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What Wayne Gretzky Has In Common With A Bull Market For Gold In 2013

Back to the Great One

Experts say he was the greatest hockey player ever.

A magician on the ice, the “Great Gretzky” had a knack at being at the right place at the right time. Not the fastest skater, nor the most athletic player on the ice, Wayne Gretzky’s strategy was simple, direct and effective.

Gretzky’s secret? “I skate to where the puck is going to be, not where it has been, and not where it is now.”

Imagine that. Heading to where you need to be so you’re in prime position to leverage opportunity. How you can position your assets to ensure that you’re ahead of the 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.

Fortunately, there’s a way to look into the future and protect the wealth you’ve worked all your life to obtain and keep it away from financial predators who stand between you and your family’s future. For that you’ll need two things:

• An understanding of how to invest in volatile financial markets

• A single, often- overlooked commodity investment that can protect your accumulated wealth from financial & economic disasters . . . and make you wealthier in the process.

We know Gretzky’s secret weapon was his ability to visualize where the puck was going to be before it got there. And the tools in his arsenal that allowed him to out-maneuver other players were his skates and his smarts that he utilized to get where he was going.

It’s the same idea in the asset investment game. You need a vision of where your assets need to be positioned in order to solidify and ensure your financial future. And you need a tool to help you get those assets where they need to be. Only instead of using skates, you’ll be using 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 . . .

• Exposure to a high-quality, growth-oriented investment• A dependable, steady source of income• Protection against economic volatility• A relatively low tax rate investment • Leverage in gaining quick cash liquidity

In other words, a simple stock investment strategy that is so easy, so powerful, and so effective that, once you have secured it, there is nobody who can ever take away the wealth you’ve earned and want to save and pass along to your family.

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The Most Effective Asset Protection Device Ever Designed

Gold Price Estimates: Morgan Stanley, 2012 to 2013

In short, if you have more money now than you’re willing to lose-or enough to make it worth someone’s effort to take-you need to consider getting yourself some serious asset protection.

And that’s where gold can help.

Gold is flying off the shelves these days, trading at $1,600 in mid-2012. Gold has skirted toward $1,800 per ounce, and the Wall Street investment firm Goldman Sachs has said gold should rise to $1,860 before the year is out.

Goldman is hardly alone. Thomson Reuters GFMS says that gold prices could rise above $2,000 by 2013, with an average price point for the year above $1,730 per ounce.

Then there’s the investment bank Morgan Stanley, which says gold could crest $2,175 an ounce in 2013. Despite what some Wall Street prognosticators say, it’s not too late to get into gold -- as Goldman Sachs, Morgan Stanley and Thomson Reuters both say, there’s plenty of upside for gold going into 2013.

Gold Price Estimates: Morgan Stanley, 2012 to 20132012 average year price: $1,825.00 / ounce2013 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

But no matter what the economy is doing, gold is a relatively safe and growth-oriented investment. At any given time, gold can be a “safe haven” investment, a hedge against inflation, a diversification play, and a hedge against a collapse of a country – or even a global – economy.

It also has five qualities that make it the best investment in the world:

• It’s rare - Gold represents roughly five parts per billion of the earth’s crust. Consequently, gold is both difficult and expensive to dig out of the ground.

• It’s virtually indestructible - Gold won’t ever diminish in quality or decay structurally.

• It’s limited in quantity - All the gold in the world could fit in the confines of a football field, and would only rise five feet off the ground.

• It’s malleable - Gold can easily be shaped in various shapes and sizes, thus increasing its value in the consumer marketplace.

• It’s hard to find - Gold is mined incrementally – its output rarely exceeds 2% annually.

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Heavy Metal: Gold Investment TipsA good rule of thumb for investing in gold is to gauge economic volatility. One way to do that is to measure the “VIX” Index.

VIX is shorthand for the Chicago Board Options Exchange Market Volatility Index, and it measures the 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

Gold has had a bumpy ride so far in 2012, but the outlook for 2013, as exemplified by the myriad bullish investment outlooks from the Goldman Sachs and the Morgan Stanley’s of the world, is highly favorable. On August 23, 2011, the spot price of gold reached $1,910.00 an ounce, mainly on the continued slide of the U.S. dollar and from a run-up in inflation. That’s more than double the price of $670 an ounce the commodities market saw just five years ago (in May 2006).

But gold prices aren’t really all that volatile, at least historically speaking. In the run-up to $1,500-an-ounce, gold prices over the past six months actually only have a standard deviation of 0.7. That’s significantly more stable than the 10.3 standard deviation the gold market saw in 1979, when gold prices rose 180%.

Consequently, more and more investors are starting to view gold as a fairly reliable investment. With demand still high (gold purchases in India, for example, have risen 25% in the past 10 years, and China’s gold market is showing similar growth), the Word Gold Council expects that number to rise significantly by 2020.

On Wall Street, like in most speculative venues, timing is everything. Investors historically view gold as an excellent hedge against inflation, and as a strong currency play against a struggling dollar. With inflation rising and the dollar falling, “gold-diggers” are increasingly turning to gold as a hedge – and a profitable one, at that.

But there’s much more to the bull market in gold coming down the pike, and we have no problem sharing five of our favorite “gold bull indicators” for 2013:

stock market volatility over the next 30-day period.

By and large, when the VIX is climbing upward, so too will gold prices. There’s even a specific gold volatility index (the “GVZ”) and it’s also trending upwards significantly in 2012.

Why Gold Will Rise in 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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Think of the various reasons that regular consumers and Wall Street fat cats invest in gold:

• As a hedge against inflation.• As a hedge against a declining dollar.• As a safe haven in times of geopolitical and financial market instability.• As a commodity, based on gold’s supply and demand fundamentals.• As a store of value.• As a portfolio diversifier.

Gold is renowned as a hedge against inflation. And inflation is exactly what’s beginning to churn in global economies, and that’s good news for gold investors in 2013.

History tells us that gold rises as inflation rises. Since 1945 – the culmination of World War II – the five years in which U.S. inflation peaked were 1946, 1974, 1975, 1979, and 1980. In that timespan, the average return from stocks, as measured by the Dow Jones Industrial Index, was -12.33%; the average real return on gold was 130.4%.

The school of thought that global economies are heading in that same direction is widening. Inflation has nominally remained below 3% for 2012, after nine months of plus-3% activity in 2011.

Now think about the chaotic global economy, where Europe is teetering on the brink of recession, and once-stable economies like the U.S., China, and India have all seen significant slowdowns in key sectors like manufacturing and housing.

Wouldn’t you want an investment that protects you in volatile economies, and in the volatile markets that accompany such economies? That’s what gold can do for you in 2013.

But myriad factors that contribute to higher inflation are now in play, including:• Robust stimulative monetary policy• Trillion-dollar bailouts for banks and corporations• A weakening dollar• A huge U.S. trade deficit• A huge U.S. public debt problem

Another point on gold and its relationship with inflation. Few investors want to earn negative interest. If you pay an entity to hold your money -- as opposed to earning interest – investing in gold is significantly more appealing. With inflation hovering at 2%, the yield for U.S. Treasuries earning under 2% in mid-2012, and bank savings rates earning far less than that, negative real interest rates (i.e. investment returns after inflation) are pushing investors toward assets with real value – namely gold. All of the above contribute to higher inflation, and ultimately, to higher gold prices.

Bullish Indicator #2: As Inflation Rises, So Too Will Gold

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.

Bullish Indicator #3: Gold Protects Against a Falling Dollar

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In 2012, the steep decline of the dollar has elevated the price in the gold price, and that’s a trend that should continue. Over the long haul currencies will be squaring off against each other for devaluation. Sooner or later, global currencies weaken, and investors will increasingly turn to gold to protect their financial portfolios.

In addition, global central banks, especially in South Korea, Thailand, Russia and Mexico are buying gold again, adding to demand. By the middle of July, central banks had bought more gold this year than in all of

Issue #4 is the massive amount of debt accumulated by Eurozone countries, and the concurrent effort by Euro leaders to deleverage and reduce that debt burden. Euro countries have taken a page out of the Keynesian economic book, and are trying to deleverage debt by adding more of it, in hopes of stimulating various regional economies (especially those of Greece, Spain, Portugal and Italy). Unfortunately for consumers in those markets, that deleveraging is already beginning to spur inflationary

last year, according to the World Gold Council. For the first time since the 1980s, central banks have been net buyers of gold for three years in a row. Economists say that Central bank demand could grow even more if China decides to replace dollar-denominated debt with gold as a hedge against a dollar that gets torpedoed by U.S. debt and economic problems.

That scenario would push gold prices even higher - a scenario more and more economists view as realistic in 2013.

conditions across the continent, and that inflation should really gain momentum in 2013.

Europe is also legitimately in crisis, and gold has a well-earned reputation as the “crisis commodity” as it has historically bested other investment vehicles during periods of political or economic tension. Ultimately, the same issues that negatively impact other investments traditionally trigger higher gold prices. That’s why gold has a great reputation as a solid portfolio option.

Bullish Indicator #4: If Europe Falls, Gold is the Place To Be

Demand for gold is outpacing supply and that trend should accelerate in 2013, especially as gold production weakens. That’s what is happening right now. In fact, global gold production has not surpassed its record output in 2000, leading some experts in the mining industry to wonder whether the world has hit “peak gold.”

That limited supply has increased global demand, especially in two major global markets. Both China and India have been purchasing unprecedented quantities of gold, not only at the central-bank level but also by encouraging their increasingly well-off citizens to

accumulate bullion. Make no mistake, China will only be buying more gold in the future as it attempts to divest itself of some of its estimated $2 trillion in U.S. dollar reserves.

As noted above, demand for gold also is surging from central banks, which have become net buyers since 2009 after several years of selling an average 400 tons per year. In fact, central banks last year added the most gold to their reserves since 1964. The official sector looks to be net buyer of gold for years to come.

Bullish Indicator #5: Demand For Gold Will Be Higher In 2013

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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.

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).

Building Your Gold Pyramid

 

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The primary benefit of buying gold ETFs over direct purchases of gold is simplicity. Owning gold directly brings with it some serious responsibilities that go with commod-ity ownership.

For example, unless you buy gold directly from a bank, there’s no guarantee of its purity on the open market. You won’t earn any interest from owning physical gold, and you’ll have to pay for a secure storage facility, like a bank vault, to hold your gold.

Besides the simplicity factor, playing gold via an ETF offers benefits:

• Increased liquidity: Gold ETF’s offer some of best liquidity on Wall Street. Besides being publicly traded every day, gold ETFs are traded on the world’s major exchanges, including New York, Sydney and Tokyo.

• 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.

• Gold pricing is more transparent with ETFs – Gold ETFs are sold on the open financial markets, thus ensur-ing that the price of ETFs are always quoted on the stock exchange and that there is always a bid/ask price avail-able during market hours enabling investors to buy/sell at market prices. Plus, with physical gold, sellers (like banks and jewelry store owners) often add a premium of up to 15% on gold sales. • No storage – You don’t have to worry about storing gold with an ETF. The gold is physically held by the fund provider, safely and securely.

• The “purity” issue: Exchange traded funds, like com-mon stocks and mutual funds, are regulated by the U.S. Securities and Exchange Commission. According to regulatory statutes, ETFs must include assets with a purity factor of 99.5% fineness and above. That guarantees investors will own a reliable source of 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.

Bonus Section: Consider Gold ETFs

Conclusion: A World In Turmoil Sets the Stage For Gold

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