What I'm about to say will challenge even the most steadfast gold bears - or anyone for that matter right now who thinks that gold has seen its better days.
The chart below tells a story - a big story. In fact, I encourage you to forward this to anyone you know who is serious about their money.
What I found here, with the help of Frank Holmes from U.S. Global and one of the smartest people on earth on the potent combination of Asian markets and commodities, is a chart that shows a truly astounding fact about gold.
Let me walk you through it, and what it could mean to your money, your gold, and your financial future.
Click to enlarge
The grey backdrop is total world mining production. The blue vertical lines represent COMEX gold deliveries. And the big long vertical red lines? That's physical gold delivery on the Shanghai gold exchange.
The takeaway? - Chinese demand for physical delivery all by itself is nearly equal to total worldwide gold production.
That's not a misprint.
In fact, in January 2014 Chinese deliveries through the Shanghai exchange exceeded 100% of total global production all by themselves. The COMEX that's part of the New York Mercantile Exchange is almost an afterthought.
This is about as bullish as it gets because the basic laws of supply and demand stipulate that whenever supply is reduced but demand remains constant or accelerates, higher prices result..
Another reason for higher gold prices is the fact that Janet Yellen will prove to be more dovish than Bernanke.
Then there's the constant shenanigans in Washington endangering the value of the dollar. I don't know what was worse, the 16-day government shutdown last October, or the decision to raise the debt ceiling again in February without any fiscal reform.
But, all positively great for gutsy gold investors at a time when others want to relegate it to the scrap pile.
Plus, imagine what happens when people actually figure out that China is buying so much gold that physical deliveries there top 100% of worldwide production...
For investors wanting to play gold, there are quite a few options.
But one's the best.
Editor's Note: Recently uncovered evidence shows Chinese tanks are secretly smuggling gold into the country. To learn what this means for the dollar according to a CIA Advisor, click here.
Purists feel owning physical gold is the only true hedge against global turmoil and declining values in the dollar and other fiat currencies.
For smaller investors, this typically means buying gold bullion bars, rounds (unadorned coin-shaped pieces) or minted gold bullion coins.
Bullion bars - produced primarily by private mints like Engelhard, Johnson Matthey PLC (LON: JMAT) and Credit Suisse Group AC (NYSE ADR: CS) - come in an assortment of sizes to suit the needs and means of every investor.
The smallest bars weigh just one gram, while the largest weigh 400 ounces.
Gold rounds are produced by the same private refiners, as well as some government mints, and are also available in a variety of sizes, typically ranging from one-tenth of an ounce to five ounces.
Prices range from as little as $15 per round over the spot price of gold at the time of the order for smaller pieces to $40 over the spot for larger specialty pieces.
Jewelry-type pieces, such as pendants, are also available, but generally carry slightly higher premiums.
Minted bullion coins come in a far greater variety, being produced by most of the private refiners as well as a number of the world's leading government mints.
Examples of the latter include the American Gold Eagle, American Gold Buffalo, the Canadian Gold Maple Leaf, the South African Krugerrand, the Chinese Gold Panda and the Mexican Gold Libertad.
Specialty bullion "commemorative" coins are also available from both private and government mints, honoring everything from African wildlife to the spouses of American presidents.
Sizes range from one-tenth of an ounce to two ounces, with the one-ounce size being most popular and readily available. Bullion coin prices typically track the spot price of gold, plus a premium of 5% to 6% for the one-ounce issues, which covers the cost of refining, minting and marketing. Premiums on smaller coins can run as high as 15%.
Beware, however, that the premiums for all sizes will be considerably higher if you buy in small quantities or want to pay by credit card rather than with a bank draft or funds transfer.
The most important rule, whether you're buying gold bars, rounds or minted bullion coins - or any other physical metal, for that matter - is to deal only with reputable dealers with proven experience and clearly stated policies and warranties. This is especially crucial if you're purchasing by phone or online.
Several well-regarded, long-standing dealers in the U.S. include:
American Precious Metals Exchange (apmex.com) - This Oklahoma City-based firm offers both bullion and collectible metals products, as well as storage facilities. Quotes are updated every 15 minutes during trading hours.
Asset Strategies International (ASI) (assetstrategies.com) - This Rockville, MD, firm has a large inventory of gold coins, bars and other bullion products, and also offers regular metals markets commentary and analysis on its website.
Goldline International Inc. (goldline.com) - Based in Santa Monica, CA, this company has been in business more than 50 years and offers a full range of gold coins and bars from mints around the globe.
Physical gold provides a long-term store of value, but it does carry one added risk - the potential for government confiscation, much like what happened in 1933
That possibility is quite real. As such, if you're seriously considering gold as a hedge against future U.S. political or economic uncertainty, you might consider a storage site for your coins or bars in Canada or elsewhere offshore.
One added note for coin buyers: If what you want is a true hedge against turmoil, inflation and a weakening dollar, stay away from "collectible" gold pieces.
While such coins are beautiful and their value will no doubt increase along with gold bullion, those values are subjective, they carry far higher premiums than bullion coins and they're much harder to sell on short notice.
By contrast, bullion coins and bars are cumbersome for investors to trade given the price premiums, storage, shipping and insurance costs.
In this case, the ultimate trading vehicles are gold futures - the most popular being the 100-ounce contract listed on the COMEX Division of the Chicago's CME Group.
However, that's a fairly high-dollar/high-risk instrument for most investors since a single contract is worth $125,000 or more at current prices.
As such, a better vehicle for smaller investors wanting to play gold's next rally is one of the exchange-traded funds (ETFs) or notes (ETNs) with shares backed by actual bullion.
By far the largest and most popular of these is the SPDR Gold Trust ETF (NYSEArca: GLD).
The price of GLD shares, which are backed by physical gold and issued in blocks of 100,000, generally tracks the price of one-tenth of an ounce of gold, usually trading at a slight discount.
As of early July, the Trust held about 946 tonnes of gold bullion - the sixth-largest cache in the world - and the fund's market capitalization at the end of June was about $42.5 billion. It's also highly liquid with an average daily trading volume in excess of 1.7 million shares.
Another option for those with smaller budgets would be the iShares Gold Trust ETF (NYSEArca: IAU). Its shares are also backed by physical gold, but they're priced at just 1/100th the price of an ounce of bullion, also typically trading at a small discount. The fund has a market cap of about $7.3 billion and a daily trading value of around a half-million shares.
Finally, if you're really bullish, you might want to consider the Deutsche Bank AG Gold Double Long ETN (NYSEArca: DGP). It holds some physical gold but primarily employs futures and options in a bid to produce percentage gains double that of gold itself on any move up. (Of course, losses on pullbacks are also magnified.) Be aware, however, that this fund is more thinly traded - usually less than 50,000 shares daily - and has a market cap of just $200 million or so.
However you choose to invest, gold's fundamentals indicate it's ready to move higher, so don't miss your last chance to get in on gold while it's this low.
Editor's Note: The People's Liberation Army is covertly bringing gold into China to hide in its central bank "off the books." In this must-see interview, the CIA's Financial Threat and Asymmetric Warfare Advisor reveals why many in the U.S. Intelligence Community fear this secret stockpile will soon be used to launch an unstoppable attack on the U.S. dollar. Click here to see the shocking evidence...
