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5 bullish-gold-indicators2013
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2. What Wayne Gretzky Has In Common With A
Bull Market For Gold In 2013
Experts say he was the greatest hockey player ever. Fortunately, there’s a way to look into the future and
protect the wealth you’ve worked all your life to obtain
A magician on the ice, the “Great Gretzky” had a knack at and keep it away from financial predators who stand
being at the right place at the right time. Not the fastest between you and your family’s future. For that you’ll need
skater, nor the most athletic player on the ice, Wayne two things:
Gretzky’s strategy was simple, direct and effective.
• An understanding of how to invest in volatile
Gretzky’s secret? “I skate to where the puck is going to financial markets
be, not where it has been, and not where it is now.”
• A single, often- overlooked commodity investment
Imagine that. Heading to where you need to be so you’re that can protect your accumulated wealth from
in prime position to leverage opportunity. How you can financial & economic disasters . . . and make you
position your assets to ensure that you’re ahead of the wealthier in the process.
puck when the financial game gets tricky.
Why not think about the future of your assets? After all,
considering your financial future isn’t a luxury – it’s a
necessity.
Back to the Great One
We know Gretzky’s secret weapon was his ability to • Exposure to a high-quality, growth-oriented investment
visualize where the puck was going to be before it got • A dependable, steady source of income
there. And the tools in his arsenal that allowed him to • Protection against economic volatility
out-maneuver other players were his skates and his • A relatively low tax rate investment
smarts that he utilized to get where he was going. • Leverage in gaining quick cash liquidity
It’s the same idea in the asset investment game. You In other words, a simple stock investment strategy that is
need a vision of where your assets need to be positioned so easy, so powerful, and so effective that, once you have
in order to solidify and ensure your financial future. And secured it, there is nobody who can ever take away the
you need a tool to help you get those assets where they wealth you’ve earned and want to save and pass along to
need to be. Only instead of using skates, you’ll be using your family.
the aforementioned commodity strategy to protect
and build upon your wealth . . . a solid, dependable,
perfectly adaptable strategy that provides true financial
security; the kind where you have . . .
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3. The Most Effective Asset Protection Device
Ever Designed
In short, if you have more money now than you’re willing But no matter what the economy is doing, gold is a
to lose-or enough to make it worth someone’s effort to relatively safe and growth-oriented investment. At any
take-you need to consider getting yourself some serious given time, gold can be a “safe haven” investment, a
asset protection. hedge against inflation, a diversification play, and a hedge
against a collapse of a country – or even a global –
And that’s where gold can help. economy.
Gold is flying off the shelves these days, trading at It also has five qualities that make it the best
$1,600 in mid-2012. Gold has skirted toward $1,800 investment in the world:
per ounce, and the Wall Street investment firm Goldman
Sachs has said gold should rise to $1,860 before the • It’s rare - Gold represents roughly five parts per billion
year is out. of the earth’s crust. Consequently, gold is both difficult
and expensive to dig out of the ground.
Goldman is hardly alone. Thomson Reuters GFMS says
that gold prices could rise above $2,000 by 2013, with • It’s virtually indestructible - Gold won’t ever diminish
an average price point for the year above $1,730 per in quality or decay structurally.
ounce.
• It’s limited in quantity - All the gold in the world could
Then there’s the investment bank Morgan Stanley, which fit in the confines of a football field, and would only rise
says gold could crest $2,175 an ounce in 2013. five feet off the ground.
Despite what some Wall Street prognosticators say, it’s
not too late to get into gold -- as Goldman Sachs, Morgan • It’s malleable - Gold can easily be shaped in various
Stanley and Thomson Reuters both say, there’s plenty of shapes and sizes, thus increasing its value in the
upside for gold going into 2013. consumer marketplace.
• It’s hard to find - Gold is mined incrementally – its
output rarely exceeds 2% annually.
Gold Price Estimates: Morgan Stanley, 2012 to 2013
Gold Price Estimates: Morgan Stanley, 2012 to 2013
2012 average year price: $1,825.00 / ounce
2013 average year price: $2,175.00 / ounce
From Morgan Stanley research report on gold prices going forward:
Investor demand for gold as a safe haven is likely to keep gold prices elevated. A low interest rate environment,
unconventional monetary policies in the U.S. and Europe, and political tensions in the Middle East will also boost
prices.
Source: Morgan Stanley
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4. Heavy Metal: Gold Investment Tips
A good rule of thumb for investing in gold is to gauge stock market volatility over the next 30-day period.
economic volatility. One way to do that is to measure the
“VIX” Index. By and large, when the VIX is climbing upward, so too will
gold prices. There’s even a specific gold volatility index
VIX is shorthand for the Chicago Board Options (the “GVZ”) and it’s also trending upwards significantly in
Exchange Market Volatility Index, and it measures the 2012.
implied volatility of S&P 500 index options. Traders
have long nicknamed the VIX as the fear index, as it
represents a key stock market the market estimate of
Why Gold Will Rise in 2013
Gold has had a bumpy ride so far in 2012, but the outlook Consequently, more and more investors are starting to
for 2013, as exemplified by the myriad bullish investment view gold as a fairly reliable investment. With demand
outlooks from the Goldman Sachs and the Morgan still high (gold purchases in India, for example, have risen
Stanley’s of the world, is highly favorable. On August 25% in the past 10 years, and China’s gold market is
23, 2011, the spot price of gold reached $1,910.00 an showing similar growth), the Word Gold Council expects
ounce, mainly on the continued slide of the U.S. dollar and that number to rise significantly by 2020.
from a run-up in inflation. That’s more than double the
price of $670 an ounce the commodities market saw just On Wall Street, like in most speculative venues, timing is
five years ago (in May 2006). everything. Investors historically view gold as an excellent
hedge against inflation, and as a strong currency play
But gold prices aren’t really all that volatile, at least against a struggling dollar. With inflation rising and the
historically speaking. In the run-up to $1,500-an-ounce, dollar falling, “gold-diggers” are increasingly turning to
gold prices over the past six months actually only have a gold as a hedge – and a profitable one, at that.
standard deviation of 0.7. That’s significantly more stable
than the 10.3 standard deviation the gold market saw in But there’s much more to the bull market in gold coming
1979, when gold prices rose 180%. down the pike, and we have no problem sharing five of
our favorite “gold bull indicators” for 2013:
Bullish Indicator #1: In Volatile Markets, Gold
Covers a Whole Lot of Ground
Gold investors know something that non-gold investors don’t now – gold is one of the most versatile investments in
history, especially in volatile economies like the one we’re experiencing right now.
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5. Think of the various reasons that regular consumers and Now think about the chaotic global economy, where
Wall Street fat cats invest in gold: Europe is teetering on the brink of recession, and
once-stable economies like the U.S., China, and India
• As a hedge against inflation. have all seen significant slowdowns in key sectors like
• As a hedge against a declining dollar. manufacturing and housing.
• As a safe haven in times of geopolitical and financial
market instability. Wouldn’t you want an investment that protects you
• As a commodity, based on gold’s supply and demand in volatile economies, and in the volatile markets that
fundamentals. accompany such economies? That’s what gold can do for
• As a store of value. you in 2013.
• As a portfolio diversifier.
Bullish Indicator #2:
As Inflation Rises, So Too Will Gold
Gold is renowned as a hedge against inflation. And But myriad factors that contribute to higher inflation are
inflation is exactly what’s beginning to churn in global now in play, including:
economies, and that’s good news for gold investors in • Robust stimulative monetary policy
2013. • Trillion-dollar bailouts for banks and corporations
• A weakening dollar
History tells us that gold rises as inflation rises. Since • A huge U.S. trade deficit
1945 – the culmination of World War II – the five years • A huge U.S. public debt problem
in which U.S. inflation peaked were 1946, 1974, 1975,
1979, and 1980. In that timespan, the average return Another point on gold and its relationship with inflation.
from stocks, as measured by the Dow Jones Industrial Few investors want to earn negative interest. If you pay
Index, was -12.33%; the average real return on gold was an entity to hold your money -- as opposed to earning
130.4%. interest – investing in gold is significantly more appealing.
With inflation hovering at 2%, the yield for U.S. Treasuries
The school of thought that global economies are heading earning under 2% in mid-2012, and bank savings rates
in that same direction is widening. Inflation has nominally earning far less than that, negative real interest rates (i.e.
remained below 3% for 2012, after nine months of plus- investment returns after inflation) are pushing investors
3% activity in 2011. toward assets with real value – namely gold. All of the
above contribute to higher inflation, and ultimately, to
higher gold prices.
Bullish Indicator #3:
Gold Protects Against a Falling Dollar
As noted above, the U.S. dollar is in decline in 2012, against both the Euro and the Japanese yen. How does that impact
gold prices? Quite significantly, actually. Gold is traded against U.S dollars, and as a result, any fall in the U.S. currency
triggers a rise in the price of gold.
Since the U.S. dollar is the world’s reserve currency, its trajectory (or decline) also impacts the direction of gold prices.
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6. In 2012, the steep decline of the dollar has elevated the last year, according to the World Gold Council. For the
price in the gold price, and that’s a trend that should first time since the 1980s, central banks have been net
continue. Over the long haul currencies will be squaring buyers of gold for three years in a row. Economists say
off against each other for devaluation. Sooner or later, that Central bank demand could grow even more if China
global currencies weaken, and investors will increasingly decides to replace dollar-denominated debt with gold as
turn to gold to protect their financial portfolios. a hedge against a dollar that gets torpedoed by U.S. debt
and economic problems.
In addition, global central banks, especially in South
Korea, Thailand, Russia and Mexico are buying gold That scenario would push gold prices even higher - a
again, adding to demand. By the middle of July, central scenario more and more economists view as realistic in
banks had bought more gold this year than in all of 2013.
Bullish Indicator #4:
If Europe Falls, Gold is the Place To Be
Issue #4 is the massive amount of debt accumulated by conditions across the continent, and that inflation should
Eurozone countries, and the concurrent effort by Euro really gain momentum in 2013.
leaders to deleverage and reduce that debt burden.
Euro countries have taken a page out of the Keynesian Europe is also legitimately in crisis, and gold has a
economic book, and are trying to deleverage debt by well-earned reputation as the “crisis commodity” as it
adding more of it, in hopes of stimulating various regional has historically bested other investment vehicles during
economies (especially those of Greece, Spain, Portugal periods of political or economic tension. Ultimately, the
and Italy). Unfortunately for consumers in those markets, same issues that negatively impact other investments
that deleveraging is already beginning to spur inflationary traditionally trigger higher gold prices. That’s why gold has
a great reputation as a solid portfolio option.
Bullish Indicator #5:
Demand For Gold Will Be Higher In 2013
Demand for gold is outpacing supply and that trend accumulate bullion. Make no mistake, China will only be
should accelerate in 2013, especially as gold production buying more gold in the future as it attempts to divest
weakens. That’s what is happening right now. In fact, itself of some of its estimated $2 trillion in U.S. dollar
global gold production has not surpassed its record output reserves.
in 2000, leading some experts in the mining industry to
wonder whether the world has hit “peak gold.” As noted above, demand for gold also is surging from
central banks, which have become net buyers since 2009
That limited supply has increased global demand, after several years of selling an average 400 tons per
especially in two major global markets. Both China and year. In fact, central banks last year added the most gold
India have been purchasing unprecedented quantities to their reserves since 1964. The official sector looks to
of gold, not only at the central-bank level but also be net buyer of gold for years to come.
by encouraging their increasingly well-off citizens to
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7. In addition, China is encouraging its citizens to buy gold – with the world’s largest population, and one of the fastest
growing economies China has made it legal for their citizens to buy gold and silver, and are actively encouraging them to
invest in these precious metals.
Then there’s India, which has been the largest buyer of gold in the past few years, a trend that is expected to continue
as government buyers load up on gold for investments, and as consumers buy more jewelry, befitting their emerging
middle class status. India already consumes most of the global gold annual mine output, leaving limited quantity for ever
competing and ever larger demand.
Building Your Gold Pyramid
Think of investing in gold as a four-tiered pyramid, with the safest tier as your foundation (on the bottom) and then the risk
(and the reward potential) rises as you climb upward on the pyramid (see chart below).
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8. Bonus Section: Consider Gold ETFs
The primary benefit of buying gold ETFs over direct • Gold pricing is more transparent with ETFs – Gold
purchases of gold is simplicity. Owning gold directly brings ETFs are sold on the open financial markets, thus ensur-
with it some serious responsibilities that go with commod- ing that the price of ETFs are always quoted on the stock
ity ownership. exchange and that there is always a bid/ask price avail-
able during market hours enabling investors to buy/sell at
For example, unless you buy gold directly from a bank, market prices. Plus, with physical gold, sellers (like banks
there’s no guarantee of its purity on the open market. You and jewelry store owners) often add a premium of up to
won’t earn any interest from owning physical gold, and 15% on gold sales.
you’ll have to pay for a secure storage facility, like a bank
vault, to hold your gold. • No storage – You don’t have to worry about storing
gold with an ETF. The gold is physically held by the fund
Besides the simplicity factor, playing gold via an ETF offers provider, safely and securely.
benefits:
• The “purity” issue: Exchange traded funds, like com-
• Increased liquidity: Gold ETF’s offer some of best mon stocks and mutual funds, are regulated by the U.S.
liquidity on Wall Street. Besides being publicly traded every Securities and Exchange Commission. According to
day, gold ETFs are traded on the world’s major exchanges, regulatory statutes, ETFs must include assets with a purity
including New York, Sydney and Tokyo. factor of 99.5% fineness and above. That guarantees
investors will own a reliable source of gold.
• Smaller purchase amounts – Gold investors can
leverage ETFs in myriad ways, but one of the most popular
ways is to buy gold in small amounts – even as low as half
a gram, depending on the particular ETF.
Conclusion: A World In Turmoil
Sets the Stage For Gold
It’s no secret that moving to where the profits are is a page right out of the Wayne Gretzky handbook, and that’s exactly
where the financial markets are moving right now. With the world economy in turmoil, and no quick end in sight to the
toxic issues weakening global economic strength, the stage is set for a bull run in gold for 2013. Consequently, investors
may want to stop looking at adding gold to their portfolio as a luxury. These days, it could be a necessity.
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