However, despite this apparent setback, gold is actually in a good place and should do well. Consider the fact that the dollar is still in a bad state; the only reason it has improved now is because the Euro is currently worse. Once the situation in France stabilizes and Hollande takes office next week, the Euro will improve while the dollar will continue to do poorly. If gold had jumped record amounts in a single day, I could understand some concern, but it is still riding the high peak of the past year. In an article for CNBC, John Carney diagnoses gold as declining every time that a government responds to economic crises. He uses 2008 as an example, citing that the price of gold dropped down to $800/oz. when the crash occurred in September. What he doesn’t mention is that today, despite being a “low” day for gold prices, the current value of gold is $1600/oz.! When the value of an item is, on the whole, twice what it was three and a half years ago, I think it’s safe to say that that market is doing very well! Furthermore, gold may have had an unstable period in late 2008 when the crash occurred, but soon went back up and actually ended the year higher than where it began! Clearly, whatever the day-to-day situation may be, it is fundamentally a good time for gold. And holding onto gold as a hedge against economic collapse has been a proven strategy for many, regardless of the occasional drop in percentage points.

A recent blog by columnist Richard Russell compared the situation to the recent news story of an anonymous man purchasing Edvard Munch’s painting The Scream and points out that the painting will always be valuable whether under the wildest inflation or the worst deflation. He also proposes the following: “If I asked you to leave something for your great grandkids in a package to be opened one hundred years from now, would you leave them a wad of hundred dollar bills or one hundred gold coins? If you had any brains you would pick the gold coins. I’d venture that Warren Buffet would also pick the coins.” You can argue that using gold as a hedge is not foolproof, but everyone is aware that as long as inflations and crises occur, a hedge is needed. And gold is the best hedge we have.

 Each of these silver bars will be one troy ounce and made of 99.9% solid silver, with a size of about 28mm x 50mm (1 1/8 inches x 2 inches). The front will be stamped with a purity mark stating “Fine Silver .999.” Each bar will also contain its own unique serial number stamped on the bottom. Finally, the back will be stamped with the Johnson Matthey logo. A troy ounce is equal to about 0.07 pounds, so, as you can imagine, being so light makes them extra convenient to carry around, store, or trade. In other words, they’re very liquid! These bars will be produced as part of a partnership between Johnson Matthey and Sunshine Minting, another major supplier of precious metals that is known for offering custom printings to their customers. Not only can you be assured that each bar will have purity in its content, but that it will be finely crafted and an attractive symbol of wealth. Johnson Matthey is currently in the process of setting up distribution channels across the United States and Canada.

So why are these bars coming back on the market now? As mentioned before, while bullion coins have a certain collectible charm to them with nationalistic implications, a bar is simply precious metal. It is an item that drops all the fancy pretense and is designed solely to be traded. From the oil crisis of the 1970’s to the mid-1980’s, investor interest in precious metals was at a peak that saw the mass production of silver bars by both JM and Engelhard, only to be discontinued during the Reagan years. Now that the country’s economic future is again uncertain, JM is wise to come back in style and market silver bullion in a way that is accessible to anyone. It is always wise to safeguard your wealth, and someone with only a small amount of money to spare can invest in precious metals as much as someone who can make a large purchase. Given JM’s historic standing and the previous history of these bars, as well as the ongoing anxiety in our economy, these items should make quite an impact. As a very large customer of Johnson Matthey, we will be among the first to receive these new bars in our inventory. Come to Bullion Trading to learn more about these bars, as well as other similar items for your investments.

            The prospectus makes a number of statements that will surely raise a few eyebrows, starting with the claim that any bullion found in the vaults that do not “meet the standards of the vault it is stored in” will be written off as a loss to the investor.  So is GLD storing bars of counterfeit gold, fully aware of this deception, with the intention of not officially “discovering” the forgery until after the time of purchase?  If so, it begs the larger question of whether or not GLD actually owns any physical gold to begin with or if it is all simply “paper gold” that they are selling to customers.  The prospectus also states that GLD does not oversee the actions of their sub-custodians, and if those sub-custodians were to commit theft from the fund, any legal action against them would be very limited.  Imagine if there was a bank that offered to store your finances but could not be held liable if those finances were then tampered with by either their employees or some other middleman you don‘t even know.  Not only would you not trust such a bank, but they would be a contradiction to the very definition that we hold banks to be.

            But the smoking gun is a short passage in the prospectus that flat-out forbids trustees from being able to visit the vault and see the physical gold they have purchased.  The reasoning behind this is that the fund wishes to avoid having visitors or have to expose their precious assets to strangers, which is a fair concern, but the poor choice of wording is definite cause for alarm and raises a number of red flags.  There is a famous quote by the late political commentator Christopher Hitchens: “That which is asserted without evidence can also be dismissed without evidence.”  To apply that statement to this example: if a merchant asserts they have sold you gold but cannot produce the item, then there is no difference between them and someone who never had gold to begin with.

            This is not to say that we are making any direct accusation at GLD; in fact, as a fellow participant in the bullion trade, we understand the large number of risks involved and why merchants will want to use wording that protects themselves at all times.  We also acknowledge that for a $68 billion operation to be a scam would be a rather extreme conspiracy.  But the bottom-line is that we advise all investors out there to always exercise caution and be willing to overanalyze every bit of fine print on any prospectus.  Again, this is why it’s always important to do the necessary research before the time of sale, whether you are the buyer or seller.

            One nice advantage about Bullion Trading is that our rules of conduct are almost the polar opposite of GLD’s; we require the customer to be physically present at the time of their purchase and encourage them to inspect the gold themselves, which they can then carry on them when they leave.  And while we do not parade the gold in our vault out to strangers for obvious reasons, we make it no secret what our business is, and we are certainly happy to discuss our gold with anyone who comes in.  This is why, once again, a trusted bullion dealer is a great place for a new investor to start before moving on to any major trust fund.  As for GLD, their situation should give us all pause.  If nothing else comes out of this news story, at least it will motivate investors to start reading the prospectus a little more closely.

His brother, Franz Ferdinand, is especially notable in the history books, as his assassination is regularly cited as the catalyst for World War I. One troy ounce Coronas have a 35mm diameter and 90% purity. This means they are only 21.6 Karat gold. They were minted in denominations of 1, 2, 5, 10, 20, and 100 Corona. So why is 1915 such an important year? It was then that the coin was discontinued. This would seem extremely appropriate, being one year into the Great War and one year away from Franz Josef’s death. As a result, any and all Corona coins found with a 1915 date are official restrikes from later dates. This makes 1915 a year of infamy that has continued to produce gold throughout history since long after it has ended. Today these coins remain notable collector’s items and so much a part of Austrian history that it’s no wonder gold coins were later reintroduced as legal tender in the form of the Philharmonics. Obviously, someone new to the gold scene may prefer coins that are currently active, as well as ones in higher purity, such as the Canadian Maple Leaf. Yet, a serious investor should not be deterred by the Corona’s current status but really look at the global picture. In 2008, at the height of the financial crisis, Austrian gold proved to sell better on a global basis than Eagles or Krugerrands! Austria’s unique place in history and both world wars give it a certain mystique, and perhaps this makes its gold seem to be “more stable” that those of other economies. So, with the economic future still uncertain, any investor who wishes to hedge his finances for the international market would do well to familiarize himself with the Austrian Corona.

            Iran’s turn to gold has been partially instigated by sanctions placed on them by the United States government and the European Union.  Yet how ironic that, while the Euro and U.S. dollar are inflating and going through crises, Iran prospers under its use of gold.  It once seemed that purchasing gold was the only way to “preserve one’s wealth.”  Today it seems that gold is the only wealth there is, and exchanging it for cash is a major liability.  Consider the fact that a single dollar bill is no different than a hundred dollar bill; both are made of the same paper, designed with the same ink, and weigh exactly the same.  What makes the second bill worth anything more than the first?  Just that a different number happens to be printed on it.  Both are essentially worthless items that are only given value by consumer-confidence in the government that issues them, a government that could theoretically print out more if need be.  The whole system is artificial.

            On the other hand, gold is made valuable not because of any numeric designation but because of its literal content and density.  It is a scare item that cannot be printed at will and is valuable through its very existence.  Two tons of gold are worth more than two kilograms of gold not because of any random number are printed on the item, but because there is a larger physical quantity of the material.  Its greater value is obvious.

            And yet, Federal Reserve chairman Ben Bernanke was famously quoted as saying that he did not consider gold to be money and that most central banks only hold the precious metal as “tradition.”  It would seem that Bernanke is so caught up in a “traditional” mindset of the national fiat that he is not in touch with the current economy, in which a global form of currency is required and gold appears to be the only commodity with enough value and recognition to take that spot.

            Iran’s use of gold in its international trade may be a major step towards legitimizing gold as the “new money” and lead an example that the rest of the world will slowly follow once certain economies begin to recover quicker than others.  Perhaps Iran is on to something that our Federal Reserve has not yet seen because it is too caught up in “tradition.”

            So says Franz Herrmann, president of the German Association of Savers, and he makes an excellent point.  Now, perhaps more than ever before in recent history, the public is harboring a strong distrust against the fiat.  Even during the Great Depression, the devastation was not such a global level as today.  Now, with multiple economies proving unstable and banks having lost credibility, many are turning to gold not because they are following its daily performance, but because it’s the only form of “banking” they feel is available to them.

            Part of gold’s appeal is the fact that you know exactly what you’re getting with it.  You are exchanging your cash for a gold bar.  No matter what happens, that gold bar will still be “in business.”  Ten years from now you can trade in that gold bar and retrieve your wealth.  The exact value of gold may not be what it was when you first made the investment, but the gold will always have value and be a reliable way to secure wealth.

            In theory, this is what a bank should be: a simple vault where one can store wealth and withdraw at will.  But in the last few years, banking has become more and more complicated.  For example, banks offer credit in exchange for interest at rates that are often unstable.  They can deduct fees from your account or even freeze your account whenever they decide to.  Worst of all, they are corporate businesses that can go under like any other corporation.  Depositing in a bank is no longer the equivalent of storing something in a vault; it’s more like making an investment in something that can easily yield a loss at any time.  Bank politics have earned the public’s distrust. 

            This lack of faith is especially evident in Germany where gold has been steadily on the rise throughout the euro crisis.  Herrmann’s case is interesting in that he realized that his attempt at saving money was actually causing him to lose money!  His account’s interest earnings were being eaten up by inflation, and the fear of currency devaluation made him realize it was too risky to keep his wealth in its current fiat-form.  Other forms of “wealth preservation” such as bonds and life insurance were no longer providing reliable returns.  Trying to save money through a bank has become, as Herrmann labeled it, “state-sanctioned robbery.”  This led him to start the Germans Association of Savers, which specializes in gold coins, and today includes a staff of over a hundred employees.

            In the present situations Germans are turning away from banks and towards other forms of investments, such as art, vintage cars, and real estate.  Art can be considered a lucrative investment in that a painting is an item that is never consumed; it is merely hung on one’s wall and its worth could potentially increase over time as it ages and the reputation of its artist possibly expands.  One German car-dealer, Diethrich-Gothard Gross, has capitalized on this investment craze by manufacturing expensive cars to be purchased only as investments and not for actual usage.  Imagine purchasing a car worth half-a-million dollars only to never once use or even register it, but just as an investment to hopefully return one day for a profit.  Yet in the current crisis with inflation believed to rise by as high as 6% in the next few years; even luxury purchases such as these are unreliable.

            Fortunately for Germany, the nation does have one reliable stock: the St. Pauli soccer club in Hamburg, which has been a thriving business since 1910 and survived multiple depressions.  In recent weeks, approximately five thousand fans have purchased $7.7 million’s worth in stocks of the club.  Sadly, the rest of the world does not have such a reliable national stock to invest in, and so for many of us, the stock market is, just like a bank account, another shaky investment and unreliable way to preserve wealth.  Gold is the only item that remains “crisis-proof.”

            Harttmann’s foresight has served him well and today he has remained afloat by turning to gold, arguably the only secure investment there is.  Yet, imagine a future of almost no banking institutions or stock markets, with private ownership of gold having become the dominant form of storing wealth.  Will that be a good thing, and will a nation prosper under such a radically altered economy?  Will governments react well to the knowledge that their citizens do not wish to use their state-sanctioned currency but rather a non-sanctioned physical metal as their form of finance?  In a sense, we cannot really give a definite answer, simply because we are entering an economic period unprecedented in history.  However, if any item of value has a proven track record lasting millennia, it is definitely gold, and as Germans are discovering, for the present it remains the single strongest safeguard against poverty.

 Whether or not gold is truly “dead” comes down to how you view gold and what you do with your purchase.  Investors can be divided into two further sub-groups: traders who will be selling gold for immediate profit as if they were selling stocks, and long-term investors who buy gold as insurance, particularly in times of uncertainty.  If you are a trader, perhaps you could listen to Gartman; the damage that has been done to the price of gold this year may be detrimental.  However, I advise all long-term investors to hold onto their assets right now.  And 2012 is expected to hold a strong performance for gold.

 Due to the bank solvency crisis, the Euro could disappear, but currency will continue to be printed.  For Germany not to relent on this issue would be the same as inviting a deflationary depression.  Once money is allowed to be printed once more, gold and silver are expected to advance!  Gold could be expected to close 2012 at over $2,500!  Meanwhile, the US continues to have an unstable economy, but I find it highly unlikely that the government will allow too much depression to occur during an election year.  We can look forward to more money being printed and for markets to be very active. 

 Beyond 2012, the continuing rise of debt and talk of a future global meltdown all put gold in a very reliable place.  There is also always the possibility of a future war, particularly now with relevant events unfolding in the Middle East and US’s loss of its spy drone to Iran.  This doesn’t mean we should run to push the panic button yet, but let’s just say that military conflicts are never good for the economy.  And economic instability leads to a bull market for gold.

 Of course, like any doomsday prediction, fear of losing wealth is something to be wary of, but it certainly does instigate a sense of caution and suggests holding onto gold as a future insurance.  This current price pullback should not be seen as a sign to flee from gold, but rather as an invitation to buy up as much insurance as one can, as, all things considered, it actually seems irresponsible to not have some gold!  If this dreaded meltdown were to happen tomorrow, those of us with gold would be in a much better position than someone who has stocks.

 The price pullback may send some panicking, but as bizarre as it may seem, both history and my own experiences in this business have shown that the best investments are always made at the scariest times.  The beginning of the Gulf War, or the early months the market crash of 2008-09, may have been a distressing period, but those who invested in gold during those periods eventually discovered a rewarding outcome!

 Gold is the only “stock” in history that has been valuable since Biblical times.  It has a track record of reliability spanning millennia!  And much like the Biblical story of those who built and worshipped a golden calf, today it seems our traders only worship market of instant profits, unaware of the golden bull; that is to say, a bull market that exists and continues to deliver based on consumer confidence.  If gold seems like a bear market today, it is only because the investor is looking with the intent of trading gold in the immediate future.  An American investor who is thinking long term are well aware of the powerful and fertile bull out in the field, ready to charge in and drive the bears away.