Posted: 27 May 2014 07:30 AM PDT

It has occurred to me that there have been so many technical and fundamental pieces written, some very good yet complicated pieces written, far out (in reality not so far out) conspiratorial pieces written and even mathematically and logically correct yet difficult to understand pieces written regarding the precious metals. Without being complicated or technical, I'll try to write a most basic "primer"…with just one preexisting assumption. This one "assumption" is that the U.S. government is broke. Even the average person today knows that this true, if you do not believe or agree with this assumption then there is no point to you reading any further. I could show you this from multiple angles financial, mathematical and plain old common sense but I won't because I will assume that this point you already understand.

OK, so what does a financially broke government mean? Normally it means that a big change in the standard of living is on its way because the United States issues the world's reserve currency there are other more "global" ramifications. I will touch on these ramifications but I want to focus "internally" and write from a U.S. centric point of view first.

What does a bankrupt Treasury and central bank really mean? First, it means that since the Treasury does not have the ability to "pay," the central bank must issue more currency and thus diluting the exiting currency's value. Without a long winded explanation, this is your basic and garden variety monetization that results in "hyperinflation." You see in the old days when money was backed by gold we might have seen an actual deflation where the currency value went up today, since currency can and is issued at will with no backing, the end result will be hyperinflation.

Let me just briefly touch on our "money." Dollars (Federal Reserve notes) are backed by the "full faith and credit" of the U.S. government. Let's examine this for a moment "full faith and credit," what does this really mean if the issuer is broke? Exactly how much "faith" would you have lending money to someone who is in the process of bankruptcy and cannot pay their bills? And "credit," how much credit is available to a bankrupt entity? In case you were not aware of this yet, the Federal Reserve has been purchasing 70% of U.S. Treasury issuance for going on 2 full years now. Why is this you ask? Because the rest of the world has and is losing "faith" and no longer extending us "credit." In simple terms, the rest of the world has stopped buying U.S. Treasuries. By default (yes, a pun intended) the Federal Reserve has been forced to purchase the bonds that the rest of the world is refusing to buy.

This is a problem, a very big problem because the Treasury absolutely MUST sell new bonds to rollover previous bonds that are coming due for maturity and also to pay the interest on the total outstanding. Without the Federal Reserve purchases, the U.S. Treasury would have already been forced into a "technical" yet very real default several years ago.

OK, so the above spoke about our "money," dollars which are issued and backed by a bankrupt entity. Simply put, a broke government means a broke and broken currency. What else does a broke government mean? Let's look at the banking system. If the government is broke then what does this say about the banks? First, you must understand that the banks are "built" upon a foundation of U.S. Treasury bonds. If these bonds are impaired in value or worth "less" then what does it say about the banks themselves? "Don't worry the FDIC is there to save the day" you say? Really? The FDIC does not have enough funds to save just one single major bank should they fail, where will they get more capital from? From Congress authorizing more funds from an empty Treasury? Do you see? Everything works because of one assumption…that government is NOT broke. What if this basic assumption is wrong?

I would be remiss if I didn't mention that gold is currently trading at the price of production meaning that very few companies can make a profit at these prices. Silver's price is at least $5 an ounce under the cost of production so the more silver that is produced the greater the losses to the mines. This cannot continue for very long, not to mention that "ore" is being chewed up that does not get replaced because it doesn't "grow on trees" like money apparently does from central banks. Please understand that as more "money" is created, inflation will continue to increase which will only increase the cost of production further. I mention this because of the laws of supply and demand. Higher production costs without higher bullion prices will only restrict supply from current levels. While on the topic of "supply and demand," global supply has been 2,700 tons per year and demand has been well over 4,000 tons for over 15 years now. This supply "deficit" had to have come from somewhere. This "somewhere" can ONLY have been the central banks themselves as they are the only ones with a "spare" 1,500 tons or so per year to supply.

I want to connect the dots in this piece with the obvious. If you know that the government is broke then you know that the currency that they issue is also broke or worth "less." You can also divine that if the government is broke then their bonds are also, these bonds are core foundational capital to the banking system. Knowing this, you can then make the leap that there is not only a problem with the currency itself but also a problem with where it is you are keeping this "money."

With the above paragraph in mind, it follows that you should do two things A. get a "better" money and B. keep it in a safer place. I would also like to address "timing." Everyone knows that you want to buy low and sell high but I am going to tell you that this will not work with the precious metals, the "selling" part at least. If you know that the issuer of a currency is broke, why would you ever "sell" your precious metals at a "profit" to receive more of the broke currency that you dumped in the first place? If you know what the end game boils down to, meaning that the currency of the broke entity will eventually go to zero or be converted to another currency at a lower value, why would you ever want to play that game? If you sell your precious metals for dollars (more of them at a "profit" so to speak), are you not reentering "the game" that you already know will end badly? The idea of purchasing precious metals in the first place is to leave the game, selling an ounce of gold for $1 million very well may be ridiculously cheap and far less than a week's worth of labor after a hyperinflation. This is not grandstanding as we have no idea how much more "money" will be printed and we certainly do not know how much (if any) gold is left in Ft. Knox or the other depositories since there has been no audit of our gold since the 1950′s.

To wrap this up, assuming that you understand that the U.S. government is broke then why stay in a game where you know how it ends? Every government since the beginning of time that overspent "paid" for this overspending by first selling their gold and then overprinting their money. This combination has always and without exception led to their currency loosing value "slowly at first and then all of a sudden" to the point of having no value at all. This is the current situation of the U.S. dollar with one nasty caveat; the dollar is the foundation for much of what the world calls "wealth." Ask yourself what this "wealth" is really worth if it all derives value from a currency that is issued by a bankrupt entity?

I know that this realism is not pleasant to read…but it is real and it is true. History has shown us that the absolute best investment to own when a country goes broke is gold, only this time it will not just be one country it is system wide. The entire global financial system relies on the dollar for "value" as central banks use dollars as the primary reserve. Is this "sound finance?"

Posted: 22 May 2014 08:05 AM PDT

When it comes to commodity investing, precious metals are some of the most highly traded commodity markets in the world. Gold in particular has long been embraced for its inherent value and safe-haven appeal. Historically, investors have added gold exposure to their portfolio via physical holdings or futures trading, but thanks to the democratization of the ETF industry, gold exposure can be purchased through a single ticker.

Currently, State Street's (NYSE:STT) SPDR Gold Trust (NYSEARCA:GLD) is the largest and most popular gold ETF. Since its launch in 2004, the fund has accumulated more than $32 billion in total assets under management; on average, its shares trade over 7 million times per day.

Last week, however, investors were introduced to yet another gold ETF: Merk's Gold Trust ETV (NYSEARCA:OUNZ).

An ETF First

Like GLD, OUNZ is designed to track the spot price of gold bullion. What makes OUNZ unique is that for the first time, investors will be able to trade shares in exchange for physical gold bullion. According to Merk, the fund "seeks to provide investors with a convenient and cost-efficient way to buy and hold gold through an exchange-traded product with the option to take physical delivery of gold if and when desired."

According to its prospectus, OUNZ will hold gold bullion in the form of allocated London bars, held in London vaults managed by J.P. Morgan Chase (NYSE:JPM). The initial basket of OUNZ shares was created with a per-share price equal to the value of 1/100th of a fine ounce of gold. The initial gold required was 500 fine ounces of gold per basket, each of which equals 50,000 shares.

For the purpose of facilitating delivery, Merk will convert the London bars into gold coins and bars in denominations that investors request. This request must be done through a broker.

The Costs of Redeeming Shares

There are hefty "exchange fees" for investors wanting to redeem their shares for physical gold. An investor will have to pay:

A 2.5% fee on 10-oz. bars, with a minimum charge of $2,500

A 2.5% fee on London bars, with no minimum charge

A 3.5% fee on 1-oz. bars, with a minimum charge of $3,500

A 6.0% fee on 1-oz. coins, with a minimum charge of $6,000

A 7.0% fee on 1-oz. American Gold Eagle Coins, with a minimum charge of $7,000

If investors choose to redeem their share for physical gold, it should be noted that no taxable event will be triggered, since OUNZ shareholders own a pro-rata share of gold held by Merk. For those interested in holding only the ETF, OUNZ charges an expense ratio of 0.40%.

The Bottom Line

While the delivery and exchange fees are quite hefty, OUNZ has certainly opened the door for commodity ETFs. Furthermore, its launch is particularly newsworthy in the gold ETF space, since many critics have questioned whether or not funds like GLD actually hold gold.

Editor's note: This article by Daniela Pylypczak was originally published on Commodity HQ.

Follow us on Twitter @CommodityHQ

No positions in stocks mentioned.

<b>Buy Gold Bullion</b> Using Karatbars at Brash Berry

Posted: 13 May 2014 07:06 PM PDT

banner4 Have you ever heard of Karatbars, the ins and outs and the way an individual start this program? Basically, karatbars is simply product from your karatbars international company in Germany that enables individuals to buy gold .

Choice makes gold bullion not just to be more accessible but in addition less costly as are going to received either in one gram at a time or perhaps lump sum payment. Karatbars therefore comes with a person a no cost saving account and enables money to get stored in the varieties of small certified sums of gold in ways that an individual who seeks to pursue the karatbars system must then open a karatbars account where their savings will likely be stored.

Karatbars will therefore issue each one member a gram of pure 24 carat gold which is implanted within a uniquely designed card just the dimensions of a normal bank card and with each card featuring its own inbuilt 999.9 certification of pure sums of gold through the LBMA.

Karatbars is thus an affiliate program that allows members to make money either when you purchase the gold or needing to recruit others this agreement they will be able to earn money as well with the purchase or on recruitment of others . The karatbars cycles are paid back each and every Friday, as the remaining units recycled and scheduled for one more cycle. Therefore the two major ways that this karatbars program permits people to generate money are:

First, from the direct commissions in the referrals which acts as a uni-level pay plan. The person that selects this is offered a direct commission oneach individual plan they are signed up on. The commission off emerged contingent on the package ,rank and so on the volume.This is therefore categorised in direct commissions respectively the bronze package that is offered in 5 % ,the silver is provided in 10% while gold is offered fifteen percent direct commission as well as the VIP package that is provided in 20 percent direct commissions.

Secondly there is a dual system which can be paid inside a cycle basis similar to 75 units, and therefore if someone which you recruit somewhere has the capacity to accumulate 50 units while the one on the reverse side accumulates 25 units then your program would cycle thereby choosing remunerated based on your favorite package.The karatbars has the bronze package that gives 10 euros,silver gives 40 euros, gold packages which provides 60 euros even though the VIP packages offers about 80 euros per every cycle.

Buy Gold Bullion | Precious Metals 101 with One Obvious Assumption | News2Gold

Buy Gold Bullion | Precious Metals 101 with One Obvious Assumption | News2Gold

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