investing in gold- Money Morning - Only the News You Can Profit From.
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Precious Metals23
Seven Ways to Tell if Your Gold is Counterfeit
I had just finished a walking tour of the Royal Canadian Mint when I saw it. Right there, out in the open, was a 400-ounce bar of pure gold.
It was chained to a display table and kept safe by an armed guard. At the time, in 2005, the bar was worth $220,000.
Today, the same bar is worth $667,700. In just seven years, gold prices have jumped by 203%.
But it's not the eternal fascination with gold that has boosted the price. With growing levels of worldwide uncertainties, mounting inflation risks and government distrust, people are clamoring for gold primarily as insurance.
According to the World Gold Council, 2011 saw gold bars and coins reach nearly $77 billion in sales, versus 2002's $3.5 billion. And in November alone, the U.S. Mint's sales of the popular American Eagle coins jumped 131% in the wake of the election.
With the market for gold growing at a feverish pace, it's now more important than ever to know that your gold is the real deal-especially with gold prices looking to break through the $2,000 mark in the new year.
Here's why...
Gold counterfeiting is nothing new. In fact, just recently there were reports of fake gold bars from China turning up in New York. Instead of gold, their centers were stuffed with tungsten.
But rest assured there are a number of methods you can use to mitigate the risks of ending up with counterfeit gold. Some are simple, quick and inexpensive. Others are more elaborate, detailed, and not so readily accessible.
Here are seven ways to find out if the gold you own is real:
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Precious MetalsGold Prices in 2013 to Go Higher Thanks to These "Wars"
Gold prices in 2013 are already expected to top $2,200, and adding fuel to that price surge is an accelerating trend in the global economy.
We're talking about currency wars.
The term currency wars describes a race between many of the world's central banks to make their currencies worth less relative to other currencies, with the goal of increasing exports by making them cheaper.
Such a strategy becomes less effective as more countries join in the battle, but a growing currency war has another effect that investors can exploit: As central banks devalue their currencies, they create inflation and cause hard assets like gold to rise against them.
Fortunately for gold investors, most of the world's central banks, from the U.S. Federal Reserve to the Bank of Japan, are expected to further step up their currency devaluation in 2013.
"Implementation of the European Central Bank's Outright Monetary Transactions, andfurther Bank of Japan easing -- both of which we expect - [will] support gold, aswould a weaker outlook for the yen, which competes with gold as a flight-to-qualityasset," wrote UBS analyst Edel Tully in a recent research note.
Why Currency Wars Will Get Worse in 2013
While the central banks' easy money policies have been aimed at stimulating their own sluggish economies, the effect has been to strengthen other world currencies, particularly those in emerging markets.
That has made their exports more expensive, hurting their economies. And they've had enough.
"Advanced countries cannot count on exporting their way out of the crisis at the expense of emerging market economies," Brazilian Finance Minister Guido Mantega said at an International Monetary Fund Meeting last week. "Brazil, for one, will take whatever measures it deems necessary to avoid the detrimental effects of these spillovers."
Mantega singled out the Fed in particular, calling its bond-buying QE3 (quantitative easing) program "selfish."
Emerging economies are also uneasy about the recent election of Shinzo Abe as Prime Minister of Japan. Abe and his Liberal Democratic Party are expected to push for as much as $120 billion of stimulus spending plus call on the Bank of Japan to print piles of yen.
"It's almost obscene what they're talking about doing," John Mauldin, chairman of Mauldin Economics, told The Daily Ticker.
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Precious Metals16Your 2013 Guide to Investing in Gold
Gold bullion, gold stocks or no gold at all?
I put that question to Real Asset Returns Editor Peter Krauth last week.
You see, there's a lot of interest in investing in gold right now. Or perhaps I should say that there's a lot of interest in what gold might do.
And you can certainly understand why.
From its November 2008 market lows, the SPDR Gold Trust (NYSE: GLD) - the No. 1 proxy for the "yellow metal" - rose as much as 158%, reaching its peak in September 2011. But it's down about 13% since that time (though it's up 5% year to date), and a lot of folks are wondering what gold is worth, and how they should play it.
Wall Street has grown more tepid on gold, with many of the investment banks ratcheting back just a bit on their target prices. But most also see prices heading up to and beyond the $2,000 level in 2013, meaning they see a potential gain of 22% or better.
Peter's target price is a bit more aggressive: He sees gold trading as high as $2,200 an ounce - 34% above current prices in the $1,640 range.
I've worked with Peter for several years now, and admire the way he works.
He based himself in resource-rich Canada in order to be closer to the many companies that he covers. And he's made a number of truly superb market calls: In September 2010, for instance, when silver was trading at $19 an ounce, Peter told investors the metal was a "Buy" - and we then watched it soar to a high of $48 (a 153% windfall).
So when I decided to bring you the latest insights on gold - and some recommendations, as well - I went to Peter.
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Precious MetalsWhy Are Gold Prices Down?
Gold prices plunged Thursday, hitting lows not seen since August, after the U.S. Commerce Department reported an unexpectedly robust reading on third quarter U.S. gross domestic product (GDP).
After the surprising strong report, February gold tumbled $14.50 an ounce to $1,653.50 and spot gold sank $22.80 to $1,643.10.
Silver prices fell as well, losing $1.13 to $29.95 shortly before noon. Prior to the report, the yellow and white metals were little changed.
The fresh report revealed GDP in the third quarter expanded at an annual rate of 3.1%, the fastest growth since late 2011. That was up from the 2.7% pace logged last month, and better than economists' expected 2.8% rate.
Phil Streible, a senior commodity broker at R.J. O'Brien & Associates in Chicago told Bloomberg News, "The GDP number was better than forecast, so the thinking is that improving conditions in the economy might mean a light at the end of the tunnel on when the Fed will end QE3."
Gold and silver have been big beneficiaries of the FOMC's generous QE3 programs.
But there's more than the end of QE measures as to why gold prices are down.
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Gold Prices: What Happened to the Rise?
- Money Morning Staff reports
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Gold Prices: Where to Now After the Sell Off
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How Gold Miners Can Effectively Leverage Gold Prices
- By Frank Holmes, Guest Writer
Gazing into their crystal balls last week, Wall Street firms interpreted differing futures for gold next year.
Morgan Stanley awarded gold the "best commodity for 2013" while Goldman Sachs called the end of the metal's hot streak.
After seeing 11 consecutive years of positive performance from gold price, one needs to be wary of research analysts' price forecasts, as they have consistently underestimated the shifting dynamics driving the precious metal higher.
Take a look at analysts' annual predictions of gold prices, which is "a telling picture," CEO Nick Holland of Gold Fields told the crowd at a mining conference last summer.
From 2006 through 2011, Bloomberg's contributing analysts have forecasted that future gold prices would be lower. "The analysts who keep telling us the gold price is going down have been wrong seven years out of seven. That's a remarkable track record!" says Holland.
Take a look at the chart...
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Precious Metals24Will the Government Confiscate Your Gold?
Whenever I write about gold, I can be certain of two things.
First and foremost, I know that readership will be exceptionally high. The interest in gold, silver and other precious metals is as intense as I've ever seen.
And, second, I can be sure that, in the days that follow, I'll receive a slew of e-mails, phone calls and letters from folks asking some variation of the same three questions:
- What are the chances that the federal government will confiscate my gold?
- Can I put gold in my IRA?
- And how much gold should I hold?
To give those newcomers a unique (and informed) perspective on these questions, I picked up the phone and called industry colleague Rich Checkan at Asset Strategies International (ASI), a precious-metals and foreign-exchange dealer that operates out of Rockville, Maryland ... just down the highway from our own offices here in Baltimore.
ASI is a veteran player, having just celebrated its 30th anniversary, so I was certain that Rich and his staffers would have something of value to say on these topics.
On that point, I was right.
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Gold1Investing in Gold: What to Expect from Prices Before 2013
It's been a down week for gold prices, reaching one-month lows, but on Thursday, things began to turn around for the precious metal.
Due to short-covering in anticipation of Friday's employment numbers and comments from European Central Bank (ECB) President Mario Draghi raising expectations for an interest rate cut, Comex February gold rose $8 an ounce to $1,701.80.
Gold exchange-traded funds (ETFs) also had a good day on Thursday as they hit record highs of 76.133 million ounces.
Peter Spina, president of Goldseek.com said to Investor's Business Daily of Thursday's levels, "If gold does remain around these levels for the near term (several months), this remains a very healthy gold market, which will set the tone for the next move up."
After the November U.S. jobs report, which had been expected to be skewed from Superstorm Sandy, came out better-than-expected on Friday, gold went above $1,700 again. Expectations for Federal Open Market Committee (FOMC) easing fell a bit.
Until the Dec. 10 and Dec. 11 FOMC meeting ends, investors are expected to hit the sidelines.
At next week's meeting, FOMC members will decide what to do with "Operation Twist" as it comes to an end. Many think they will extend it, plus implement a "QE4."
This would be good for the precious metals markets. But gold prices are affected by much more than the FOMC.
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Precious Metals1How to Buy Gold: Don't Miss the Yellow Metal's Next Move Up
With experts predicting rising gold prices for at least the next year, it's no surprise that more and more investors want to know how to buy gold.
According to the facts and figures cited last week by Money Morning Global Resources Specialist Peter Krauth, 2013 should be a banner year for gold. Krauth projects prices for the primary precious metal could easily climb from the current $1,704 an ounce to $2,200 - or even more - a one-year gain in excess of 25%.
That means every serious investor should have at least some gold in their portfolio.
That raises two immediate questions:
1) What are the best vehicles for investing in gold; and,
2) What are the best ways to buy the yellow metal?
For each investor, the best approach to how to buy gold depends on your goals and expectations.
How to Buy Gold
If you're worried global political and economic tensions will intensify, then holding the actual physical metal is your best choice.
Possible flash points include strife in the Middle East, a meltdown in the Eurozone debt crisis, a continued slowing of China's growth rate and, of course, the U.S. fiscal cliff crisis, which could plunge America and perhaps the world economy back into recession - or worse.
Under such conditions, purists feel holding physical gold provides the only truly effective hedge against almost certain declines in the value of the dollar and other fiat currencies - declines that could be amplified by sharp reversals in global financial markets.
For smaller investors, how to buy gold in physical form typically means buying gold bullion bars, rounds (unadorned coin-shaped pieces) or minted gold bullion coins.
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