HOW TO INVEST IN GOLD

Transcription

1 HOW TO INVEST IN GOLD A SNAPSHOT OF THREE INVESTORS Portfolio Diversification Interest Rate Trends Rare Coins vs. Dow Jones Industrial Worldwide Gold Availability Certified Gold vs. Bullion Presented by the UNITED STATES GOLD BUREAU

2 HOW TO INVEST IN GOLD A SNAPSHOT OF THREE INVESTORS PORTFOLIO DIVERSIFICATION: A WINNING STRATEGY Diversification is a strategy designed to manage overall risk. Assets are divided into Classes. Two assets that respond in the same way to economic changes are said to be Correlated. Two assets that respond differently to economic changes are said to be Non- Correlated. Stocks and Precious Metals are two different asset classes. Each class has its own advantages and disadvantages, but a diversified portfolio makes you less dependent on a Single asset class for overall performance. When stocks and precious metals are combined into a single portfolio, a Non- Correlated asset is created. The non-correlated relationships of these two classes are ideal partners! When Gold is rising in value, stocks are generally falling in value, and vice versa. In January of 2001 Bob, Mary, and Steve each had $50,000 to create a portfolio. Bob takes his $50,000 and acquires five of the most widely held stocks.bob puts $10,000 in each of the following stocks: AT&T, Citigroup, G.E., Johnson & Johnson, & Merck. Since all of Bob s assets are in a single Class (stocks) he has created a Correlated portfolio. After five years and rising interest rates, Bob has experienced a $6,000 LOSS! The value of Bob s portfolio is down 11% to $44,000. Mary wanted to diversify her portfolio by owning Two Classes of assets (stocks & gold coins). Mary acquired the same five most widely held stocks: AT&T, Citigroup, G.E., Johnson & Johnson, & Merck. Mary put $7,000 into each of these stocks. Mary was left with $15,000 to put into gold coins. By doing this, Mary created a Non- Correlated portfolio. Mary purchased 55 one-ounce Gold Eagles (non-certified bullion coins) in January of $271 per coin. By January of 2007 bullion prices reached $623 per ounce. Since Mary had 55 ounces of Gold she saw the value of her bullion go from $15,000 to $34,265 which offset the losses her stocks experienced over the same five year period. After five years and rising interest rates, Mary experienced a $12,294 GAIN! The value of Mary s portfolio has increased 30% to $62,984! By creating a Non- Correlated portfolio, Mary avoided the 11% losses Bob experienced and had a 30% gain. Steve also decided to diversify his portfolio by acquiring Two Classes of assets (stocks & certified Gold coins). Steve also acquired the same five most widely held stocks: AT&T, Citigroup, G.E., Johnson & Johnson & Merck. Steve put $7,000 into each of these stocks. Steve like Mary, was left with $15,000 to put into precious metals and also created a Non-Correlated portfolio. Bob, Mary & Steve Bob invested $50,000 into a Correlated Portfolio of 5 widely held stocks in After 5 years, he experienced an 11% loss, or $6,000. Mary invested $50,000 into a Non-Correlated Portfolio of the same stocks and Bullion in After 5 years, Mary achieved a 30% gain, or $12,294. Steve also invested $50,000 into a Non-Correlated Portfolio of the 5 widely held stocks and Certified Gold Coins. After 5 years, Steve saw the grestest return as he achieved a 64% gain, or $31,907. PAGE 1 For a free consultation with a Precious Metals Specialist, a price quote, or to place an order, call our

3 However, Steve invested in Certified Gold coins. Steve acquired 17 of the 1914 $20 one ounce Gold pieces certified Mint State 63 PCGS certified. There are only 529 of these coins in a Mint State 63 condition in the entire world. This fixed low supply was the key to increased value. As the demand for gold grew, the law of supply vs. demand took over. The value of these coins increased from $ per coin in July 2001 to $2, per coin in January of These prices are actual prices paid for these coins at auction. Steve saw the value of his $15,000 of Certified Gold Coins increase to $52,764 for an increase of 351% over the 5 year period. After five years and rising interest rates, Steve s diversified portfolio of falling stocks and rising Certified Gold Coins experienced a $31,907 GAIN! The value of Steve s portfolio has increased by 64% to $81,907! HOW HAVE RARE COINS PERFORMED IN THE PAST VS. THE DOW JONES INDUSTRIAL INDEX? As an asset class, rare coins have outperformed conventional assets such as stocks and bonds. A broad rare-coin index, the PCGS3000, is up 23.6% in the past 10 years. By comparison, the Dow Jones Industrial Index was at 11,723 at the beginning of January 2000 and is now at about 10,000 at the time this is being drafted ( July 2010). So, if you had been a long-term investor in the stock market, your investment is actually lower today than it was 10 years ago. How s that for return on your investment? Two very important factors that are critical for individual and institutional organizations considering rare coins are: Understanding your time frame Working with a reputable dealer KNOW YOUR TIME FRAME: The population, as it is called, of any particular rare coin issue is essentially static. The population of people, however, grows. More people create the potential for more coin buyers and collectors. Dow Jones Industrial Index January 2000 to June 2010 Ultimately, more buyers and collectors competing for the same limited number of coins leads to the steady increases in values we ve described. As with stocks, bonds, real estate, and other investment classes, while the long-term direction of the rare coin market is up, there are peaks and valleys along the way. If you are an individual investor planning on retiring in 20 or more years, or you are building a legacy for your children or grandchildren - and you can rely on other assets to take care of any needs for cash that might arise - you are ideally positioned to benefit from the long-term tendency of rare coins to increase in value. Recent Examples of Interest Rate Trends 1960s s: Interest Rates were rising. Gold rose from a low of $35 to $875 while Stocks struggle to perform. 1980s s: Interest Rates were declining. Gold struggles to perform. The Dow rose from 759 to 11, Present: Interest Rates are rising. Gold has risen from a low of $250 to more than $1200 while Stocks struggle to perform. Having more Gold and fewer stocks in 1960 to 1980 was a winning combination. However, having more stocks and fewer Gold coins from was the winning strategy. We are currently at the beginning of a new Interest Rate cycle. Combining these two Non-Correlated assets (stocks & Gold coins) will help increase the performance of your portfolio and help lower your risk! We have now learned that the asset class and interest rate trends are two important investment factors. It is important to recognize not every certified coin performs the same way. Having a professional that knows the rare coin market was the key to Steve s success. The key is finding the right rare coins to diversify your portfolio with. The research department at The U.S. Gold Bureau is continuously analyzing market trends, population reports, mintage figures, conditions, and past performance of all rare coins so that we can serve our clients interests best. PAGE 2 For a free consultation with a Precious Metals Specialist, a price quote, or to place an order, call our

4 good strategy is to buy and hold. A You could purchase all the coins you intend to own now, or plan to invest a given amount each year. With a perspective of two, three, or more decades, the direction and level of the current market would be of little concern to you. Nor would it be critically important to select hot coins that are likely to appreciate the most within the next year or two. No one knows what the hot coin issues will be several decades out, so you would be well served to assemble a broad range of quality rare coins. Review the 10 year PCGS3000 chart. If you had bought your coins in 2000, you d be 10 years into your hold period, and be very pleased with the increase in value of your coins today. Conversely, if you d invested in the stock market, your investment wouldn t have gained a penny - in fact, you would have lost money. WORK WITH A REPUTABLE DEALER: With certified coins, as with other asset classes, you should know our goal, including your time frame. And, a reputable dealer will assist you with your specific goals. How do you know if you are dealing with a reputable dealer? Well, one way to tell immediately whether or not the dealer is concerned with your goals is whether or not they ask you questions, before they tell you what you need to know. At the United States Gold Bureau, our experts have decades of experience in the industry, and we re in this business for the long-term. PCGS January 2000 to June 2010 PCGS 3000 Index (10 Year) 6 Month Moving Avg. Mary owns Bullion Gold, but Steve owns Certified Gold. So why did Steve do so much better when Mary had 55 ounces of gold and Steve had only 17 ounces of gold? Why is all Gold not created equal? So, you when you call us, you should expect that you will be treated well and your specific goals will be listened to carefully. Tell us what you re trying to accomplish in the certified coin market, and we ll help you get there. CERTIFIED VS. BULLION Mary owns Bullion Gold, but Steve owns Certified Gold. So why did Steve do so much better when Mary had 55 ounces of gold and Steve had only 17 ounces of gold? Why is all Gold not created equal? To answer this question we must first understand why Gold itself is valuable. Gold by nature s design is indestructible. That s right, you cannot destroy Gold! If you apply heat to Gold, it turns to liquid and is still Gold. Once cooled, it becomes the familiar solid form we all recognize. How Much Gold Is Available in the World? Since Gold is indestructible, all the Gold that has ever been mined by man is still here. For 6,000 years, man has sought Gold. After all that time, the supply of Gold is still limited. Today, the total world supply of gold is 161,000 Metric Tons. One metric ton of Gold equals 35,274 ounces of Gold. That means there is 5,679,114,000 ounces of Gold! That s almost five billion ounces. While still rare compared to other metals, gold mines continue to add to the supply every day. Mary owned 55 ounces out of 4.9 billion ounces, or % of the world supply. Mary s success was based on the whole world deciding to buy Gold instead of selling Gold. Mary s purchase was so small compared to the world supply that her investment had no impact on the price. If Mary decided to sell her Gold, she could not bring down the price of Gold with her sale. However, if someone who owned a significant amount of Gold decided to sell, this would immediately decrease Mary s bullion value. Who Owns the Most Gold? The largest quantities of Gold are held by various countries/governments around the world. You should be proud to know, the government who owns the most Gold is The UNITED STATES OF AMERICA! It is not a coincidence that the U.S.A. is also known as the richest country in the world! This perception is based on the fact that the U.S. Government owns 5.7% of the world supply or 8,000 metric tons or 282,192,000 ounces of Gold! So when governments, through the central bank system, decide to sell some of their Gold, the price changes drastically. This activity exposes Mary s portfolio to risk or loss of value. Her financial future all depends upon her buying when Gold is low and selling before it drops. Mary has to be on top of the news on a daily basis and continue to monitor her holdings constantly. PAGE 3 For a free consultation with a Precious Metals Specialist, a price quote, or to place an order, call our

5 If you take a hammer and beat it you still have Gold. If you drop Gold into the ocean and let the salt water attack it for centuries, when you pull it up it is still Gold! used in barter all had a shelf life and only had value for a limited amount of time. Additionally, all commodities have different values to different users so there was no standard for all people. This was one of the main reasons why Gold became money, because of its ability to maintain its integrity without breaking down. Before Gold was used as money people bartered with other commodities such as corn, wheat, livestock, etc. The problem with this system is twofold. First, the Equal Value, problem; what is more valuable a bushel of corn or a cow? Since each commodity had a different value, it was hard to set a standard value. For instance, the value of a cow, is it worth one bushel of corn, two, or three? Well, it depended upon which commodity you owned. If you owned the cow, of course the milk and the meat, was the most valuable. But if you owned the corn, you would say, that without my corn to feed your cow it will starve. So, my corn is more valuable and the battle continued. The second problem with this system was the Store of Value problem. If you were a corn farmer and had a record crop producing more corn than you could use, you would store your corn and save it. However, over time if you did not use the corn it would go bad and its value would diminish to zero. So, the commodities When a Certified Rare Coin is HISTORICAL, RARE & IN PERFECT CONDITION, the price of Gold Rising or Falling will have no impact on its value. This is when an ounce of Gold is worth more than an ounce of Gold. If you were poor, corn would be very important and have a high value, however if you were rich, corn may not be as valuable to you after a certain amount. This is why a system was needed so that all people would have a standard measure of values. Gold had all the answers! It is a commodity, and limited in supply. It is indestructible, so it will last forever. If you were rich or poor you wanted it. Mankind had created The Gold Standard, a standard of value for all. Gold is Money and recognized all over the world as valuable. SO WHEN IS 1 OUNCE OF GOLD WORTH MORE THAN 1 OUNCE OF GOLD? In Mary s portfolio she purchased raw bullion coins. Since Mary purchased the basic commodity, the value of her Gold is based upon the daily spot price. When Mary made her initial purchase in January of 2001, the physical demand for Gold was down so she was able to acquire 55 ounces for $ per ounce. After this purchase, the worldwide demand for gold increased. By January of 2007, bullion was priced at $ per ounce. If she kept her gold for another four years, it would have doubled again. So What About Steve? Since Steve also owns Gold, does he have the same risk as Mary? In short, NO! Here is why. When Steve purchased his Gold, the price per ounce was $ Steve paid $ for an ounce of Gold. Mary had this same option. However Mary felt it was CRAZY to spend 3 times the current value for a single ounce of Gold. Due to the price difference, Mary ended up with 55 ounces and Steve only had 17 ounces. So why would Steve do such a thing? In addition to the basic knowledge of Gold that everyone knows, Steve also knows that All Gold is Not Created Equal. When Steve was a child, his parents took him to a museum. Steve asked about a painting he saw and why it was so valuable. The employee of the museum said that this painting is very old, the artist that made it was no longer alive, he painted only one of this scene, and the person who acquired the painting protected it, and kept it safe from damage. As Steve asked about other items, the employee answered the same way. It is Old, It is Rare, and It is in a Perfect Condition. Then the museum employee would say, that is why it is priceless. Steve continued to look around and he noticed that a long line was forming to see a Special Exhibit of Rare Gold. It turned out that this special exhibit was the KING TUT GOLD exhibit. As the tour guide told the story of King Tut and Steve saw all the Gold, he knew why it was so valuable. First, King Tut was no longer alive and there was a limited amount of Gold Items in his tomb. Since the tomb was untouched for all those years, the quality of the Gold was still perfect. Steve knew from that moment on that anything of Historical value, in top Condition with low Supply would one day become Priceless. PAGE 4 For a free consultation with a Precious Metals Specialist, a price quote, or to place an order, call our

6 STEVE S KNOWLEDGE INCREASED HIS WEALTH Steve applied this knowledge to all of his investments. Steve knew that as long has an item has a FIXED supply and the DEMAND was steady, he would benefit. So when it came time to diversify into Gold, Steve looked for 3 Qualities: HISTORY, SUPPLY, and CONDITION. Steve knew that the world supply of Gold was large and that Gold mines around the world were still digging up more Gold and this would increase the supply which would dilute the value of bullion Gold. Steve asked his Gold dealer if there was Gold available that would never increase in supply. The dealer began to explain, that at one time, the United States of America was on the Gold standard and our money was made of actual Gold. Since the money was actual Gold, this limited the government to how much money they could produce. Steve replied, So there is a Limited Supply. The dealer said yes, and a bell went off in Steve s mind. He remembered the museum employee talking about what made the items in the museum so valuable, HISTORY, SUPPLY, and CONDITION. Steve knew he was on the right track! Steve asked the dealer how he would know if the Gold coin was the actual Gold from the government and not a reproduction or copy. The dealer began to explain that rare Gold coins should be Certified by a third party to AUTHENTICATE and GRADE the coin. Steve asked, what does GRADE mean? The dealer explained that it was about the CONDITION or state of preservation of the coin. The dealer reminded Steve that because these coins were real money, older coins tend to be worn from being handled. He then explained that it is not enough to have a coin of HISTORIC value if it is damaged or in poor CONDITION. TRUE RARITY comes when all three elements are combined. When a Certified Rare Coin is HISTORICAL, RARE & IN PERFECT CONDITION, the price of Gold Rising or Falling will have no impact on its value. This is when an ounce of Gold is worth more than an ounce of Gold. The Numismatic Specialists at The U.S. Gold Bureau will work directly with you to understand your needs and can help to recommend specific purchases to help you meet your objectives to protect your assets and grow your wealth. About the United States Gold Bureau The United States Gold Bureau is the leading authority on all things related to precious metals. Our clients from around the world look to The United States Gold Bureau for their investment needs in rare and modern US and foreign coins and currency. Our professionals have more than 100 years combined experience and are ready to assist you with all of your precious metals investing and coin collecting needs. When speaking with a USGB professional, you should expect to be treated fairly and to receive the most accurate information available to us. At The United States Gold Bureau we highly value our relationships with our clients. This dedication to our clients has allowed us to earn repeat business on a consistent basis. More than 80% of our clients are repeat buyers! Headquartered in Austin, Texas, the United States Gold Bureau maintains a technologically advanced facility helping to ensure that each order is processed and treated with tremendous care. We re confident that once you do business with us, you will become a client for a lifetime. We d enjoy the opportunity to speak with you, even if you are just interested in learning about how to invest in precious metals. Please call us anytime at 1 (800) or visit us online at www. usgoldbureau.com. for current news and information, tips on how to invest, FAQs, current recommendations, and much more. PAGE 5 For a free consultation with a Precious Metals Specialist, a price quote, or to place an order, call our