
quality of being an asset thats nobody elses liability... will carry its
value.
67
So if you buy gold, even at the wrong price, you will be rewarded even-
tually. Thats because gold is ethically, morally, and traditionally and
for sound physical reasons the best form of money ever created.
Of course, how much you will be rewarded depends upon the moral
and economic failings of the paper money systems gold competes with.
I would judge those failings to be approximately total.
By the time my children are having children, lets say 25 years from
now, I would expect the paper dollar to be nearly worthless. Because
you measure the price of gold in paper dollars, you would then expect
the price of gold to be nearly infinite. Thats only measuring these
things in terms of nominal prices, which are meaningless in the real
world.
So if you look at the value of gold and not the price, I think youll have a
much better sense of whats happening. The value of gold has remained
almost completely unchanged over thousands and thousands of years.
And this latest bull market in gold has not changed the metals funda-
mental value.
An ounce of gold should be worth approximately the same amount of

labor and materials as the finest mens suit. That has always been what
gold has been worth. So whats the competitive price of the finest mens
suit?
As a connoisseur of mens clothing, I can get a well-tailored suit for

about $1,500 at the low end. It could be as much as $5,000 at the high
end. So I think somewhere in that range is a fair price for an ounce of
gold. Though the nominal price is bouncing all over the place, I truly
believe the value of gold remains unchanged.
None of the latest market gyrations has changed my view of the intrin-
sic utility of gold. I dont expect the true value of gold to change much at
all over time. I expect that its relationship with other paper currencies
will change dramatically in golds favor. And I expect that will happen
soon.
Porter and Sean Goldsmith, Digest Premium, April 18, 2013
68
DONT BELIEVE THE GOLD MYTHS

By Dr. David Eifrig
Editors note: Weve excerpted the following pages from Doc

Eifrigs April 2012 issue of Retirement Millionaire. By the time you
read this research, several time-specific numbers will be out of date.
That doesnt matter in the slightest. What matters is the outstanding
thinking contained in this piece and the timeless ideas youll learn
about investing in gold.
Last month, the greatest investor on Earth attacked one of the finan-
cial worlds sacred cows... and an army of bloggers and self-appointed
pundits flooded the Internet with condemnation.
Warren Buffett, as you probably know, is an investing legend. Hes

one of the few people to amass a billion-dollar fortune mostly on his
ability to invest in the stock market.
Every year, he publishes an annual letter to shareholders of his hold-

ing company, Berkshire Hathaway. Its one of the most widely read
commentaries in the financial world. (You can find them here: www.
berkshirehathaway.com/letters/letters.html.)
In this years letter (2011), he included a page-long takedown of one

of the most emotionally charged investment choices people make
holding gold.
He ridiculed the idea of owning gold... comparing its buyers to the

ignorant folks who were wiped out during the legendary 17th century
tulip mania in the Netherlands
What motivates most gold purchasers is their belief that the

ranks of the fearful will grow. During the past decade, that
belief has proved correct. Beyond that, the rising price has on
its own generated additional buying enthusiasm, attracting
69
purchasers who see the rise as validating an investment thesis.

As bandwagon investors join any party, they create their own
truth for a while.
Less than a day after Buffetts critical comments, the Internet lit
up with rebuttals. Gold lovers (sometimes labeled gold bugs)
called Buffett a moron, a government shill, and a senile old man.
But in this months issue, Im going to show you that Buffett has
a good point. What Im about to say might anger you... You may
even consider canceling your subscription. But hear me out. Reg-
ular readers of Retirement Millionaire know I like to focus on the
facts, not the hype.
Knowing the facts about gold will make a huge difference in your
wealth over the coming decade... And if you own gold, it will help
you understand when its time to hold and when you should diver-
sify into other investments
Why People Love Gold
For thousands of years, mankind has used gold as a medium of

exchange... as money. It was a good choice for a lot of reasons...
First is scarcity. The world has only a finite amount, and you cant
create any more. Further, all the gold ever mined about 170,000
metric tons would fit onto a football field piled to about 6.5 feet
high. (At todays prices, the pile of gold is worth roughly $10 tril-
lion or so.)
In addition, it doesnt corrode or deteriorate, its easily divisible,

and... relative to other valuable assets you find in the natural
world... its portable.
Even after the advent of modern currency, the U.S. government

initially backed its currency with gold (meaning the monetary
unit represented a claim on some fraction of the governments
gold stash).
70
Today, thats no longer the case... Our

The Rare Collectible
money is not backed by gold. Regard-
Coin That Was Minted
less, our anity for gold continues.
Last Year Myth
Since early 2001, gold has marched
Another gold myth many
from $260 to about $1,700... an al-
folks fall for are rare col-
most unheard of long-term bull mar-
lectible coin scams...
ket for any asset. But much of these
investors enthusiasm is built on... I keep seeing advertising
for gold and silver coins in
Two Gold Myths You Need to almost every magazine. So I
Reject Starting Now
cant help but think the top
of the market in gold and
The fundamental reason people will
silver is in. The colorful ads
tell you to buy gold is that it is a
claim the next great collec-
great form of savings... that gold is
the ultimate store of value. That tors items someday.
belief flows from all the reasons gold
Just this week, Ive seen
was used as money. (Theres a finite
ads for ancient silver
amount, it doesnt deteriorate, etc.)
coins in scientific journals,
newly minted Chinese
But heres whats wrong with that
thinking... coins in sports magazines,
and alleged rare (but made
If you own one ounce of gold, no last year) proof coins
one can tell you whether it will depicting a ship wreck of
retain its value over time. It de- ancient times in a food
pends on the price of gold relative to and wine magazine. This
other things. amount of hype is often the
sign of a top.
You see, golds fundamental problem
is it is an unproductive asset. It cre- So please, please dont buy
ates nothing, generates nothing, and those coins... ever. They
does nothing that increases the value are mostly fabricated and
of your investment in it. a major ripoff. If you buy
one and then try to resell it,
I dont deny that building up a large youll lose half your money
supply of gold over your lifetime will overnight.
probably result in a valuable stock-
71
pile. But will it be worth more or

If youre interested in le-
even as much as you sacrificed to
gitimate rare coins (which
accumulate it? No one can answer
that question. have an entirely different
value proposition from
Golds value depends on someone bullion or traditional
else paying more for your ounce than investments)... you should
you did. As Buffett says, if you want directly contact a reputable
to make money, youre depending on coin dealer. Stansberry
the belief that others will desire it Research subscribers have
even more avidly in the future. That had consistent success
means someone else has to pay more working with Van Sim-
for it. Some call it the greater fool mons at David Hall Rare
theory of investing. Coins (800-759-7575) and
the folks at Camino Coin
On the other hand, land can be (800-348-8001).
farmed, and buildings can be rented.
An equity stake in a company (stock)
can grow more valuable as the company sells more goods. And it
can generate cash in the form of a dividend. As a result, you can
build financial models assessing things like its present value and
future cash flow... giving you the tools to make reasonable esti-
mates of that assets future value.
Gold does none of that. So you have no way to know its value other
than the price today...
The other myth that leads people to gold is the belief that the precious
metal can hedge you from inflation. (This is the idea that as the price of
everyday goods we buy rises, the price of gold will increase in lockstep.)
This makes some intuitive sense. But in reality, it doesnt work that
way... The next chart shows that over 17 years (1987-2004) of rising
inflation, gold prices went nowhere...
Over my investing lifetime, the only great time to own gold has been
when real returns on fixed-income securities turned negative. So for
example, imagine investing in a five-year U.S. Treasury note paying
interest twice a year. When inflation has been more than interest
rates on these U.S. Treasurys, gold has been a great asset to own.
72
Heres a chart showing that. When the real return on a five-year U.S.
Treasury note (the interest rate minus the consumer price index)
dips and stays in the negative return area, gold thrives.
But that situation is uncommon. Its only happened 76 months out

of the last 40 years (just 16% of the time). Most of the time, when
the five-year Treasury note has paid more than inflation, gold has
done nothing.
73
Gold as a Chaos Hedge
At this point, Im sure many of you are wondering, So, Doc, if

gold is an unproductive asset... a weak savings vehicle... and a poor
inflation hedge... why is it in our Retirement Millionaire model
portfolio?
Gold outperforms many other asset classes during times of great

economic and political stress. The following chart shows how gold
outperformed stocks when the dot-com bubble burst and mort-
gage crisis sparked a global contraction...
In my Retirement Millionaire, we keep an asset category in our port-

folio called Chaos Hedges. This is where we hold investments that
will protect us during unusual times. Depending on an individuals
circumstances... a person should limit this category to no more than
15% of his assets (and usually much less).
For example, if violence broke out in the streets and the paper cur-
rency of the U.S. government was worthless, youd need to barter
with gold or silver coins to get what you wanted. (I dont believe
this is likely... but you should always have an emergency plan.)
74
In 2009, I recommended people

The Safe Deposit
keep about 10% in this category. But
Box Myth
as gold has performed well, I slowly
lowered our interest in gold. Last
spring (2011), I recommended people One gold myth some folks
keep no more than about 6% in this fall for is the idea that you
chaos category. should store your gold in a
safe deposit box with one
In Retirement Millionaire, we pre- of the big banks, like Wells
fer silver coins because the everyday Fargo or Bank of America.
things youd need to buy (food and
gas) would be closer in price to an This is a crazy idea.
ounce of silver ($17 in January 2015)
than an ounce of gold ($1,257 in Jan- The No. 1 reason to own
uary 2015). gold is as a chaos hedge...
to have your share of real
But I also recommend a trade on the money, in case something
SPDR Gold Trust exchange-traded horrible happens to the
fund (GLD), which holds real gold
U.S. government and its
bullion. We even negated my gold
paper currency, the dollar.
produces nothing criticism by sell-
ing call options against the fund to
Remember... big banks
generate income. (Keep in mind... we
pursued this trade as an income-pro- are controlled by the
ducing strategy, not a way to own government. If such a
real, physical bullion.) worst-case scenario were
to occur, youre not going
Finally, our third chaos hedge is a true to want your gold inside a
hedge against inflation, as measured bank that the government
by the consumer price inflation (CPI). could seal up with one
These securities are called Treasury In- phone call.
flation-Protected Securities (TIPS) and
are issued by the U.S. government. If you do own physical
gold, I recommend keeping
The Better Ination Defense it in a safe located on your
own property, a private
The best way to secure your retire- storage site, or literally
ment is to regularly invest in what
buried in another se-
Warren Buffett prefers productive
75
assets. These include everything

cure location. Make this
from farms to businesses.
location known only to
you and a few members of
If youre looking for a good inflation
your family. Storing your
hedge... these productive assets are
an excellent choice. Their power to gold this way is more work,
protect against inflation comes from but it keeps your gold in
their ability to grow your investment YOUR possession... not the
faster than inflation erodes it. governments.
I know many folks like to

Look for businesses (stocks) that hold
own gold stocks... especial-
pricing power and have brand loy-
ly smaller exploration
alty. If inflation kicks in, the ability
companies that hold lot-
to raise prices right along with input
tery-ticket-like potential to
costs helps maintain our wealth. And
businesses with loyal customers can produce big gains. Others
usually pass along those price hikes like to own larger gold
without much loss in volume. That producers.
means steady profit margins and
I know some guys who
more wealth.
are excellent gold-stock
traders. They do well in the
Take a company like McDonalds
market. But I dont think
(MCD). The demand for fast food will
gold stocks are a good idea
continue, and Mickey Ds will surely
for the average retiree.
be slinging burgers in another five
or 10 years. The company regularly Small exploration firms are
responds to consumer demand. For notorious money-losers...
example, it placated health-conscious and only appropriate for
parents by offering apples and milk specialists. Also, mining
in its Happy Meals. And it sells lattes in general is a terrible
now that compete with local coffee- business with thin prof-
houses. Some retired friends of mine it margins. The average
just confessed to a daily trip to their retiree just doesnt need
coffee shop the one under the the stress of owning these
Golden Arches. volatile businesses.
If prices go up along with inflation,

you can be sure MCD will retain its
loyal patrons and its profits like it has
76
for the last 50 years. Companies like

If you absolutely must
MCD are perfect inflation defenses
own gold stocks, make
Investing in blue chips is a winners them a tiny portion of your
game. Names like Johnson & John- portfolio (like 1%-2%).
son, Chevron, Wal-Mart, and Wal-
greens will grow our wealth in almost Owning elite blue-chip
any conditions... something that cant dividend-payers like
be said for bonds or precious met- Coca-Cola and McDonalds
als. These stocks have proven their is a far better and safer
ability to make money in some of the idea for long-term wealth
toughest times our economy has ever compounding. This is an
seen. Imagine what will happen when area of the market you can
things pick up even faster. place serious money into...
and let it safely compound
So if youre at all worried about infla- for many years.
tion, you should own these sorts of
blue chips for the long term. They are
better than gold at fighting inflation... they are better than cash...
and they are all seasons assets.
This chart of MCD, gold, and the S&P 500 shows how a great blue-
chip company protects you as well as gold can during tough times.
77
And remember... good stocks can protect you in both short-term

and long-term wealth generation. Data from a recent Fortune
magazine article says it all. Three $100 investments in 1965 placed
in six-month U.S. Treasury bills (short-term interest-bearing
securities), gold, and the S&P 500 would be worth $1,336, $4,455,
and $6,072, respectively. Stocks beat gold by 36%. This shows the
power of long-term investing in good stocks.
Of course, it makes sense to always hold a balanced portfolio of

stocks, bonds, cash, and chaos hedges. We currently recommend
an allocation of around 45% stocks, 35% fixed-income, 15% cash,
5% chaos hedge... and never more than 4%-5% of your assets in
any one investment.
In sum... Dont fall for the gold hype. Gold is a good chaos hedge,
but its not an asset you want to place a large chunk of your wealth
in. Go ahead and own gold for some disaster insurance. But
avoid fanciful marketing claims of rare collectible coins that
were struck last year. Store your physical gold on your own prop-
erty, not with a government-controlled institution.
If youre truly interested in an all-weather asset to place a
large chunk of your portfolio into, go with the worlds best divi-
dend-paying companies... like Coca-Cola, McDonalds, and John-
son & Johnson.
If inflation ever gets to be a problem, you can depend on these

companies to grow your nest egg, while paying cash dividends
along the way. If inflation isnt a problem, these companies still
grow your wealth and pay ever-rising cash dividends. No one can
make those claims for gold.
78
WORRIED ABOUT A FINANCIAL CRISIS?

BUY THIS VERY RISKY INVESTMENT
By Dan Ferris
These days, everybody loves to read and talk about the next
financial crisis.
But what should you actually do to prepare for a financial crisis?
Ill tell you what in a moment. But first, lets talk about Howard Marks...
Marks, the founder of Oaktree Capital Management, is the latest

voice to join the next financial crisis discussion.
Marks is one of the greatest investors of our time. His book, The
Most Important Thing, is one of the best investment books ever
written. His shareholder letters are must-reads.
Marks November 2013 letter to investors, is about the excesses in

credit markets he saw building up in 2007... and sees building up
again today. He says the current market has gathered steam since
the 2008-2009 crisis, but admits its not anywhere near the same
degree of craziness as it was in 2006-2007.
I agree. There are similarities between todays financial environ-

ment and the pre-crisis environment. In his letter, Marks noted
that low interest rates are making it unattractive to invest in
bonds, which is driving people to invest in risky assets with little
regard to the value theyre getting. This is what caused the 2008-
2009 credit crisis.
Another well-known and highly credible voice is warning us about

the next crisis: legendary value investor Seth Klarman. Most
people have never heard of Klarman, but hes one of the greatest
investors in the world.
At the Grants Interest Rate Observer conference in October 2013

79
in New York, James Grant interviewed Klarman. Klarman was

wringing his hands, as he has done every time Ive seen him speak
in public.
Klarman believes low interest rates and easy credit have distort-
ed market prices. If the Federal Reserve wasnt printing money
and buying bonds with it every month, Klarman says, None of
us know what the level of stock prices would be, what the level of
corporate earnings would be, or, of course, where interest rates
would be.
This clearly implies that interest rates should rise much higher in
the near future.
Klarman went on to explain why he has 1.5% of his fund exposed

to a rise in gold prices. He said he buys call options, which he
admitted were expensive and routinely expire worthless. (Call op-
tions are leveraged bets that profit from rising prices.)
He said the cool thing about gold is that its a good hedge to own
should the solvency of the United States be called into question.
If gold goes to $3,000, $5,000, or $10,000 an ounce, he called
buying call options on gold the most interesting hedge.
This is remarkable. One of the most conservative value

investors of the last 30 years is buying call options on gold.
This is one of the riskiest trades in the world.
Its pure speculation. Its virtually guaranteed to lose money the

overwhelming majority of the time... and make you a bloody for-
tune the one time it works.
Klarman sees it more as an insurance policy. Its a hedge

against an enormous nancial catastrophe, like a mass
global exodus out of the U.S. dollar.
You dont buy insurance to make money. You buy it to keep from
losing money.
80
That is classic behavior of a value investor. A true value investors

main objective is to not lose money. Other value-oriented hedge-
fund managers like David Einhorn and John Paulson are also
long gold, but through less speculative vehicles (like gold bullion).
If youre concerned about the next financial crisis like Klarman

is, consider taking some kind of position in gold. For most folks,
simply buying gold bullion is the best move. Buying gold stocks
is also a good idea. If you consider yourself an advanced, experi-
enced investor, you might want to look into the gold call options
Klarman is talking about.
However you choose to do it, make sure you understand gold as

Klarman understands it: As an insurance vehicle.
When you buy insurance, you hope you never have to use it. Thats
how many professional investors see gold today.
81
HOW TO MAKE THE BIGGEST, SAFEST

RETURNS POSSIBLE IN ROYALTY COMPANIES
An Interview with John Doody, editor, Gold Stock Analyst
The interview below features one of the best precious-metals

investments in the world: royalty companies.
To explain the incredible benefits of these stocks, we sat down

with John Doody, one of the worlds top experts on gold and
silver stocks.
John is the editor of Gold Stock Analyst, an advisory with a track

record thats unrivaled in the newsletter industry. John has been
studying and analyzing these stocks for over 40 years. And his
recommended portfolio averaged returns of 35.5% per year from
2000 through 2012.
His opinion on gold stocks is so respected, hes been profiled

by Barrons seven times, quoted in The Financial Times, and is
frequently interviewed on CNBC. He counts several of the worlds
best-known gold funds and investment managers among his
subscribers.
As Stansberry Research founder Porter Stansberry says, No one

in the world knows more about gold and silver producing compa-
nies than John Doody. No one else even comes close.
Whether youre just getting started in resource stock investing or

you already own some of these companies, Johns advice could
be critical to making the biggest, safest returns possible in this
volatile sector.
Stansberry Research: John, youre one of the worlds top ex-

perts on gold and silver stocks. And follow several royalty com-
panies. Before we get into the value of owning these stocks, can
82
you define what a royalty company is?
John Doody: A royalty company is basically a mine-financing

entity that has sold shares to the public. These companies pro-
vide money to miners for either exploration or actual capital
costs such as mine and processing plant construction. So in a
sense, they compete with bank lenders and equity offerings that
brokers want to do for mining companies.
Royalty companies provide this financing to mining companies in

exchange for one of two types of future payments.
In the first type, the royalty company will finance an explora-

tion program to receive a royalty on any future sales that are
produced from any discovery which is kind of like a sales
tax that typically ranges from 1%-5% of sales. While the up-
front money can be small often just a few million dollars the
royalties can be quite big. One royalty company we like steadily
receives about $50 million per year from a site it helped fund
exploration for in the mid-1980s.
In the second type, the royalty company will help finance mine
construction which is much more expensive than funding an
exploration program and receive a royalty payment called a
stream. A stream is a commitment for either a certain number
of ounces of metals per year or a certain percentage of ounces
produced on an annual basis from the mine.
In this second type, a royalty company might be able to buy

streams of gold at a 75% discount to the current spot price. But
in order to buy gold at that kind of discount, it has to put up a
significant amount of capital upfront.
Streams are often the preferred financing methods for the mining
companies. If they borrow the money from a bank, they might
have to hedge the production... or the bank might want more
security of other mining assets, and so forth. If they sell more
shares to finance the mine, it dilutes and irritates existing
stockholders. So its generally an easier financing mechanism
for the miners, and its a nice stream of income that the royalty
83
company earns over the life of the mine.
Stansberry Research: What makes royalty companies such

great investments?
Doody: First, its a great way to get diversification.
From an investors standpoint, the typical mature royalty com-

pany has a portfolio of anywhere from 10 or 15 up to 50 different
mines that are paying them royalties and streams.
So its a broad, diversified portfolio compared to a typical mining

company that might own one or two mines. And as you know,
theres a lot of risk associated with a one- or two-mine compa-
ny. Its common to see mines encounter diculties for various
reasons, and the related mining stocks might lose 25%, 50%, or
more of their value in one day.
On the other hand, if a big royalty company had a royalty on that

mine, it wouldnt be a big deal because there would be royalties
from other mines that could take up the slack.
You also have a degree of transparency and clarity you dont get
with mining stocks. Royalty pipelines are typically pretty visible,
particularly over a three- or four-year time frame. And once a royal-
ty company has put the money in, it doesnt have any further risk.
If there are capital cost overruns and that can be a big problem
for mines because they often cost more to build than what was
planned for theyre not the royalty companys problem. Its
already struck its deal. It might take another bite of it, but that
would be a new deal. Its not something that it would have to pay
any portion of. The miner is responsible for all overruns in the
construction budget.
Theres also no exposure to the rising costs of production that

miners have. The production cost of an ounce of gold or silver
has gone up dramatically over time. For example, the average
cost of production for an ounce of gold in the early 2000s was
84
around $200 an ounce. By 2012, the average cost to produce an

ounce of gold was close to $650... and its only likely to go higher.
A third benefit of royalty companies is they typically pay higher

dividends than even some of the biggest mining companies. They
have very low overhead. I dont think any of the big ones have
more than 20 employees because you dont need a lot of people
in the business. And that means that a very high percentage of
royalty income typically over 90% goes to gross profits, and
from this they pay dividends and taxes, and finance future royal-
ties and streams.
Usually, they pay out about 20% of their royalty income as a div-
idend, which gives you great current income and visible growth
from the royalty pipeline.
Stansberry Research: Based on those traits diversification,

relative safety, and high dividends some folks might assume
these stocks dont experience big growth. Is that true?
Doody: No, not really. Royalty companies typically provide strong,

steady growth... and much less risky growth, in my opinion.
One of the disadvantages of these companies is theres a lot of

unfamiliarity about them among investors. They dont really
understand the unique features that make them much more pre-
dictable in terms of their growth and their dividends. I think as
their pluses get more widely known, their stock prices will react
higher.
Stansberry Research: Can you provide a couple of examples

of how royalty companies can grow to the sky?
Doody: One of the best-known royalty companies is Royal Gold.

Its a great example of a royalty company that started small and
steadily grew to a multibillion-dollar business.
Royal Gold had the original idea of exploring to grow its own
properties, and then finding majors to develop them, while re-
85
taining a royalty interest in them.
The company had explored and found gold on a property in Ne-

vada called Cortez. It got a miner called Placer Dome to develop
it, and Royal Gold kept a royalty on it. It was a much smaller
property when Placer first got involved, and it turned into a mil-
lion-ounce-a-year mine. That huge royalty basically funded Royal
Golds growth in the acquisition of more properties, and it snow-
balled from there.
Stansberry Research: Do you have any rough guidelines for

buying these royalty companies?
Doody: The most important thing to know is that the big ones
trade in the market at different multiples than the smaller ones.
The big companies tend to trade around 20 times royalties per
share.
So if a company has $2 in royalty income per share, the price

would tend to average around 20 times that, or $40. Of course,
that doesnt mean it cant trade between 15 to 30 times royalty
income. Stocks go up and down over the course of the year. But
the multiples center around 20.
The smaller companies trade at about half that. In a sense, the

public market wont pay the same premium for the small roy-
alty producers that it does for the big ones. And thats probably
because theres more risk associated with the smaller ones. They
have fewer royalties, so theyre more exposed to mine risks. And
they dont get to see a lot of big deals, so they tend to get the
scraps that the big guys arent interested in.
Ideally, you want to buy the big ones when theyre trading
around 15 times royalty income, and sell them when theyre
trading over 25 times income. And you want to buy the small
ones when theyre trading around five times royalty income, and
sell them when theyre trading over 10 times income. But, rather
than trading in and out based on the multiple, it can be better to
just buy and hold based on their pipeline of growth.
86
Stansberry Research: Any parting thoughts on royalty companies?
Doody: Ill just add that its common for several of the 10 recom-
mendations in our current Top 10 portfolio to be royalty com-
panies. That should tell you something about how much we like
these stocks.
Stansberry Research: Thanks for talking with us, John.
Doody: Youre welcome. Thanks for inviting me.
Summary: There are several benefits to owning royalty

companies... diversification, relative safety, and high div-
idends. Those traits allow royalty companies to provide
strong, steady growth for investors, with much less risk
than the typical mining stock.
87
A RATIONAL REASON TO OWN GOLD

Gold rises in times of fear... the old saying goes. And it is true. But
how exactly do you measure fear? Its tough, because fear is not
rational.
However, there is an outstanding and very rational reason for the

price of gold to continue rising over the long term. It has nothing
to do with fear. Its simple. It could lead to extraordinary profits.
And Ill share it with you today.
No Chicken Little Here
Most gold writers push the fear buttons... The world is going to
hell in a hand-basket youd better own some gold, they say.
I try to stay out of the fear crowd. Im agnostic when it comes to

investments... I dont love gold or love stocks. I just want a good
buy. And there is an excellent, rational reason to buy gold. You can
leave fear out of it.
Gold is attractive now because its attractive... fear or no fear. Let

me explain...
Money Flows Where Its Treated Best
Gold pays no interest. Its just a lump of yellow metal. So if the

bank is paying you 7% interest on your cash, chances are youll
prefer to have your money in the bank.
It makes sense... because due to compound interest, in 10 years

youd have doubled your money in the bank. But if youd held gold
instead, youd still have the same lump of metal.
But consider this... Imagine if the bank was paying zero-percent

interest... then which is more attractive, paper dollars or gold? In
88
this case, both pay no interest. And in this case, a rational investor
would choose gold. The gold is still the same lump of metal, but a
government could print money and make the paper money worth-
less. It cant print gold.
Money flows where its treated best. If there are high interest rates,
gold does poorly, as money flows where its treated well. If interest
rates are low or zero, money flows toward gold. Gold cant com-
pete with high interest rates. But it is extremely competitive with
zero-percent interest.
But wait, you say. How did gold run from $100 to $800 in the
late 1970s?
The Real Deal... Considering Ination
If youre just looking at the current interest rate, youre not getting
the whole picture. You have to consider inflation as well, to get
to the real interest rate. For example, banks might pay you 1%
interest. But inflation may be 2%. So the real interest rate the
interest rate AFTER inflation would actually be -1%. And that
explains it all...
Investors lose money to inflation by putting it in the bank. When

faced with -1% interest in cash, or 0% interest in gold, the smart
money is choosing to get out of cash and into gold.
Back in 1979, short-term interest rates were 8%, but inflation was
13%. That means your real return was negative 5% a year on
your cash. Gold went from $100 to $800 in no time.
Then, at the end of the decade, Fed Chairman Paul Volker drove
short-term interest rates through the roof. By 1981, short-term
interest rates were 15%, and inflation was back into the single dig-
its. That means investors got an outstanding real return on their
money... and gold tanked, back into the $300-plus range by 1982.
89
The present situation is like the 1970s...
Back in the 1970s, the real return on cash (the return after in-
flation) was negative. So money flowed out of cash and into gold.
Today, for the first time since the late 1970s, were seeing the same
thing. The real return on cash is negative.
Its gold time. No fear-mongering necessary.
90
THE EASIEST WAY TO PROTECT YOURSELF

FROM THE NEXT FINANCIAL DISASTER
By Brian Hunt
You wake up in the morning, turn on the news, and get a sick feel-
ing in your stomach...
The stock market is crashing again. Another big Wall Street bank
has failed. Your 401(k) has lost another 25%. Its bleeding value
every week.
Your dream of early retirement is history. Youve lost so much

money in stocks that even a regular retirement is in jeopardy. If
you live a long life, theres no way youll have enough money.
This is the financial disaster scenario that terrifies a lot of in-

vestors. Its what kept people up at night during the 2008 credit
crisis.
Could it happen again? Could another crisis cause the value of the
U.S. dollar to collapse? Could the stock market suffer another epic
decline?
Many people say the answer to these questions is yes.
Fortunately, I dont need to know the answer to these questions...

and neither do you.
The good news is that its very easy to buy insurance against finan-
cial disasters like these. I personally own this insurance. Many of
the smartest, wealthiest people I know own it, too. It could mean
the difference between a comfortable, early retirement... and just
barely getting by.
First, its important to agree on what insurance is. In my book,

buying insurance comes down to spending a little bit of money to
hedge yourself against a disaster.
91
Throughout our lives, we spend a little bit of money on insurance

and hope we never have to use it. For example, home insurance
costs a small fraction of your homes value. Buy it and hope you
never have to use it. Same goes for car insurance. It costs a frac-
tion of your cars value, so you buy it and hope you never have to
use it.
Its the same with investment insurance. You can buy investment
insurance and hope to never have to use it.
There are hundreds of wealth and investment insurance policies

out there. They involve intricate details, lots of forms to sign, and
payment of big fees to advisors and salesmen (which are often the
same thing).
Id rather keep things simple and keep money in my pocket in-

stead of a salesmans pocket. Heres how you can do it...
Put a small portion of your wealth in gold bullion.
Thats it.
Thats all it takes to insure yourself against a financial disaster.
No complicated insurance products. No big fees to pay. Just pay

a small commission to a gold seller, store the gold in a safe place,
and youre done.
Heres why this insurance is important...
Some popular market gurus are predicting a global depression, a

collapse in the dollar, and a huge increase in the price of gold. The
chances of them being right are relatively slim. People have been
predicting the next depression for 30 years. The world just has a
way of not ending.
However, the doom and gloom gurus bring up some good points.
They arent crazy. There are some big risks to our financial system.
The U.S. government is spending way too much money on wars,
Obamacare, welfare, and other programs. Europe and Chinas
92
economies could decline and trigger a global recession. These are

all real risks to your retirement account.
Im no doom-and-gloomer. I think the economy will deal with

these risks and keep growing. Again, the world just has a way of
not ending like so many people believe it will. Thats why I want to
own stocks, bonds, and real estate. These assets will do well if the
crap doesnt hit the fan.
However, I also want insurance in case Im wrong and the poten-

tial disaster that some are predicting takes place. People would
likely flock to gold in a global financial disaster... and cause its
price to soar.
Thats why it makes sense to buy gold as a form of insurance.
The good news is that you dont have to buy a huge amount of gold
to have a good insurance policy. You can place just 5% of your
portfolio into gold.
Lets say you have a $100,000 portfolio with 95% of it in blue-chip

stocks and income-paying bonds. You place the remaining 5%
of your portfolio into gold. This gives you $95,000 in stocks and
bonds and $5,000 in gold.
If the predicted financial disaster doesnt strike, your stocks and

bonds will increase in value. Your gold will probably hold steady in
price or decline a little. Since the bulk of your portfolio is in stocks
and bonds, youll do just fine.
But what if the financial disaster strikes? Ive heard some top
financial analysts say gold could climb to $7,000 an ounce in the
financial-disaster scenario.
Lets say a financial disaster sends the value of your stocks and
bonds down 50%. That would be a massive decline. Throughout
history, only the worst, most severe bear markets sent stocks down
this much.
This epic financial disaster would cut your $95,000 stock and bond
93
position by 50%, leaving you with $47,500. But lets say this disaster
also causes gold to rise to $7,000 an ounce. In February 2015, gold
went for $1,265 per ounce. A rise to $7,000 would produce a more-
than-fivefold increase in the value of your gold. It would cause the
value of your $5,000 gold stake to rise to about $28,455.
Post-financial disaster, youre left with $75,955 ($47,500 from

stocks and bonds + $28,455 from gold). The disaster still hits you,
but not nearly as hard. Your insurance played a big role in limiting
the damage.
But what if you think the chances of financial disaster are higher
than unlikely? What if youre more worried than the average
Joe?
If you are, simply increase the insurance portion of your portfo-

lio. Instead of a 5% position in gold, you could increase it to 20%.
If the previously mentioned financial disaster were to strike your

$100,000 portfolio weighted 80% in stocks/bonds and 20% in
gold, the math works out like this:
The 50% decline in your $80,000 stocks/bond position leaves you

with $40,000. Golds increase to $7,000 an ounce makes your
$20,000 gold position increase to $113,821.
Your large gold insurance position actually produces a net gain

in this scenario. Youre left with $153,821... an increase of more
than 50%.
As you can see, the larger your gold-insurance policy, the better
you do in the financial-disaster scenario. But if the financial disas-
ter doesnt strike, you wont benefit as much because you hold less
money in stocks and bonds, which do well if the economy carries
on. And keep in mind... it would take a serious financial disaster to
send stocks down by 50% and gold to $7,000.
Depending on what you think the chances of financial disaster are,

you can adjust your gold-insurance policy. It all depends on your
94
goals and beliefs.
Think the chances of disaster are slim? Consider a gold-insurance

policy equivalent to 1%-5% of your portfolio. Think the chances of
disaster are high? Consider a gold-insurance policy equivalent to
20% of your portfolio.
Are the gloom and doom gurus right? Is financial disaster

around the corner? I dont know the answer. Nobody does. But
if you buy some investment insurance in the form of gold, you
dont need to know the answer. Its simple. Its easy. Its low-cost.
You buy gold and hope to never have to use it. Youll do fine if
things carry on. Youll do fine if the crap hits the fan.
And the peace of mind you get from owning gold insurance is
worth even more than the money it could save you.
95
DOUG CASEY ON GOLD STOCKS

An Interview with Doug Casey
Editors note: The following is an interview with contrarian

speculator Doug Casey, excerpted from his book Right on the
Money. Doug discusses the importance of picking the right gold
stock... and provides tips on reducing risk and stocking the odds in
your favor.
Louis James chief metals and mining analyst at Casey Research

conducted this interview in September 2009, when gold stocks
were rebounding from their post-crash lows. But Dougs thoughts
are timeless. Read on to find out why Doug sees huge potential in
this market
Louis James: If one of the reasons to own gold is that its real
its not paper, its not simultaneously someone elses liability
why own gold stocks?
Doug Casey: Leverage. Gold stocks are problematic as invest-

ments. Thats true of all resource stocks, especially stocks in explo-
ration companies, as opposed to producers. If you want to make
a proper investment, the way to do that is to follow the dictates of
Graham and Dodd, using the method Warren Buffett has proven
to be so successful over many years.
Unfortunately, resource stocks in general and metals-exploration

stocks in particular just dont lend themselves to such methodolo-
gies. They are another class of security entirely.
James: Security may not be the right word. As I was reading

the latest edition of Graham and Dodds classic book on securities
analysis, I realized that their minimum criteria for investment
wouldnt even apply to the gold majors. The business is just too
volatile. You cant apply standard metrics.
96
Casey: Its just impossible. For one thing, they cannot grow con-
sistently because their assets are always depleting. Nor can they
predict what their rate of exploration success is going to be.
James: Right. As an asset, a mine is something that gets used up,

as you dig it up and sell it off.
Casey: Exactly. And the underlying commodity prices can fluc-

tuate wildly for all sorts of reasons. Mining stocks and resource
stocks in general have to be viewed as speculations, as opposed
to investments.
But that can be a good thing. For example, many of the best spec-
ulations have a political element to them. Governments are con-
stantly creating distortions in the market, causing misallocations
of capital. Whenever possible, the speculator tries to find out what
these distortions are because their consequences are predictable.
They result in trends you can bet on. Its like the government is
guaranteeing your success because you can almost always count
on the government to do the wrong thing.
The classic example, not just coincidentally, concerns gold. The

U.S. government suppressed its price for decades, while creating
huge numbers of dollars before it exploded upward in 1971. Spec-
ulators that understood some basic economics positioned them-
selves accordingly.
As applied to metals stocks, governments are constantly distorting

the monetary situation. And gold in particular, being the markets
alternative to government money, is always affected by that. So
gold stocks are really a way to short government or go long on
government stupidity, as it were.
The bad news is that governments act chaotically, spastically. The

beast jerks to the tugs on its strings held by its various puppeteers.
So its hard to predict price movements in the short term. You
can only bet on the end results of chronic government monetary
stupidity.
97
The good news is that, for that very same reason, these stocks are
extremely volatile. That makes it possible, from time to time, to get
not just doubles or triples, but 10-baggers, 20-baggers, and even
100-to-1 shots in these mining stocks.
That kind of upside makes up for the fact that these stocks are
lousy investments and that you will lose money on most of them,
if you hold them long enough. Most are best described as burning
matches.
James: One of our mantras: Volatility can be your best friend.
Casey: Yes, volatility can be your best friend, as long as your

timing is reasonable. I dont mean timing tops and bottoms. No
one can do that. I mean spotting the trend and betting on it when
others are not, so you can buy low to later sell high. If you chase
momentum and excitement, if you run with the crowd, buying
when others are buying, youre guaranteed to lose. You have to be
a contrarian. In this business, youre either a contrarian or road-
kill. When everyone is talking about these stocks on TV, you know
the masses are interested, and that means theyve gone to a level at
which you should be a seller and not a buyer.
That makes it more a game of playing the psychology of the market

than doing securities analysis.
Im not sure how many thousands of gold-mining stocks there are

in the world today. Id guess about 3,000. But most of them are
junk. If they have any gold, its mainly in the words written on the
stock certificates. So in addition to knowing when to buy and when
to sell, your choice of individual stocks has to be intelligent, too.
Remember, most mining companies are burning matches.
James: All they do is spend money.
Casey: Exactly. Thats because most mining companies are really

exploration companies. They are looking for viable deposits, which
is like looking for a needle in a haystack. Finding gold is one thing.
98
Finding an economical deposit of gold is something else entirely.
And even if you do find an economical deposit of gold, its excep-

tionally dicult to make money mining it. Most of your capital
costs are upfront. The regulatory environment today is onerous in
the extreme. Labor costs are far above what they used to be. Its a
really tough business.
James: If someone describes a new business venture to you, say-

ing, Oh, itll be a gold mine! Do you run away?
Casey: Almost. And its odd because, historically, gold mining

used to be an excellent business. For example, take the Homestake
Mine in Deadwood, South Dakota, which was discovered in 1876,
at just about the time of Custers Last Stand, actually. When they
first raised capital for that, their dividend structure was something
like 100% of the initial share price, paid per month. That was driv-
en by the extraordinary discovery.
Even though the technology was very primitive and inecient in

those days, labor costs were low. You didnt have to worry about
environmental problems. There were no taxes on whatever you
earned. You didnt have to pay mountains of money to lawyers.
Today, you probably pay your lawyers more than you pay your
geologists and engineers.
So the business has changed immensely over time. Its perverse

because with the improvements in technology, gold mining should
have become more economical, not less. The farther back you go in
history, the higher the grade youd have to mine in order to make
it worthwhile. If we go back to ancient history, a mineable deposit
probably had to be at least an ounce of gold per ton to be viable.
Today, you can mine deposits that run as low as a hundredth of an

ounce (0.3 grams per ton). Its possible to go even lower, but you
need very cooperative ore. And that trend toward lower grades
becoming economical is going to continue.
For thousands of years, people have been looking for gold in the
99
most obscure and bizarre places all over the world. Thats because
of the 92 naturally occurring elements in the periodic table, gold
was probably the first metal that man discovered and made use of.
The reason for that is simple: Gold is the most inert of the metals.
James: Because it doesnt react easily and form compounds, you

can find the pure metal in nature.
Casey: Right. You can find it in its pure form, and it doesnt
degrade and it doesnt rust. In fact, of all the elements, gold is not
only the most inert, its also the most ductile and the most mal-
leable. Other than silver, its the best conductor of both heat and
electricity, and the most reflective. In todays world, that makes it
a high-tech metal. New uses are found for it weekly. It has many
uses besides its primary one as money and its secondary use as
jewelry. But it was probably also mans first metal.
But for that same reason, all the high-grade, easy-to-find gold
deposits have already been found. There have to be a few left to be
discovered. But by and large, were going to larger-volume, low-
er-grade, no-see-um-type deposits at this point. Gold mining is
no longer a business in which, like in the movie The Treasure of
the Sierra Madre, you can get a couple of guys, some picks and
mules, and go out and find the mother lode. Unfortunately, now,
its usually a large-scale, industrial earth-moving operation next to
a chemical plant.
James: They operate on very slender margins, and they can be

rendered unprofitable by a slight shift in government regulations
or taxes. So we want to own these companies... why?
Casey: You want them strictly as speculative vehicles that offer

the potential for 10, 100, or even 1,000 times returns on your
money. Getting 1,000 times your money is extraordinary, of
course. You have to buy at the bottom and sell at the top. But
people have done it. It has happened not just once or twice, but a
number of times that individual stocks have moved by that much.
Thats the good news. The bad news is that these things fluctuate
100
down even more dramatically than they fluctuate up. They are
burning matches that can actually go to zero. And when they go
down, they usually drop at least twice as fast as they went up.
James: Thats true, but as bad as a total loss is, you can only lose
100%. But theres no such limit to the upside. A 100% gain is only
a double, and we do much better than that for subscribers numer-
ous times per year.
Casey: And as shareholders in everything from Enron to AIG to

Lehman Brothers, and many more, have found out: Even the big-
gest, most solid companies can go to zero.
James: So what youre telling me is that the answer to Why

gold? is really quite different to the answer to Why gold stocks?
These are in completely different classes, bought for completely
different reasons.
Casey: Yes. You buy gold, the metal, because youre prudent.
Its for safety, liquidity, insurance. The gold stocks, even though
they explore for or mine gold, are at the polar opposite of the
investment spectrum. You buy those for extreme volatility and
the chance it creates for spectacular gains. Its rather paradoxical,
actually.
James: You buy gold for safety and gold stocks specifically to
profit from their un-safety.
Casey: Exactly. They really are total opposites, even though its
the same commodity in question. Its odd. But then, life is often
stranger than fiction.
James: And its being a contrarian timing in the sense of mak-

ing a rational decision about a trend in evident motion that helps
stack the odds in your favor. It allows you to guess when market
volatility will, on average, head upward, making it possible for you
to buy low and sell high.
Casey: You know, I first started looking at gold stocks back in the
101
early 1970s. In those days, South African stocks were the blue chips
of the mining industry. As a country, South Africa mined about 60%
of all the gold mined in the world, and costs were very low.
Gold was controlled at $35 per ounce until Nixon closed the gold
window in 1971. But some of the South Africans were able to mine
it for $20 an ounce or less. They were paying huge dividends.
Gold had run up from $35 to $200 in early 1974, then corrected
down to $100 by 1976. It had come off 50%. But at the same time
that gold was bottoming around $100, they had some serious riots
in Soweto. So the gold stocks got a double hit: falling gold prices
and fear of revolution in South Africa.
That made it possible, in those days, to buy into short-lived, high-

cost mining companies very cheaply. The stocks of the marginal
companies were yielding current dividends of 50%-75%. They
were penny stocks in those days. They no longer exist; theyve all
been merged into mining-finance houses long since then.
Three names that I remember from those days were Leslie, Brack-
en, Grootvlei. I owned a lot of shares in them. If you bought Leslie
for $0.80 a share, youd expect, based on previous dividends, to
get about $0.60 a share in that year.
But then gold started flying upward, the psychology regarding

South Africa changed, and by 1980, the next real peak, you were
getting several times what you paid for the stock, in dividends
alone, per year.
James: Wow. I can think of some leveraged companies that might

be able to deliver that sort of performance, if gold goes where we
think it will. So where do you think we are in the current trend
or metals cycle? Youve spoken of the Stealth, Wall of Worry, and
Mania Phases of a bull market for metals do you still think of our
market in those terms?
Casey: Thats the big question, isnt it? Well, the last major bottom
in this sector was from 1998 to 2002. Many of these junior mining
102
stocks mostly traded in Canada, where about 75 percent of all the

gold stocks in the world trade were trading for less than cash in
the bank. Literally. Youd get all their properties, their technology,
the expertise of their management, totally for free or less.
James: I remember seeing past issues in which you said, If I

could call your broker and order these stocks for you, I would.
Casey: Yes. But nobody wanted to hear about it at that time. Gold
was low, and there was a bubble in Internet stocks. Why would
anyone want to get involved in a dead-duck, 19th century, choo-
choo train industry like gold mining? It had been completely dis-
credited by the long bear market, but that made it the ideal time to
buy them, of course. That was deep in the Stealth Phase.
Over the next six to eight years, these stocks took off, moving us
into the Wall of Worry Phase. But the stocks didnt fly the way they
did in past bull markets. I think thats mostly because they were so
depleted of capital, they were selling lots of shares. So their market
capitalizations the aggregate value given them by the market
were increasing. But their share prices werent. Not as much.
Remember, these companies very rarely have any earnings, but

they always need capital, and the only way they can get it is by sell-
ing new shares, which dilutes the value of the individual shares,
including those held by existing shareholders.
Then the last fall hit, and nobody wanted anything speculative.
These most volatile of stocks showed their nature and plunged
through the floor in the general flight to safety. That made the
last fall the second best time to buy mining shares this cycle, and
I know you recommended some pretty aggressive buying last fall,
near the bottom.
Now, many of these shares the better ones at least have recov-
ered substantially. And some have even surpassed pre-crash highs.
Again, the Wall of Worry Phase is characterized by large fluctua-
tions that separate the wolves from the sheep (and the sheep from
their cash).
103
Where does that leave us? Well, as you know, I think gold is going
to go much, much higher. And that is going to direct a lot of atten-
tion toward these gold stocks. When people get gold fever, they are
not just driven by greed, theyre usually driven by fear as well. So
you get both of the most powerful market motivators working for
you at once. Its a rare class of securities that can benefit from fear
and greed at once.
Remember that the Federal Reserves pumping up of the mon-

ey supply ignited a huge bubble in tech stocks, and then an even
more massive global bubble in real estate which is over for along
time, incidentally. But theyre still creating tons of dollars. That
will inevitably ignite other asset bubbles.
Where? I cant say for certain, but I say the odds are extremely
high that as gold goes up... a lot of this funny money is going to be
directed into these gold stocks, which are not just a microcap area
of the market but a nanocap area of the market.
Ive said it before, and Ill say it again: When the public gets the bit
in its teeth and wants to buy gold stocks, its going to be like trying
to siphon the contents of the Hoover Dam through a garden hose.
Gold stocks, as a class, are going to be explosive. Now, youve got

to remember that most of them are junk. Most will never, ever find
an economical deposit. But hopes and dreams drive them, not re-
ality. And even without merit, they can still go 10, 20, or 30 times
your entry price. And the companies that actually have the goods
can go much higher than that.
At the moment, gold-stock prices are not as cheap, in either rel-

ative or absolute terms, as they were at the turn of the century,
nor last fall. But given that the Mania Phase is still ahead, they are
good speculations right now especially the ones that have actual-
ly discovered gold deposits that look economical.
James: So if you buy good companies now, with good projects,

good management, working in stable jurisdictions, with a couple
years of operating cash to see them through the Wall of Worry
104
fluctuations... If you buy these and hold for the Mania Phase, you
should come out very well. But you cant blink and get stampeded
out of your positions when the market fluctuates sharply.
Casey: Thats exactly right. If you buy a quality exploration com-

pany or a quality development company (which is to say, a com-
pany that has found something and is advancing it toward pro-
duction), those shares could still go down 10%, 20%, 30%, or even
50%. But ultimately, theres an excellent chance that that same
stock will go up by 10, 50, or even 100 times. I hate to use such
hard-to-believe numbers, but that is the way this market works.
When the coming resource bubble is ignited, there are excellent

odds youll be laughing all the way to the bank in a few years.
I should stress that Im not saying this is the perfect time to buy.
Were not at a market bottom, as we were in 2001, nor an inter-
im bottom, like last November. And I cant say I know the Mania
Phase is just around the corner. But I think this is a very reason-
able time to be buying these stocks. And its absolutely a good time
to start educating yourself about them. Theres just such a good
chance a massive bubble is going to be ignited in this area.
James: These are obviously the kinds of things we research, make

recommendations on, and teach about in our metals newsletters.
But one thing we should stress for nonsubscribers reading this in-
terview is that this strategy applies only to the speculative portion
of your portfolio. No one should gamble with his rent money or the
money he has saved for college tuition, et cetera.
Casey: Right. The ideal speculators portfolio would be divided

into 10 areas, each totally different and not correlated with each
other. Each of these areas should have, in your subjective opinion,
the ability to move 1,000% in price.
Why is that? Because most of the time, were wrong when we pick
areas to speculate in, certainly in areas where you cant apply
Graham-Dodd-type logic. But if youre wrong on nine out of 10 of
them and it would be hard to do that badly then you at least
105
break even on the one 10-bagger (1,000% winner).
Whats more likely is that a couple will blow up and go to zero, a

couple will go down 30%, 40%, 50%. But youll also have a couple
doubles or triples. And maybe, on one or two of them, youll get a
10-to-1 or better win.
So it looks very risky (and falling in love with any single stock is
very risky). But its actually an intelligent way to diversify your risk
and stack the odds of profiting on volatility in your favor.
Note that I dont mean that these areas should be 10 different

stocks in the junior mining sector. That wouldnt be diversifica-
tion. As I say, ideally, Id have 10 such areas with potential for
1,000% gains. But its usually impossible to find that many at once.
If you can find only two or three, what do you do with the rest of
your money? Well, at this point, I would put a lot of it into gold, in
one form or another, while keeping your powder dry as you look
for the next opportunity.
And ideally, Id look at every market in every country in the world.

People who look only in the United States, or only in stocks, or only
in real estate they just dont get to see enough balls to swing at.
James: OK, got it. Thank you very much.
106
PART III
How to Know When to
Sell Your Gold
THE ULTIMATE GOLD-BUBBLE TEST

By Brian Hunt
Editors note: In this essay originally published in the No-

vember 12, 2009 edition of Stansberry Researchs free e-letter
DailyWealth Editor in Chief Brian Hunt explains how to per-
form the ultimate test of whether an asset is too popular or in
a bubble. A few time-specific numbers may be out of date by the
time you read this piece. But it contains an important lesson
one that will help to guide your decision on when to sell your
gold
Recently, theres been a very popular and very wrong thing to

say about owning gold.
I hear it a lot from inexperienced Wall Street analysts, bloggers,

and money managers who spend little time living in the real
world.
Heres what theyre saying: Gold is way too popular now... Its
near the end of its bull market. The recommended action to
take is to cash in your gold profits and move on to something
different.
I can tell you that taking this advice is a big mistake. Anyone who
believes gold is too popular with the mainstream public simply
doesnt know who the mainstream public is... and they dont un-
derstand how bull markets end.
Sure... gold is up big in the last decade. Gold is also enjoying a

lot of mainstream press these days. In 2003, when I would tell
someone I was placing a significant portion of my net worth in
gold, theyd look at me like I was crazy. Now, they nod and say, I
heard something about gold the other day on TV.
108
Thats as far as the average Joe goes with his interest in

gold. This is why gold is nowhere near a blow off top. Heres
how to perform the ultimate test of whether an asset is too pop-
ular or in a bubble...
Ask 100 people on the street if they own gold. See what they say.
Dont ask folks who read newsletter writers like Doug Casey or
Porter Stansberry. Dont ask folks who you regularly talk invest-
ments with. Ask a group of randomly chosen members of the
public if they know why gold is real money. Ask them why gold
climbed from $650 to over $1,700 in five years.
I guarantee you the average person on the street is going to look

at you like you asked him which airline offers nonstop flights to
Venus.
Hes going to have no idea what you are talking about. Hes heard
about gold on the news a few times, but he cant tell you why gold
is rising, who is buying it, or why it is the best form of money
mankind has ever found.
Gold is divisible, portable, lasting, consistent the world round,

useful in industry... and as master speculator Doug Casey re-
minds us, gold cannot be created out of thin air by a government.
In other words, you actually have to work and save in order to
build a gold hoard. You cant Bernanke your way to real gold
wealth.
The people who realize this like billionaire hedge-fund manag-

er John Paulson are getting more publicity now than they were
six years ago. But its nowhere near enough publicity for a sea-
soned investor to say, Gold is too popular.
When a bull market gets too popular, it looks like tech stocks did
back in 1999. This was when everybody and his brother bragged
at the oce Christmas party about making a fortune in Cisco or
Microsoft. It was when schoolteachers, personal trainers, and cab
drivers suddenly became tech stock experts.
109
Folks knew what bandwidth, routers, and e-commerce

meant. Only when an asset enjoys that sort of widespread atten-
tion can you say its too popular.
I cant say that about gold... not after talking with friends who do
not invest... not after talking with the people sitting next to me
on the plane. The public still has no idea what bullion really
is... or how the governments reckless tax and spend behavior is
clobbering our currency.
Dont believe me? Just ask em.
110
WATCH FOR THIS SIGNAL

TO SELL YOUR GOLD
Business was so good, Empire Diamond

and Gold Buying Service had to hire a Warning on Mail-In
security guard to handle the crowd in Gold Offers
their oce.
By Dr. David Eifrig,
Weve been serving about 100 cups of
editor, Retirement Mil-
coffee a day, going through three or four
pounds daily, said an assistant, hurry- lionaire
ing away to fill the empty pot.
Late night commercials
We found Empire Diamond and Gold beg you to sell your
Buying Services story in the New York
unwanted jewelry.
Times archives from January 1980.
When the gold price soared, Empire
Unless youre in dire
Diamond and Gold Buying Service were
suddenly inundated with people looking circumstances, hold on to
to sell gold trinkets. your gold. If you absolute-
ly need to sell your gold,
We are handling a couple of hundred
customers a day off the street and the do some research first.
average wait is three hours, said the
owner, Mr. I. Jack Brod. The most advertised
company seems to be
Nobody has ever seen anything like
Cash 4 Gold. It claims
this. Im looking for a beautiful year in
1980, said Bob Deitel, owner of the you can get cash fast
Madison Coin Shop in Connecticut. when you mail in your
gold, silver, platinum, or
If youre trying to spot the peak of a gold
bull market, dishoarding is one clue to diamonds to them.
look for. Dishoarding is what happens
when people decide the gold price is so We called Cash 4 Gold,
high, theyd like to swap their old gold and the people there
111
heirlooms for cash. They pile down to

the local gold and coin stores with their refused to give us price
lockets, scarf pins, and old gold dental quotes. ABCs Good
fillings. Morning America sent
The massive new supply floods the mar- in gold jewelry valued at
ket and causes the gold price to collapse. $350 and only received
The intense dishoarding in January $66.07 from Cash 4
1980, for example, was one reason
golds bubble popped. Gold fell $250 in Gold.
the final days of January and then kept
falling for the next two decades. Instead of mailing
your jewelry off, your
Heres the thing: Gold fever has re- best bet is to shop your
turned to America. A few commercials
on TV are offering cash for gold... gold around to a few
local jewelry stores and
Pawnshops are doing well. But so far, it compare their offers.
seems people are still more interested in
accumulating gold. You probably wont get
face value... but youll
Until you see lines around the block at do much better than you
coin shops and New York Times articles
about dentists earning thousands of dol- will with Cash 4 Gold.
lars from used gold fillings, you should
assume were still in the bull market.
112
PART IV
Chinas Influence in the
Gold Market
HOW THE CHINESE WILL ESTABLISH

A NEW FINANCIAL ORDER
By Porter Stansberry
Editors note: In February 2012, Porter introduced readers to

Chinas ongoing and enormous accumulation of gold a plan
that could allow it to replace the U.S. as the owner of the worlds
reserve currency
I know this will all sound crazy to most folks, he wrote. But
most folks dont understand gold or why it represents real, time-
less wealth. The Chinese do.
Porters four-part series is a must read for anyone who wants to

understand what the Chinese are doing, why they are doing it, and
the near-certain outcome.
Some time-sensitive material in these essays may be out of date.

But the critical and controversial ideas he exposes are still
relevant, even today.
Whether you agree with Porters research or not, you owe it to

yourself to consider what will happen if he is right
For many years now, its been clear that China would soon be pull-
ing the strings in the U.S. financial system.
In 2015, the American people owe the Chinese government nearly

$1.5 trillion.
I know big numbers dont mean much to most people, but keep in
mind... this tab is now hundreds of billions of dollars more than
what the U.S. government collects in ALL income taxes (both cor-
porate and individual) each year. Its basically a sum we can never,
ever hope to repay at least, not by normal means.
114
Of course, the Chinese arent stupid. They realize we are both trapped.
We are stuck with an enormous debt we can never realistically

repay... And the Chinese are trapped with an outstanding loan they
can neither get rid of, nor hope to collect. So the Chinese govern-
ment is now taking a secret and somewhat radical approach.
China has recently put into place a covert plan to get back as much
of its money as possible by extracting colossal sums from
both the United States government and ordinary citizens,
like you and me.
The Chinese State Administration of Foreign Exchange (SAFE) is

now engaged in a full-fledged currency war with the United States.
The ultimate goal as the Chinese have publicly stated is to cre-
ate a new dominant world currency, dislodge the U.S. dollar from
its current reserve role, and recover as much of the $1.5 trillion the
U.S. government has borrowed as possible.
Lucky for us, we know whats going to happen. And we even have
a pretty good idea of how it will all unfold. How do we know so
much? Well, this isnt the first time the U.S. has tried to stiff its
foreign creditors.
Most Americans probably dont remember this, but our last big
currency war took place in the 1960s. Back then, French President
Charles de Gaulle denounced the U.S. government policy of print-
ing overvalued U.S. dollars to pay for its trade deficits... which
allowed U.S. companies to buy European assets with dollars that
were artificially held up in value by a gold peg that was nothing
more than an accounting fiction. So de Gaulle took action...
In 1965, he took $150 million of his countrys dollar reserves and

redeemed the paper currency for U.S. gold from Ft. Knox. De
Gaulle even offered to send the French Navy to escort the gold
back to France. Today, this gold is worth about $12 billion.
Keep in mind... this occurred during a time when foreign govern-

ments could legally redeem their paper dollars for gold, but U.S.
citizens could not.
115
And France was not the only nation to do this... Spain soon re-
deemed $60 million of U.S. dollar reserves for gold, and many
other nations followed suit. By March 1968, gold was flowing out
of the United States at an alarming rate.
By 1950, U.S. depositories held more gold than had ever been
assembled in one place in world history (roughly 702 million
ounces). But to manipulate our currency, the U.S. government was
willing to give away more than half of the countrys gold.
Its estimated that during the 1950s and early 1970s, we essentially
gave away about two-thirds of our nations gold reserves... around
400 million ounces... all because the U.S. government was trying
to defend the U.S. dollar at a fixed rate of $35 per ounce of gold.
In short, we gave away 400 million ounces of gold and got $14
billion in exchange. Today, that same gold would be worth $620
billion... a 4,330% difference.
Incredibly stupid, wouldnt you agree? This blunder cost the U.S.
much of its gold hoard.
When the history books are finally written, this chapter will go
down as one of our nations most incompetent political blunders.
Of course, as is typical with politicians, they managed to make a
bad situation even worse...
The root cause of the weakness in the U.S. dollar was easy to
understand. Americans were consuming far more than they were
producing. You could see this by looking at our governments
annual deficits, which were larger than ever and growing... thanks
to the gigantic new welfare programs and the Vietnam police ac-
tion. You could also see this by looking at our trade deficit, which
continued to get bigger and bigger, forecasting a dramatic drop
(eventually) in the value of the U.S. dollar.
Of course, economic realities are never foremost on the minds of

politicians especially not Richard Nixons. On August 15, 1971,
he went on live television before the most popular show in Ameri-
ca (Bonanza) and announced a new plan...
116
The U.S. gold window would close effective immediately and no

nation or individual anywhere in the world would be allowed to
exchange U.S. dollars for gold. The president announced a 10%
surtax on ALL imports!
Such tariffs never accomplish much in terms of actually altering

the balance of trade, as our trading partners simply put matching
charges on our exports. So what actually happens is just less trade
overall, which slows the whole global economy, making the impact
of inflation worse.
Of course, Nixon pitched these moves as patriotic, saying: I am

determined that the American dollar must never again be a hos-
tage in the hands of international speculators.
The sheeple cheered, as they always do whenever something is

done to stop the speculators. But the joke was on them. Within
two years, America was in its worst recession since WWII... with
an oil crisis, skyrocketing unemployment, a 30% drop in the stock
market, and soaring inflation. Instead of becoming richer, millions
of Americans got a lot poorer, practically overnight.
And that brings us to today...
Roughly 40 years later, the United States is in the middle of anoth-

er currency war. But this time, our main adversary is not Europe.
Its China. And this time, the situation is far more serious. Our
nation and our economy are already in an extremely fragile state.
In the 1960s, the American economy was growing rapidly, with
decades of expansion still to come. Thats not the case today.
This new currency war with China will wreak absolute havoc on
the lives of millions of ordinary Americans, much sooner than
most people think. Its critical over the next few years for you to
understand exactly what the Chinese are doing, why they are doing
it, and the near-certain outcome.
In my next installment, Ill explain the rest of the story... and what
it means for you as an investor.
117
THE LARGEST GOLD-ACCUMULATION

PLAN OF ALL TIME
For more than 30 years, since the start of the countrys Reform
Era in 1978, China has been selling (exporting) more goods than
it has imported.
Thats allowed the nation to stockpile trillions of dollars more

money than our entire monetary base totaled before the recent
financial crisis.
The way it works is simple to understand. When a Chinese busi-

ness earns dollars by selling overseas, the law requires the com-
pany to hand those dollars over to the countrys central bank,
the Peoples Bank of China (PBOC). In return, the business gets
Chinese currency (called either the yuan or the renminbi) at a
fixed rate.
Theres nothing fair about this. The Chinese people do all the
work, and the Chinese government keeps all of the money. But
thats the way it goes.
At first, the dollar inflow was small because trade between the two
countries was tiny. In 1980, for example, Chinas foreign currency
reserves stood at approximately $2.5 billion. But since then, the
amount of foreign currency reserves held by the Chinese gov-
ernment has gone up nearly every year... and now stands at $3.2
TRILLION. Thats a 127,900% increase. Its simply astonishing to
look at the chart of the increase in currency reserves...
118
As I mentioned in the first installment of this series, the group

in China that manages these foreign reserves is called the State
Administration of Foreign Exchange (SAFE). This group is en-
gaged in a full-fledged currency war with the United States. The
ultimate goal as the Chinese have publicly stated is to create a
new dominant world currency and dislodge the U.S. dollar from its
current reserve role.
And for the past few years, SAFE has had one big problem:
What to do with so much money?
SAFE decided to use most of these reserves to buy U.S. gov-

ernment securities. As a result, the Chinese have now accu-
mulated a massive pile of U.S. government debt. In fact, about
two-thirds of Chinas reserves remain invested in U.S. Treasury
bills, notes, and bonds. The next biggest chunk is in euro. Of
course, all this money is basically earning nothing to speak of in
terms of interest... because interest rates around the world are
close to zero.
And while the Chinese would love to diversify and ditch a sig-
nificant portion of their U.S. dollar holdings, they are essential-
ly stuck.
You see, if the Chinese start selling large amounts of their U.S.
government bonds, it would push the value of those bonds (and
their remaining holdings) way down. It would be like owning 10
119
houses on the same block in your neighborhood... and deciding to

put five of them up for sale at the same time. Imagine how much
that would depress the value of all the properties with so much for
sale at one time.
One thing China tried to do in recent years was speculate in the

U.S. stock market. But that did not go well... The Chinese govern-
ment bought large amounts of U.S. equities just before the market
began to crash in late 2007. It purchased a nearly 10% stake in
the Blackstone Group (an investment firm)... and a similar stake
in Morgan Stanley. Blackstones shares are down about 46% since
the middle of 2007, and Morgan Stanley is down about 70% since
the Chinese purchase.
The Chinese got burned big time by the U.S. equities markets and
received a lot of heat back home. They are not eager to return to
the U.S. stock market in a meaningful way. So Chinas U.S. dollar
reserves just keep piling up in various forms of fixed income U.S.
Treasury bonds, Fannie and Freddie mortgage bonds, and other
forms of debt backed by the U.S. government. These investments
are considered totally safe except that theyre subject to the risk
of inflation.
According to a statement by the government: SAFE will never be

a speculator. It mainly seeks to protect the safety of Chinas for-
eign exchange reserves and ensure a stable investment return.
If the Chinese wont buy stocks and the only real risk to their ex-
isting portfolio is inflation, what do you think they will do to hedge
that risk?
They will buy gold... lots and lots of gold.
It was no surprise to us when, in 2011, China became the No. 1

importer of gold. For many people in the gold market, this was a
big shock India has always been the worlds leading gold buyer.
In India, people traditionally save and display their wealth in gold.
Their entire financial culture is based on gold. Historically, silver
has played the same role in China... but not anymore.
120
In fact, not only has China become the worlds leading importer of
gold, it was already the worlds leading producer... by far. Accord-
ing to the most recent figures from the World Gold Council, China
produces nearly 50% more gold (about 300 tons per year) than the
second-place country... Australia. And guess what? Every single
ounce produced in China whether its dug out of the ground
by the government or a foreign company must, by law, be sold
directly back to the government.
The Chinese are now clearly on a path to accumulate so much gold

that one day soon, they will be able to restore the convertibility of
their currency into a precious metal... just as they were able to do a
century ago when the country was on the silver standard.
The West wasnt kind to China back then. The country was re-
peatedly looted and humiliated by Russia, Japan, Britain, and the
United States. But today, it is a different story...
Now, China is the fastest-growing country on Earth, with the

largest cash reserves on the planet. And as befits a first-rate power,
Chinas currency is on the path to being backed by gold.
China desperately wants to return to its status as one of the worlds

great powers... with one of the worlds great currencies. And China
knows that in this day and age when nearly all governments
around the globe are printing massive amounts of currency backed
by nothing but an empty promise it can gain a huge advantage
by backing its currency with a precious metal.
As the great financial historian Richard Russell wrote recently:

China wants the renminbi to be backed with a huge percentage
of gold, thereby making the renminbi the worlds best and most
trusted currency.
I know this will all sound crazy to most folks. But most folks
dont understand gold, or why it represents real, timeless
wealth. The Chinese do. And in my next essay, Ill provide more
evidence of how they are carrying out the largest gold accumu-
lation plan of all time.
121
HOW AND WHY CHINA CAME

TO DOMINATE THE MARKET FOR GOLD
In my last two essays, Ive introduced an idea that Im sure will

earn me jeers and derision from the mainstream press... And prob-
ably even worse from the U.S. government.
But my job isnt to fit in with the mindless journalism that pass-
es for the mainstream press these days. And it isnt to impress
the U.S. government. My job is to study the numbers and report
on the most important financial developments that will affect my
readers.
One of those ideas is the ongoing and enormous accumulation of

gold by China... which will allow it to supplant the United States as
the owner of the worlds reserve currency.
If you doubt this is what the Chinese are doing, I suggest you
take a look at a cable that was leaked on the nonprofit website
Wikileaks last year.
This cable was prepared by the U.S. Embassy in Beijing and was
sent back to ocials in Washington, D.C. The embassy was com-
menting on a recent report by Chinas National Foreign Exchanges
Administration. The cable quoted the Chinese administration as
follows...
Chinas gold reserves have recently increased. Currently,

the majority of its gold reserves have been located in the
U.S. and European countries. The U.S. and Europe have
always suppressed the rising price of gold. [The U.S. and
Europe] intend to weaken golds function as an inter-
national reserve currency. They dont want to see other
countries turning to gold reserves instead of the U.S.
dollar or euro.
122
Therefore, suppressing the price of gold is very beneficial for

the U.S. in maintaining the U.S. dollars role as the inter-
national reserve currency. Chinas increased gold reserves
will thus act as a model and lead other countries towards
reserving more gold. Large gold reserves are also beneficial
in promoting the internationalization of the RMB [Chinas
currency].
Do you see where this is all heading?
A century ago, China used silver to back its currency. Today, it has
chosen gold... And it is basically buying up the worlds gold supply.
China is essentially attempting to corner the gold market.
Just remember... no gold mined in China... not a single ounce... is

allowed to leave the country. It all goes to the governments re-
serves. Yes, the Chinese government allows foreign companies to
enter China and form joint ventures with local Chinese firms. And
foreign companies are free to mine as much gold as they want in
China... But every single ounce must be sold to the Chinese gov-
ernment at current market prices. So the government is piling up
every ounce thats mined in China... at least 9.6 million ounces a
year (the equivalent of 300 tons).
And thats just the beginning...
I can also say with near-100% certainty that China is secretly

buying massive amounts of gold from the International Mone-
tary Fund and other sources. I feel confident about saying this
because its exactly what the Chinese did from 2003 to 2009. If
you remember... in 2009, China suddenly announced that its gold
holdings had risen by 75% because of secret purchases that took
place over six years.
These purchases moved China into sixth position on the list of

countries with the most foreign gold reserves. But keep in mind,
even with these giant purchases, Chinas gold holdings still ac-
count for less than 2% of its foreign reserves. Thats a pittance
when you compare it to places like the U.S. and Germany, which
123
hold more than 70% of their reserves in gold.
Theres no doubt in my mind that China will continue to buy huge

amounts of gold.
Just over a month ago, news outlet Bloomberg reported mainland

China bought 3.6 million ounces of gold from Hong Kong over the
past few months... Thats 483% more than during the same time
the year before. The data come from the Census and Statistics De-
partment of the Hong Kong government. The Chinese government
does not make such information public.
In fact, the Chinese have not announced a single gold purchase

since 2009. But when you look at the massive amounts of gold
disappearing from the world markets, its obvious the Chinese
must still be buying. As the newswire Reuters recently suggested
in an article that detailed the sale of 150 tons of gold to unnamed
buyers, among the most likely candidates is China, which has the
largest currency reserves... at $3.2 trillion.
When you are buying this much gold, its almost impossible to
keep the entire thing a secret. Thats why many stories of Chinas
secret purchases have been mentioned in the mainstream press.
For example, CNN Money interviewed Boris Schlossberg, director
of currency research at Global Forex Trading, reported...
China is considered a stealth buyer of gold... As the worlds

largest producer of the metal, China often buys gold from its
own mines and doesnt report those sales publicly. Analysts
suspect the country is continuing to buy gold and could
in fact, be the worlds largest buyer consistently. It simply
doesnt reveal its pro-gold stance...
Announcing an aggressive gold buying spree is not in Chi-

nas best interest because, for one, it might push gold prices
higher. Secondly, it could devalue the U.S. dollar, which
would subsequently lessen the worth of the countrys port-
folio of U.S. government bonds.
124
This is why the Mining Journal said last November that it expects
China to amass some 5,000 tons of gold over the next five years.
I would not be surprised if it amasses twice that amount. As CNN
explained, The thing to remember here is that if China is going to
continue to purchase massive amounts of gold, the last thing they
want to do is make this information public, until they really have
to. The less they say, the cheaper the price theyll have to pay.
I recently interviewed the most successful gold and silver inves-

tor in the world, Eric Sprott, on this subject. Eric is a billionaire,
who made much of his fortune in silver. He runs Sprott Resource
Management, one of the worlds largest resource investment firms.
Heres what he told me...
Im sure Chinas buying gold. I just have no doubt that its

the most logical thing in the world that they would be buy-
ing gold. Theyre seeing their value of their Treasurys de-
clining almost every day now with the weakness of the U.S.
dollar. They are losing a lot of money, and they see the gold
price essentially go up every day. Well, its not a dicult
decision to say, Well, we should be buying gold and getting
rid of dollars. Thats got to be the easiest call in the world.
Now... while I might not be able to technically prove that the

Chinese are buying millions of ounces of gold bars, I can prove
theyre buying plenty of gold out of the ground. The Chinese gov-
ernment is now in the process of secretly buying up part or all of
dozens of the best gold-mining companies around the globe.
One of the biggest recent purchases was by the govern-

ment-owned Shandong Gold Group (the second-biggest producer
in China), which made an offer to purchase Jaguar Mining for
$785 million in cash thats 77% more than what Jaguar is now
worth in the markets.
Keep in mind... This is the biggest premium EVER paid for a

large gold-mining firm. Before that, state-owned Zijin Mining
Group (Chinas biggest gold producer by market value) said it
would spend as much as $1.6 billion a year on acquisitions. Last
125
year, the company bought 17% of Australian gold miner Norton

Gold Fields and a 60% stake in gold company Altynken.
And these are only the deals the government WANTS to make
public.
The government also has kept a slew of investments in the gold

markets private and secret. You see, few investors realize the
governments China National Gold Group (CNGGC) makes little
information public on its most sensitive purchases.
For example, CNGGC has many aliases, including its 40% stake
in China Gold Intl. Resources and may have more than 300
secretive investment stakes in various gold mining companies
around the globe. With a tremendous amount of digging in re-
cent months, weve been able to locate the Chinese governments
significant equity stakes in dozens of junior gold mining stocks.
The point is, when you look at the gold China already has in
reserve... and look at what it controls thats still in the ground...
the Chinese might already have more gold than any oth-
er nation on Earth.
But even these resources dont guarantee China control of the

market. To really control the market for gold, the Chinese must
establish the worlds leading exchange and regulate it honestly.
As Ill show you in my next essay, they are doing just that.
Its the next step in Chinas hidden currency war against the
United States.
126
HOW CHINA PLANS TO CHANGE

THE WAY GOLD IS TRADED
The global price of gold is largely controlled by just five bullion

banks in London. These banks establish the price twice a day
by offering to buy or sell gold at a fixed price. The worlds other
markets operate largely off these prices.
Manipulating the price of gold (and thus the value of other

major currencies, like the U.S. dollar) is possible by influencing
those five bullion banks: Bank of Nova Scotia, Barclays Capital,
Deutsche Bank, HSBC, and Societe Generale.
Whether thats happening right now or not, I cant say. But it

is a matter of public record that the worlds eight leading gov-
ernments conspired from November 1961 until March 1968 to
suppress the price of gold by using their central banks to ma-
nipulate the London bullion market. So it has happened before.
Meanwhile, the trading range of the gold price suggests

that the market continues to be heavily manipulated.
Why do I believe that?
Because as a precious metal with no yield, gold should be a

fairly volatile asset like silver and platinum are. But when you
look at how many times the price of gold moves by more than
5% in a day, you find that it almost never happens.
Over the last 10 years, the price of gold has moved up or down
by more than 5% on only 10 occasions. The same volatility has
occurred in silver 80 times. It has happened in oil 137 times.
No explanation other than manipulation can account for golds

exceptionally low volatility. It simply doesnt trade like a
free-market commodity.
127
To control the market for gold, the Chinese must not only accumu-
late massive gold reserves (which its doing), it must establish the
worlds leading exchange and regulate it honestly.
And thats exactly whats happening...
For decades, Chinese citizens were barred from owning physical

gold under penalty of imprisonment. Then in September 2009,
China became the only country in the world to promote gold own-
ership to its citizens. The government started a major campaign to
encourage all citizens to buy gold.
Locals can buy gold bars, which come in four sizes, at ANY Chinese
bank in the country. If you dont think thats unusual, try buying
gold at ANY bank in the United States and watch the funny look
you get from the teller.
The Chinese government has also set up thousands of gold stores

around the country... which look like jewelry stores, but instead
sell bars of gold.
As Forbes recently reported at the scene of one such gold store...
The crowds surge shoulder to shoulder inside Beijings Cai Bai

store to buy five to 10 gram slivers of gold and jewelry of every
size and shape. Its one dramatic example of the gold craze
in China, which is ocially and unocially promoted by the
Communist government... And it is an integral part of the pro-
gold preference by the Chinese public and its government.
My friend Simon Black who writes about geopolitical, expatria-

tion, and wealth issues on his Sovereign Man website also visited
one of these Chinese gold stores on a recent trip, and said...
On the inside, these gold stores look like jewelry shops

armed guards, glass viewing cases, etc. But instead of
diamond crusted earrings and white star sapphires, you see
bars. Lots of bars. The government mints bars in sizes rang-
ing from 5 grams (which are so tiny theyre actually cute) to
128
1 kilogram. The prices are updated instantly they have a

Bloomberg screen that tracks the spot price... and the bars
are all serialized and [offer] 0.9999 purity, the same as you
would get from Switzerland. They are also certified by the
gold exchange, which validates the quality.
We went into several stores and saw Chinese people buying

like crazy... all with cash. The most popular denominations
were 10 grams and 50 grams, as well as every piece of jewel-
ry in sight. Im surprised the mint shops didnt sell out [as]
the inventory was flying off the shelf.
Why would the Chinese government set off a frenzy for gold?
Well, heres one thing to remember... the Chinese government

doesnt pay much attention to human rights or property rights. It
could demand all of its citizens gold at any time just like FDR
did in the U.S. back in 1933.
But all of these facts are just hints about whats to come. The real
story wont be unveiled until June. Thats when China will open
something called the Pan Asia Gold Exchange (PAGE). This is a
direct competitor to the London Metals Exchange and the COMEX
in New York.
The way things work, the futures market in London fixes the
spot price of gold each morning and afternoon, based on trading in
London and on Americas COMEX market.
But both of these markets back gold contracts with only 10% of the
actual metal. The new China PAGE market is expected to have a
much larger gold backing and could change the way gold is traded.
As James Turks GoldMoney site recently reported:
The potential effects cannot be underscored enough PAGE

is clearly preparing the world for a Chinese world reserve
currency, and is doing this by bringing gold, and by exten-
sion silver, back into the Chinese economy.
129
Forbes wrote about the development...
It means the spot market in gold could be headed for China

and away from Londons Metals Exchange or the Comex
in New York. It also means that the Chinese currency not
dollars will for the first time become the ruling currency
used in one of the major speculative commodities of our
age. All eyes will be on the influence of the gold trade in
China rather than New York, London, Switzerland, or South
Africa.
For several years, weve been warning about the loss of world
reserve currency status for the U.S. dollar. We have worried about
our currency because we understood the propensity of govern-
ments to steal from their citizens through inflation.
With roughly half of our national debt held by foreigners, we have

long believed efforts to print away our obligations will prove cat-
astrophic for Americas leading international position and most
especially for the role of our dollar as the worlds leading reserve
currency.
But until recently, we were unsure of the exact mechanism by which

the dollar would be replaced. Now, we see how it will unfold...
The Chinese will slowly hedge their exposure to the dollar by

becoming the worlds leading gold investors. By taking over the
worlds gold markets and building a huge stockpile of gold, they
will be able to back their currency with the worlds traditional form
of money.
Once they are ready to make the yuan freely convertible, they will
have created tremendous demand for their bonds and bills by
making their currency the worlds most reliable... and the only one
backed with gold.
The impact on the dollar could be catastrophic... And every day the
dollar falls, Chinas gold stockpile will grow more valuable (and
more powerful). You can protect you and your family from this po-
130
tential collapse with a handful of very simple steps... the first one
being to own plenty of gold.
131
APPENDIX
RECOMMENDED READING
Gold: The Once and Future Money
A great book from author Nathan Lewis on the history of

gold and its use as money.
Hot Commodities
The master, Jim Rogers, on the basics of commodity

investing and his favorite ways to play the commodity
boom. Its an older book... but full of quality information.
Market Wizards
Jack Schwager compiles interviews with the best traders

and investors in the world. This book isnt focused on
natural resources, but it has plenty of useful information
for natural resource speculators. Make sure to read the
Paul Tudor Jones interview many times.
The Power of Gold
A great history of gold and mankinds lust for it from

author Peter Bernstein.
The Prize: The Epic Quest for Oil, Money & Power
An incredible history of oil. Full of neat stories and facts.

Author Daniel Yergin achieved something great by writing
this book.
The Quest: Energy, Security, and the Remaking of

the Modern World
This is another brilliant book by Daniel Yergin. It

continues the story he began in The Prize. It lays out the
future of energy.
Reminiscences of a Stock Operator
At his height in the 1920s, Jesse Livermore was one of

the biggest traders in the world. Author Edwin Lefvres
account of Livermore making and losing huge fortunes
contains the commandments of speculation. Its not
focused on gold and natural resources, but it has plenty of
important insights for speculators.
Secrets of the Natural Resource Market
This is one of the most comprehensive guides to resource

investing Stansberry Research has ever published.
Whether youre just starting out in resources or looking
for ways to reduce your risk while increasing your
profits... this is a must-have guide.
IF YOURE INTERESTED IN LEARNING MORE
To learn more about gold and the natural

resource market, you can follow Matt
Badialis recommendations in The
Stansberry Resource Report.
Since joining Stansberry Research in

2005, Matt has traveled the world to find
the best energy and commodity related
investment ideas for his subscribers.
His work has taken him to Papua New
Guinea, Vancouver, Hong Kong, Texas, the
Canadian Yukon, Haiti, Turkey, Nevada,
Switzerland, and Kurdistan.
Every month, Matt uses this boots on the ground expertise and
industry connections to recommend the most promising small oil and
mineral explorers, drilling-service providers, power companies, and the
best gold and metals companies in the world.
Matt counts many mining and energy industry veterans among his
subscribers. As Gerald Wilson, director of an NYSE-listed exploration
and production company, said...
Your letter, in many instances, has confirmed good ideas under

consideration and at other times introduced new ideas, which have
proven to be very profitable! I look forward to your report each month
and find it extremely valuable.
Learn how to access The Stansberry Resource Report by typing this

unique, safe, and secure website address into your Internet browser:
www.sbry.co/jS1pg8. Or call 888-261-2693.
MORE FROM STANSBERRY RESEARCH
The Stansberry Research Traders Manual
The Worlds Greatest Investment Ideas
The Doctors Protocol Field Manual
High Income Retirement:

How to Safely Earn 12% to 20%
Income Streams on Your Savings
World Dominating Dividend Growers:

Income Streams That Never Go Down
Secrets of the Natural Resource Market:

How to Set Yourself up for Huge Returns
in Mining, Energy, and Agriculture
The Stansberry Research Guide to Investment Basics
The Stansberry Research Starters Guide for New Investors
America 2020:
The Survival Blueprint
The Living Cure:

The Promise of Cancer Immunotherapy
Dividend Millionaire:
How You Can Earn Inflation-Proof,
Crisis-Proof Income Streams in the Stock Market
Dr. David Eifrigs Big Book of Retirement Secrets

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THE STANSBERRY RESEARCH

Founded in 1999 and based out of Baltimore, Maryland, Stansber-

Stansberry Research has nearly two dozen analysts and research-

The companys unrelenting and uncompromised insight has made

Porter Stansberry founded Stansberry Research in 1999 with the firms

Prior to launching Stansberry Research, Porter was the first American

Today, Porter is well-known for doing some of the most important

Dr. Steve Sjuggerud

Dr. Steve Sjuggerud is the editor of True Wealth,

Prior to joining Stansberry Research in 2001, Steve was a stockbroker,

Matt Badiali is the editor of The Stansberry Resource

Prior to joining Stansberry Research in 2005, Matt was a geologist for a

Dr. David Eifrig, Jr.

Dr. Eifrig is the editor of three Stansberry Research

Before joining Stansberry Research in 2008, Dr. Eifrig worked in

Dan Ferris is the editor of Extreme Value, a monthly

Dan joined Stansberry Research in 2000. In 2002, he became the editor

Brian Hunt is the Editor in Chief of Stansberry Research.

Since 2007, he has managed dozens of Stansberry Researchs

Brian is a successful private trader and frequently contributes to Growth

Brian is the author of Dividend Millionaire: How You Can Earn

Van is one of the most knowledgeable minds in the world on coins,

Tom Dyson is the publisher of Common Sense Publishing,

Tom graduated from the University of Nottingham in the United

Jeff Clark is the editor of Casey Researchs BIG GOLD

Jeff is a regular speaker at the industrys top investment conferences,

Amber Lee Mason

Amber Lee Mason is the managing director at Bonner

John Doody is the founder and editor of Gold Stock

Doug Casey is the chairman of Casey Research, a financial

Dougs book on profiting from periods of economic turmoil, Crisis

He has been a featured guest on hundreds of radio and TV shows,

Finally, thanks to Michael Checkan, head of Asset Strategies

The Ultimate Form of Real Money 1

What You Dont Know About Gold 3

Heres What Poor People Dont Know About Gold 8

Why You Should Hold Gold 11

The Gold Buyers Toolkit 15

The Right Amount of Gold Investors Should Own 21

The Gold Investors Biggest Risk 23

The Best One-Click Ways to Own Gold 26

Get Paid to Protect Your Savings 29

How to Keep the Governments Hands Off Your Gold Profits 31

You Can Hold Gold in Your Bank Account 34

How to Buy and Store Physical Gold 36

What My Most Trusted Gold Insider Is Buying 41

My Favorite Ways to Own Gold Bullion 46

How to Legally (and Easily) Hold Gold Offshore 52

How to Legally Smuggle Gold 54

What You Need to Know About Counterfeit Gold 56

Why Value Investors Should Buy Gold 60

A Common-Sense Guide to Buying and Selling Gold 63

Dont Believe the Gold Myths 69

Worried About a Financial Crisis? Buy This Very Risky Investment 79

How to Make the Biggest, Safest Returns Possible in Royalty Companies 82