As we discussed in Gold Tells the Truth, gold really represents fiscal honesty.  And as long as the Fed keeps printing money and the balance sheet keeps growing, there’s every reason to believe gold and silver will continue to rise.  Yet, somehow many people are still not convinced about gold.  They find every reason in the world to talk themselves out of buying gold and keeping their money in cash or the stock market.  Underpinning their fallacious beliefs about gold are what I call “The 7 Deadly Myths of Gold Investing.”  So I wrote the "7 Deadly Myths" book to counter these deadly myths and reveal the 7 empowering signs that now is, in fact, the absolute right time to invest in gold.

Why do I call the fallacious beliefs that prevent people from investing in gold “The 7 Deadly Myths of Gold Investing”?  Because quite honestly – as we tell our Wholesale Direct Metals clients – failing to balance your investment portfolio with gold and/or silver can literally be deadly to your savings and investments.  Yet sadly, many of the concerns people have about gold are simply based on myths.  And once you learn the truth about gold, you’ll realize why gold is absolutely fundamental to your overall investment strategy.  So let’s examine the 7 deadly myths of gold investing.

Deadly Myth #1:  The Gold Boom is Over

You’re no doubt aware of gold’s tremendous performance over the last several years, and maybe you’re a little nervous that it might be too late to get in on the gold boom.  As a longtime gold dealer at Wholesale Direct Metals as well as an experienced gold investor, I am often asked about gold’s price action.  These days the questions tend to have a bubble-ish tone to them.  The “gold is in a bubble” debates are the easiest one’s to counter, albeit the most frustrating.

When someone asks me about gold prices being in a “bubble” or gold’s price action resembling the tech stock market of the late 90s or the real estate pandemonium of 2007, they’re forgetting a crucial fact about bubbles:  For a true investment “bubble” to exist, you need penetration and participation on a massive scale.  In the late 90s right before the NASDAQ blew up, everyone owned tech stocks.  Tech stocks made up a large portion of people’s investment portfolios, and penetration and participation in them was deep and aggressive.  Look also at the real estate bubble.  Participation was so deep and combined with so much leverage, that in order to melt down, the market didn’t even need to fall; it simply needed to stop rising as fast.  Lenders would loan money to anyone with a pulse.

By contrast, ask your friends how many of them have bought even a single ounce of real investment gold, let alone a significant portion of their savings or investment capital in real gold or even gold stocks.  I can already tell you the answer:  not much, if any.  Gold makes up 1 to 1.5% of the average American’s portfolio today.  It’s even less of a percentage in 401Ks, IRAs, pensions and other retirement accounts.  Yet because of gold’s price, people want to talk bubble?  Forget the price.  The fundamentals that caused gold to double over a three-year period are not only still in place, they are accelerating.  Debt, money printing, political indifference, global slowdown, lack of fiscal faith in policy makers, and global uncertainty all mean that now is still a great time to invest in gold.

The concern over gold being in a bubble also says something about the perception of today’s fiat currency, the US debt and other forms of paper or “debt-based” savings.  Or it simply illustrates the very common lack of understanding in monetary policy or, and even more importantly, the history of money.  People who worry that gold is in a bubble are typically comparing what gold is worth in terms of paper money.  Their perception is that green paper is a viable benchmark for the cost of goods or assets to be priced in, and they couldn’t be more wrong.

By contrast, the central banks that control the world banking system use gold as their store of value and backing to their currencies, because gold has a real value that cannot be debased by monetary policy the way paper money can.  Simply put, the more your paper gets diluted, the more your purchasing power is eroded, and the more you need to switch your faith out of paper money and into gold.  I try my best to help my clients understand that there is an end-game to debt-based savings and living beyond our means in a debt-based economy.  Gold’s upward limit can really only be calculated in terms of fiat currencies’ downside limit.  Yet if a currency’s downside limit is zero, think how high can gold go, considering it has outlasted every fiat currency ever made.  It’s clear that gold will keep rising as long as debt accumulation persists and fiat currencies continue to be debased.

Deadly Myth #2:  Gold Is Too Risky of an Investment

We all worry about risky investments.  Yet gold and silver often get lumped together erroneously with other paper-based “investments” in the risk basket.  I would argue that they should not be, especially gold.  As I tell my clients, gold is one of the least risky places you can store your wealth, and it has also been one of the least risky places to find yield.  Investments that work are ones that go up and have intrinsic value.  Dollars in the bank or government bonds are nothing more than debt-based savings, while gold is real savings.  When you consider what the bank is paying, real negative interest rates, and current Fed policy, sitting with your money in a bank has proven to be much riskier than gold.

In addition, looking for wealth preservation or yield in the equities market certainly must be considered risky given it’s volatility and downswings, not to mention possible failure.  When I hear people say they perceive hard gold ownership as “risky,” I can’t help but hope that they are capable of a change of perspective, because it’s their faith in paper that should be seen as risky and is misguided in our professional opinion.  When paper provides no return, loses value, loses people’s faith, and is intrinsically worth zero, hard monetary-based assets like gold and silver are the least risky assets.

Deadly Myth #3:  There Are Better Performing Investments

It may very well be possible that you can think of an investment that has done better or “might” do better in the future, but with how much risk?  Remember, we’re not here to hit home runs for people based on performance.  Gold is not a purchase you make to get rich quick.  Rather, it’s an asset you hold so that you don’t get poor quick.  Its purpose is to protect against the kind of wealth destruction we saw in 2008 and have seen for 10 years while we’ve run massive deficits.  Gold’s main purpose is to act as a wealth preserver and wealth protector.  That said, gold has “performed” quite well also.  20% yearly growth on average every year for 11 years in a row is what I would call stellar performance.

Gold’s gains are largely due to the effect of the printing of fiat paper and accumulation of debt.  It’s the indicator and yard-stick against which the debasement of fake (printed) money is valued against.  If you’re looking for “performance,” you should look for it elsewhere in your portfolio, and remember that “performance” equals added risk by default.  You buy gold to hedge the items of perceived performance in your portfolio, but don’t be surprised if gold continues to outperform most everything else if we keep printing currency, accumulating debt, and spending money we don’t have.

Deadly Myth #4:  I’m Too Old to Buy Gold

We have a number of clients at Wholesale Direct Metals who are retired and elderly.  As they get older, naturally they become more cautious about their investments, and that’s a good thing.  Yet none of us would ever say, “I’m too old to protect my wealth,” or “I’m too old to grow my wealth,” or “I’m too old to take a defensive position and hedge the collapsing monetary world around me and protect myself from the madmen trying to centrally plan the global economy, and failing!”  Okay, the last one might be a little dramatic, but the concept that, once you’re old your money belongs in a bank, is a very dangerous one.  I would argue that with negative real interest rates (banks paying a lower interest rate than inflation), it is even more important for a retiree or someone on a fixed income to have a hedge against dollar debasement and inflation.  The older you get (and no longer work), the more important safe yield becomes.

Once you become too old to work anymore, you have to look at the longevity of your wealth and invest it in such a way that it lasts longer than you.  If or when all this money printing becomes real inflation and your expenses go up but your income doesn’t, you better have your savings in a safe place where it can get yield.  If expenses are rising -- energy costs, water, food, gas, etc.  -- gold will be rising too by its very nature as a dollar-denominated hard asset.  So owning gold is even more important as you get into your “golden years.”

Deadly Myth #5:  Bullion is the Best Way to Invest in Gold

If you watch any cable television these days, you’ve no doubt seen one gold advertisement after another.  And all of them recommend buying gold bullion as the way to enter the gold market.  Not surprisingly, a huge percentage of our clients at Wholesale Direct Metals call us initially looking to buy gold or silver bullion.  It’s at that point we tell them, yes, we’d be more than happy to sell them bullion, “but are you aware of the other gold and silver investment products that offer many advantages over bullion?”  Most of the time they are not aware, so we take the opportunity to do what we enjoy most:  arm our clients with game-changing investment guidance.

The fact is, bullion is not the only way you can invest in gold and silver, and it’s very often not the best way to invest in gold and silver.  You can often get the best out of gold and silver by investing in numismatic or semi-numismatic coins, sometimes referred to as certified coins.

It’s a good idea to understand numismatic coin investing before making a major investment in numismatic coins.  The good news is, it really just comes down to a simple definition of each.  “Bullion” refers to gold that trades solely for its weight,  and “numismatic” refers to a coin that has a value premium in addition to its weight, usually because it is limited in population and has some privacy advantages.  Bullion can be a bullion coin like a Canadian Maple Leaf or it can be a bar or ingot in various sizes.  Bullion is worth nothing more than its weight when selling and, when buying, will be its weight plus a mintage fee.  Mintage fees are larger on coins and fractional coins than larger bars, but all bullion has a mintage fee to buy it.

Numismatic coins, by contrast, maintain a premium to their weight and can be sold for their weight plus whatever the current premium is.  Numismatic coins also tend to be more stable than bullion as they do not have a paper-traded component.  While gold bullion has had an impressive record of profitability since the mid-1970's, there really is no comparison with pre-1933 numismatic gold coins.  A $1,000 basket of pre-1933 numismatic gold coins in 1970 was worth a stunning $57,977 in 2007, and it’s worth even more today.

Numismatic coins also offer more privacy than bullion as they are non-reportable and less visible to the government.  With some forms of gold bullion, a 1099 form must be completed. This is not the case for pre-1933 numismatic gold coins, for which there are no reporting requirements whatsoever.  Pre-1933 numismatic gold coins are one of the few remaining investments today that can be accumulated privately and confidentially.  They are the least visible form of wealth.  By investing in them, you are not revealing a single thing to the world at large.  While banks and brokerages require the extensive disclosure of client information to governmental agencies, pre-1933 numismatic gold coins are absolutely free from this kind of intrusiveness.

As a rule of thumb, if you are trading in and out of gold several times a year, bullion might be a better asset for that strategy.  Yet numismatic coins are geared to the saver/investor who wants wealth preservation over a longer time-frame and when privacy and a lack of government interference is important.

In short, buying numismatic gold coins offers you numerous benefits over gold bullion:

• Numismatic gold coins are investment-grade and often outperform bullion investments due to the added value of rare coins
• Numismatic gold coins can be less volatile than bullion because they are not paper or ETF traded
• Numismatic gold coins are completely private and non-reportable and can be bought and sold in any amount without paperwork
• Numismatic gold coins are not subject to government confiscation as gold bullion was in 1933 (see Deadly Myth #6)

Deadly Myth #6:  All Gold Can Be Confiscated During Crises

During the darkest days of the Great Depression in 1933, President Franklin D.  Roosevelt was desperate to stabilize the U.S. dollar from the ravages of a shrinking economy.  By executive order, Roosevelt confiscated U.S. gold coins from U.S. citizens in exchange for paper currency notes, under the severe penalty of a $10,000 fine and a maximum 10-year imprisonment for anyone who failed to cooperate.  Some historians believe this was the beginning of the “shrinking U.S. Dollar,” as the government melted the majority of confiscated coins into bars and then devalued the dollar, raising gold’s value by nearly 75%.

Today, some investors are wary of buying gold because they fear another government confiscation during bad economic times.  But they fail to realize that not all gold was subject to government confiscation in 1933.  In fact, certain types of gold coins – namely, pre-1933 numismatic gold coins – have never been confiscated by the U.S. government and never will be.

Roosevelt’s 1933 executive order excluded “gold coins having a recognized special value to collectors or rare and unusual coins,” which meant pre-1933 numismatic coins were exempt from government confiscation.  And that’s doubly good news for today’s investors.  Number one, when you invest in numismatic gold coins, you won’t have to worry about them ever being confiscated.  Two, because the majority of confiscated U.S. gold coins were melted into bars, any existing pre-1933 U.S. gold coins remaining today have both a “gold value” and a “scarcity” value because of high investor demand and low supply.

Deadly Myth #7:  Gold Is for Collectors, Not Investors

A number of our clients at Wholesale Direct Metals initially make the mistake of referring to pre-1933 numismatic coins as “collector” coins.  While it’s true that many people do collect numismatic coins as a hobby, it is severely limiting to think of numismatic coins just in terms of their value to “collectors.”  We call numismatic coins “investment-grade” coins because they are as durable, well-performing and wealth-protecting as any investment products on the market.  And the fact that they are also valuable to collectors means that they are scarce and maintain an intrinsic premium value over gold bullion, all of which make numismatic coins a great investment for anyone looking to grow their money and protect their wealth.

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Also See:
Why Gold Will Surge to $3800
The 7 Warning Signs for Gold Investors

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