Thinking about investing in gold, but not sure what is the safest way to do it? The other day, I shared how I delayed receiving my second passport by making three basic mistakes. One of those mistakes was simply not letting the experts be the experts. These days, I make great efforts to not only go to the experts and pay them for the true value of their knowledge and services but, when possible, I also curate the information I gain from my network to share it with you.
Not too long ago, my friend Claudio Grass — an expert in the gold business — shared the short version of his top ten tips for buying gold. Knowing the wealth of knowledge he possesses, I asked him to sit down for an interview so we could create the long version of that same list. His insights into the world of gold did not disappoint.
Claudio built up a precious metal company called Global Gold several years ago that focused on trading and storing physical gold under Swiss law.
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After six years in the business, he resigned from the company in order to promote Switzerland as the best place to store physical money. From his years of experience, he has created powerful connections with the best gold companies in Switzerland and Liechtenstein — many of which were previously his greatest competitors. As a gold consultant, he is now able to refer clients to the right companies, helping them create tailor-made solutions for buying physical gold and storing it in the right jurisdictions to protect their gold investments outside the banking system.
Anyone investigating gold and silver needs to understand that its basic function is as money. Gold was used as money for years. It was only in when Nixon went off the gold standard that the whole world began to transition into the fiat system using paper money that is not backed by gold. Before that, all paper money was backed up by gold.
This is especially easy to see if you look at the commodity exchange market — COMEX — where they sometimes have over paper claims for every ounce of physical gold regularly available at the COMEX. The leverage in the system is huge because so many people believe that they own gold on paper.
However, if they want to claim that money, they will quickly find out that there is not enough physical gold available. Buy it physically because there are even certain paper products that do not guarantee that you actually own gold. On top of that, you are not allowed to ask for physical delivery and, quite often, they have cash settlement clauses, which means that the bank can pay you out in cash instead of physical metals in a harsh monetary crisis or war.
Also, make sure that you receive the exact details of the items that you own, including bars numbers, hallmarks, etc. If that is your situation, you should buy small gold coins directly and store them nearby where you live so that you have quick access to your gold storage in a harsh crisis scenario. If you have more money and you really want to allocate parts of your wealth into physical gold, then it makes sense to go into jurisdictions that have strong private property rights. The best jurisdictions you can find these days are still Switzerland and Liechtenstein, especially when it comes to physical precious metals stored outside the traditional banking system.
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Just make sure that whenever you elect a gold storage company, you know that you are the owner of the gold, that the gold belongs to you directly, and that the company you are dealing with cannot pledge it, hedge it, or lease it out. That is vital. You want to get as much gold for cash as possible.
The main rule is to build up your liquid gold and silver stock. This means you should invest in legal tender coins such as the Maple Leaf, the Austrian Philharmoni c, or the Australian Nugget. Just make sure they are a legal tender and that they have a low fabrication fee. When you buy, the price of the physical ounce of gold should be as close as possible to the paper spot price of gold. That is always the underlying way you calculate the value of an ounce of gold.
Then, on top of that, you have to pay the fabrication fee which the dealer has to pay to the mint to get it physically produced and then you pay a brokerage fee for all the work the dealer has to do before you can get it delivered to you in person. It really depends on the setup, but that is the general price range. As soon as you are happy with your stock of smaller dominations coins, you can move up to bigger formats. Be cautious when looking to buy from phony sources. Try to find out what certificates a precious metal dealer who has a store may have.
It is also important to know this rule of thumb: the smaller the unit, the higher premiums clients are willing to pay. This means that buying a one-kilo gold bar will always cost less in terms of premium over spot than buying a one ounce coin. What about numismatic coins?
Anyone wanting to buy rare coins needs to fully understand the numismatic business before making any big decisions. You need to know the coins.
Numismatics can have a huge up price. The market could pay two, three, or even four times the price of a regular ounce of gold for an old coin.
Gold is monetary insurance as well as a means of building up savings over a longer period of time. In this case, that means you need to have an investment horizon. Instead, ensure that you are buying and then putting the gold to the side. It acts as a store of value. You can do it for a certain period of time, but one day the debt has to be repaid.
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The world financial system had trillion of credit in ; today, we are standing on almost trillion of credit. Everything has an end and this debt orgy that we have been witnessing for the last 50 years is going to end as well. That is why you should be putting liquid gold on the side. You will want it to be liquid. A lesson from the past: During the Weimar Republic in Germany when inflation ran rampant, an ounce of gold could purchase a house and a silver ounce could pay the farmer to have chicken for the next four or five weeks.
If a similar situation were to arise today, you will be able to use gold for bigger opportunities and silver to finance smaller things. Anyone who wants to buy gold must save first before they invest. That is the backbone of a healthy economy. The current system relies on debt, credit, and consumption — the exact opposite of a healthy economy. If you buy gold, use your savings, put it on the side, and make sure that it is fully yours.
You never know what the market is doing and you may have to pay back your credit before the price of gold rises.
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Use your savings. You have to give up certain wishes today so that you are able to profit from your investments in the future. As I mentioned earlier, you should always have access to some gold. You can put it in a safe at home or bury it outside — whatever you want — just make sure you can find it. The key is to have direct access to your gold if something happens.
You should have your insurance outside the country. The United States, for example, confiscated gold back in under Franklin Roosevelt. Switzerland, on the other hand, was the last currency to go off the gold standard. They have always had a currency — even during wartime — that could be exchanged for physical gold. For anything less than that, keep it nearby. Because of the issues discussed above, you should store some of your gold in a safe jurisdiction where the power of politics is limited.
Switzerland is one of the safest jurisdictions because they have seven presidents and a decentralized political system.
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