Why Gold Buyers Are So Attracted To Buying Gold?

While scanning for new gold articles and gold blogs, I came across this. It was such a good artcle I decided to add it to our D.R.E.A.M. System gold blog. Makin Bacon is the author and did an excellent job writting it.

Our fascination with gold
Gold as a metal has always fascinated people as it has represented wealth, success, and in some cases deities throughout the ages.
In our modern age, as far as it relates to an investment, gold is a somewhat odd metal and vehicle if you want to use it to build wealth.
The reason is is its uses aren't nowhere near in volume as its cousin silver, which has an enormous number of uses, and can be measured in that way when you look to invest in it.
Gold on the other hand, has really only several major uses, and that isn't enough to create the type of demand commodity investors look for.

Gold the political metal
In essence, gold has become a political metal, because it represented in times past a standard and check and balance for those creating paper money. Now that the gold standard has been dropped, it removes the discipline it forced on governments, and so now fiat money is created, and is the cause behind the endless booms and busts we experience in our economies.
Anyway, now gold is primarily looked upon by most investors as a major hedge against inflation and uncertainty; the reason it moves up in price in difficult times, as it has over the last couple years.

Gold Uses
As far as practical uses that create some demand for gold, the major ones are in electronics, dentistry, and Indian weddings. And it may surprise you to know that by far the greatest demand for gold is in connection with Indian weddings.
There are many other uses for gold, but its in small amounts across a variety of industries and in specific situations, which don't produce much demand.
So what does that make gold as an investment? Like I said - unique. For a small but growing number of people, it is being acquired for protection against economic collapse and social unrest.
Indian wedding major source of gold demand

Present Gold Demand
There has been a huge demand for physical gold since the global economic went into the deep recession, and many continue to invest in gold coins and bars as a protection against anything happening.
The reason this is done is because gold is the ultimate currency, and no matter how difficult times get, can be used for trade. You can't say that about paper money which isn't backed by anything any longer, except the 'good will' of the government having the paper money printed out.

Can gold build wealth?
Investing in gold, for the reasons stated above, is difficult to make people rich, as far as gold in and of itself. You can invest in gold coins from a numismatic perspective, but that's different than investing in gold as a commodity.
What has been keeping gold prices from really surging has been a period of forced liquidation, where funds had to sell off their gold because they weren't able to get access to money.
That means that they not only weren't holding on to gold, which they really wanted to, but also weren't investing in it at a time when it usually warrants it.
The attempt to artificially prop up the U.S. dollar has also resulted in gold prices moving up far beyond their current prices, which are still at historic highs, although not when adjusted for inflation.
So at this time, investing in or buying gold in primarily being done for safety reasons, and as a hedge against inflation.

Inflation should push gold prices up for years ahead
With the unbelievable deficit spending by the U.S. government, inflation is going to be a huge factor in the years ahead, as printing of money, by definition, is inflation. And the amount being printed boggles the mind, and will result in the price of gold skyrocketing to protect against the inflation pressures, which will no doubt come upon us.
The unprecedented bailouts by the U.S. government makes this only a matter of when, not if.
So those investing in gold will find themselves possibly enjoying one of the greatest upward gold price movements in history, and will build wealth in a way gold has never been able to do in the past.

Physical gold in big demand- Invest in gold with the long term in mind
There are a number of ways to invest in gold, but I would only focus on the long term trend, and forget about attempting to make a quick killing by trying to predict short term movements, which even the best of day traders aren't able to do very well.
Long term investing in gold is the only way to approach it, and those that do will find themselves in a good position when gold prices start to go up.

Best ways to invest in gold now
So to recap, gold is different that any other commodity because it's the only one that isn't measured by supply and demand, as the amount of demand just isn't enough to move the price of gold.
Gold is valued mostly as a hedge against inflation and safety in times of turmoil. That's where the price point is fixated on, and that's what will drive up the price of gold.
The key indicators are already in place which meets the above two criteria, with economic turmoil raging and inflation about to go out of this world, as the U.S. government just keeps the printing presses going to print out their funny money.
With that in mind, gold may possibly enter an enormous bull run in response to inflationary pressures that could be unprecedented in history, because of the debt being incurred from government intervention into the free markets. Those investing in gold should enjoy great success in response to these realities.

Gold Price is Falling as Stock Rise???

Something's wrong with this picture: the Gold Price is falling as stocks rise...The GOLD PRICE has fallen $150 an ounce from its top of early December, closing on Tuesday and Wednesday of Christmas below $1100, writes Bill Bonner in his Daily Reckoning.We expected a correction in the Gold Price. But we thought it would come along with a correction in the stock market. And stocks are rising.We take this as a warning: something is going on that we don't understand. That said, there's a lot going on that we don't understand. But the broad patterns generally make sense.Boom was followed by bust. As dear readers know, the force of a correction is equal and opposite to the deception that preceded it. The deception of the Bubble Era being exceptional, the correction would be exceptional too - even under the best of circumstances.But these are not the best of circumstances. Because several other things are happening...things that need to be reckoned with, too.The United States is losing its privileged place in the world. Americans now compete with many other people in many other places for the world's resources – including its savings.The international monetary system, an experimental system built of paper Dollars, may be falling apart. The days of cheap and bountiful energy are over.Governments are going broke. State governments. National governments. In Europe. In the Middle East. And in America.The engine of economic growth – Americans' willingness to go into debt in order to consume more and more of the world's output – has gone into reverse. And governments are meddling on an unprecedented scale...delaying and avoiding necessary adjustments, possibly turning an ordinary depression into a Great Depression...or even a Much Greater Depression.These are not small challenges. Any one of them would be a worthy crisis on its own. Put them together and you have the makings of a catastrophe.What will happen? Don't know. Wish we did.A series of mini-disasters? Or one big planet-wide blow-up? Or, are the authorities so smart that they can engineer trouble-free solutions to these challenges?If you have confidence in Obama...Bernanke...Geithner...Congress...the European Central Bank...the Bank of China...and so forth...well, you have no business reading The Daily Reckoning! Heck...let them figure it out. Everything will be fine. Go back to the TV.If, on the other hand, you have a sly suspicion that the authorities are headed for the rocks...you should own some gold. Traditionally, people Buy Gold when they are afraid things might not work out as planned.As near as we can tell, gold is fairly priced. It will buy about as much as it would have bought 500 years ago...or 2,000 years ago, for that matter. That's what's nice about it. It doesn't make you any money, but it doesn't lose you any money either.Of course, the Gold Price can still vary substantially. In the last bull market in gold – from the trough in 1967 to the peak in 1980 – gold rose 1550%. That was a good time sell. The next two decades saw the price sawed in half...and then sawed in half again.Now it has been going up again. Most likely, it is merely adjusting to the inflation of the previous three decades. Or perhaps it is anticipating more inflation ahead. As to that, we're not so sure. There's probably a long, dark, cold period of depression to go through before we get to the heat of hyperinflation. But then...who knows? As those challenges listed above hint, anything could happen.Here at The Daily Reckoning we are neither bullish nor bearish on Gold Investment. We don't know whether it will go up or down. But as to our confidence in human beings, we have no doubt. In our opinion, the world's most popular economists – notably Ben Bernanke and Paul Krugman – would probably make fine bartenders. They are good at providing "liquidity" but and not much more. They have no idea what is happening in the world of finance...and their idea of what to do about it will almost surely make things worse.Meanwhile, we feel we can count on Congress and the president too. The nation may already have a net worth of minus $70 trillion (according to John Williams of ShadowStats)...but they will surely keep spending until the nation goes broke.Typically, power begets gold...then gold begets power...and then both gold and power are begotten by someone else. The world never stands still, even for someone with a million Dollars' worth of Krugerrands in his home safe.The BRICs – Brazil, Russia, India and China – are begetting power. Their economies are growing much faster than the developed, mature economies of the west. They grew by selling products – often in Dollars. This left them with Dollars as financial reserves. They have little gold.For a very long time, Dollars were "as good as gold". Or almost. But now the power equations need to be reworked. The BRICs are gaining power...but find themselves still hostage to America's paper money. Inevitably, they're going to follow India's recent example...as well as the example of practically every nation to gain power throughout history; they're going to add to their supplies of gold.A rising power acquires gold. A fading gives it up. The US has more than 8,000 tonnes of gold...nearly 80% of its reserves. Meanwhile, China – America's most likely rival for superpower status – has only 1000 tonnes of gold. It keeps less than 1% of its reserves in the yellow metal. Put all the BRICs together and you get 1,500 tonnes, less than a quarter of the US hoard. And the BRICs have 10 times as many people.Official purchases of gold by central banks have been negative for many years. They still are. In the 2nd and 3rd quarters central banks sold more than they bought. Imagine if they suddenly went positive! If the BRICs wanted to bring their reserves up to just half the level of the US, they'd have to buy 2,500 tonnes.Looking to Buy Gold for your own personal reserves today? Make it simple, secure, instantly tradable and cost-effective at BullionVault...

Bill Bonner, 24 Dec '09 Read more at http://goldnews.bullionvault.com/gold_stocks_122420091

GET VETTED OR GET LOST!!!

Silence is fraud's best friend. Word of mouth is fraud's worst enemy. Pass the word!

Precious metals should never be purchased from or sold to anyone other than a precious metals broker or seller of good repute. Good repute can only be established by independent research performed by the buyer or seller before getting involved in any transaction.
There are many sites on the Internet that provide an excellent education about various precious metals such as gold and platinum, and one should never consider getting into the precious metals market without a thorough understanding of every aspect of the metal of interest, including its mining history, differences in value, history of values, market routes, all uses, best known dealers, political impact on the value, pitfalls, risks, what is possible and what is not possible, and much more.
Buying and selling gold can be as simple a transaction as working with a local coin dealer or jeweler for small amounts such as heirloom jewelry or a few coins. When the amounts are significant, transactions are much, much more complicated and should not be handled without experienced and specialized advice, again - from a reputable precious metals expert.
Scam:
Gold scams are among the most popular of the precious metals scams. Gold scams have been a traditional scams among the Nigerian fraudster families for generations.
Gold scams come in many forms, from buying phony gold mines to buying non-existent gold bullion. Many gold scam deals involve gold supposedly stashed in the Philippines, in Swiss vaults; left over from the Marcos regime, from World War II Nazis, straight from mines located in Nigeria or other African nations; in 99.9 gold bars, powder, refined, unrefined, and on and on.
Scam artists often want the victim to show up at some bank with a suitcase full of money. The money isn't going into the bank, the suitcase is merely being "exchanged for pure gold". Whatever the means of money exchange, it is always "in advance" of the release of [fake] documents or the non-existent gold or coated ingots. That is why these scams are generically known as Advance Fee Fraud.
Sometimes the scams are simple, sometimes complex involving securities, BLOCKED FUNDS, insurances, special transportation arrangements, PARALLEL ACCOUNTS, banks in several countries, the Federal Reserve, HISTORICAL GOLD BONDS, and whatever combination needs to be assembled to part the unwary from their money. Some of the more popular scenarios involve Arab princes or emirs (usually princes) and royal family names are bandied about with abandon. Regardless of the claimed title or affiliation, it is always a name or title that is meant to inspire a feeling of privilege in the target: Rubbing elbows with the rich and famous.
All documents are fake. Some were the genuine article once upon a time, but those shown to buyers or sellers caught up in these scams have been greatly altered to fit the occasion. This includes documents of authenticity, assayers' reports, customs documents, insurance documents, shipping documents, sales documents, provenance reports, ownership transfer documents, bank documents, storage documents, mine reports, etc., etc.
One must also watch for attempts at incriminating the targeted victim by way of persuading the target to lie about the source of the gold, supposedly in order to slip the shipment past local or international restrictions. This gives the fraudster leverage over the target to use at a later date to manipulate the target into obtaining more funds. The leverage is entirely fake, but the target doesn't know this and believes he or she has broken the law and may rot away in a foreign jail for the rest of his life.

SOFT LETTER OF INTENT (LOI) FOR GOLD

I get so many inquires from new comers and season veterans that want to get into buying and selling gold that I decided to put my companies Soft Letter Of Intent (LOI) up on a blog! Let me start out by saying that it is the norm to be in this business for two years and not make a penny. Just be lucky that you have not lost any! Yes, it is true that when you close a deal it is of "lottery" proportions. That is of course the reason why most people put up with the time and frustration of completing a gold deal.

These deals come in all shapes, sizes, and places. From large (10,000 MT) to small (10 KG) amounts of gold. From gold dust to gold GLD bars. I have seen contracts from every part of the world even Vatican City. Every deal is different. That is one reason why it is hard to put a gold deal together. There is no stadard.

You hear of Swiss Procedure, World Gold Council Procedures, New Fed, etc. The list goes on and on. The Buyer is telling you the way they want it done, while the Seller is saying the complete opposite. It is enough to drive you crazy.

The question that plagues most intermediaries, brokers, and mandates is, "When do I quit?". We all have felt "it". "It" being like you are going in a big circle. It is your job to figure how to bring each side closer to each other. That is what the Buyer and Seller are paying you for. There is no doubt that you might want to give up. This is why I have enclosed my LOI so you and your potential sellers may view it. If you can convienve your Sellers to follow my procedures, your on your way to a "lottery" fortune.

Hear is some useful advice before I go. Based on my system, you don't have to sign NCND's, IMFPA's, S&P's, etc. It is all a waste of time. I'm sure most of you have dozens of them stacked up on your desk collecting dust. The paper is worth more than the deal. Just call me or email and let me know that your Seller is ready to move and I'll take care of the rest. I know, why didn't someone tell you this before?

APRIL '09 GOLD NEWS- WHAT TO MAKE OF THE GOLD MARKET

YOU CAN FOOL ALL of the people some of the time, and some of the people all of the time, notes Julian Phillips of the Gold Forecaster.

But as you can't fool all of the people all of the time, you can at least discredit the rest who won't be fooled, correct?

Many commentators and analysts are still digesting the outcome of the G-20 meeting in London. Yet if I went to my bank and asked, "May I have another loan? Oh, I know I am terribly over-borrowed already, but could you lend me my entire year's income on top of my present loans?", then they would ask me, "Against what collateral?"

Imagine I then reply "None!"...and try to guess the bank's response. But to top it all I add that "I am your only client and saying no means you'll go bust along with me."

Finally, the banker might crack a smile. But will he hail me as his financial savior, too?

This is what the issue of $1 trillion in US government debt on top of the $12 trillion already issued as guarantees, 'quantitative easing' and the like – already equivalent to the entire production of the US in one year – really represents. Just think of it: Where is the money coming from? What collateral is being given, and on what repayment terms? Isn't the latest round of G-20 stimulus simply another tranche of I.O.U.'s, but this time offered to lift less-developed nations out of a potential depression.

Let's face it, the financial system has broken down and still has not been repaired. Yes, steps are underway to try and restore the system. Yes, the banking system is also being checked to ensure it will be healthy, but something else has not been repaired and remains structurally damaged.

Confidence!

Without this, no matter what mechanics are applied, the repairs won't work. And we are not talking about professionals in finance becoming confident; we are talking about the drivers of the global economies, the consumers. Unless they are confident going forward, they will not spend freely again, but rather save, reduce debt, and remove their vulnerability to suffering a diminished lifestyle from here.

At the moment, repairs to the system are starting at the top not at the bottom. You may reply but homeowners are receiving assistance and seeing a reduction in the threat to their homes. But while this may be true, what we are talking about here is the full restoration of confidence so that the consumer will buy houses again, he will go out and finance cars again, without that sneaky feeling that he could see them foreclosed on or repossessed.

Until that happens don't expect much improvement in the overall national or international economies.

Will the present issues of mountains of money restore confidence? Only with caution, and a retreat into fear can be sparked in just a day or a week. After all, confidence in the banking system has been badly mauled in the last 18 months and presently still stands on the edge of a precipice.

How can the system speed up the process? Through a different kind of fear! With very few choices in the hands of governments and central banks the most obvious way forward is an unpleasant one. But if the consumer is made to believe that his income will rise because of inflation – and that his savings will be further decimated by inflation, too – then he will stop saving and start spending, if only to gain value through the rising prices that his house and perhaps his car will enjoy through inflation. That would be a quicker process, moving at the same speed as inflation.

We don't advocate this path at all, but there has to be a policy of saving what can be saved and letting go of that which cannot be saved, and savers will be the victims as their wealth is erased. (That is unless they switch to precious metal now, Buying Gold or silver to shield themselves from inflation. We do expect to see this happen, but sad to say, most investors just don't know gold and silver.) Until the powers that be accept that the system is structurally faulty and rectify this, the path ahead will not be clear.

Such a course will produce convincing benefits. The consumer would see the burden of debt drop as inflation pushed his income up and that sufficient for him to repay debt quicker. Institutional debt would face the same outcome enabling the system to produce a larger after-tax, cash flow and lowering of debt ratios. Yes, it would be tough on those who live on past savings, unless they hold these in the unprintable precious metals. Unfortunately the dangers are so vivid that this may well be taken as collateral damage, as was the case in the past.

In the Sixties through the Eighties, debt re-scheduling was used in the same way to the point where such bad debt was written off and ceased to be a threat to the banks. A similar path can be followed speeded up by inflation. Toxic assets will have to be "contained" until that process is well underway, emasculating such toxicity. As inflation scythes it way through debt (and the mountains of debt we now see with the lenders of last resort have never been seen before) so confidence, most likely misplaced, will be restored as the threats hanging over the consumer diminish.

Thus the printing of money serves a dual role:
1.)Restore the system, if only in the short-term;
2.)Pressure the consumer into spending again.

Remember the target remains the consumer, so that inflation must encourage spending out of both fear and the preservation of value.

However, the entire experience of the last two years will not be erased. The system has broken down and can't be fixed in this way. All the moves to date simply restore the system to a workable one. Genuine confidence, the sort that inspires hope in the future, has gone.

What is most concerning is the way the market is receiving bad news in dribs and drabs. We are aware that another $500 billion in write-downs is on the way and that the process of new liquidity flowing to trouble spots is usually inefficient, so we must expect more shocks to the system. But that takes away a bit more confidence each time and belittles any efforts made to repair the system. Can a resuscitation of confidence take place in this environment?

The consumer driven growth has been found to be wanting. It engendered a "Live now, Pay later" attitude, which has now become "lived once, now paying". And in the current environment the consumer doesn't harbor dreams of wealth beyond his means, he is in survival mode.

How can one get the system right without the traumas that usually attend system reformation? Only if the short-term answers have produced an environment that takes away the traumas at the lowest common denominator of consumer, the blue collar worker level.

In the Great Depression of the 1930s the consumer was revived through infrastructural spending, where he would simply be paid to work, even if that work produced few goods. In China today the government has instituted massive infrastructural projects to keep workers busy and paid. This process must be on-going until confidence is restored, but across the entire world!

One economy from history, millenniums ago, had laws that had debt written off every seven years, with property being returned to it original owners every fifty years. This prevented the building of banking and property empires and spread wealth more evenly through the nation, bringing integration to that society that made it survive and prosper on a broad front. In that economic system there was no mass production, no mass distribution system and no unemployment because of that.

But there is little will to change the current system into anything that produces that sort of result. The focus is now on to get our consumer driven system with its financial empires, restored to what it was. This implies it will remain vulnerable to what it has already experienced.

Consequently, wise investors have to take precautions against the potential damage they may suffer. Leveraged investing with time limits will be seen as what it is, gambling! More and more, investments will be fully paid for up-front and short-term investments relying on short-term results will be seen as unacceptably risky. The prudence of investments in assets that are at the same time assets and cash, such as gold and silver, will come firmly back into fashion and institutional portfolios.

We here at Gold Forecaster cannot emphasize enough the dangers of the inflation that lies ahead. Gold Investment has yet to have its day.

Julian D.W. Phillips, 20 Apr '09

Russia Backs Return to Gold Standard to Solve Financial Crisis

Russia has become the first major country to call for a partial restoration of the Gold Standard to uphold discipline in the world financial system.

Arkady Dvorkevich, the Kremlin's chief economic adviser, said Russia would favour the inclusion of gold bullion in the basket-weighting of a new world currency based on Special Drawing Rights issued by the International Monetary Fund.

Chinese and Russian leaders both plan to open debate on an SDR-based reserve currency as an alternative to the US dollar at the G20 summit in London this week, although the world may not yet be ready for such a radical proposal.

Mr Dvorkevich said it was "logical" that the new currency should include the rouble and the yuan, adding that "we could also think about more effective use of gold in this system".

The Gold Standard was the anchor of world finance in the 19th Century but began breaking down during the First World War as governments engaged in unprecedented spending. It collapsed in the 1930s when the British Empire, the US, and France all abandoned their parities.
It was revived as part of fixed dollar system until US inflation caused by the Vietnam War and "Great Society" social spending forced President Richard Nixon to close the gold window in 1971.

The world's fiat paper currencies have lacked any external anchor ever since. It is widely argued that the financial excesses and extreme debt leverage of the last quarter century would have been impossible - or less likely - under the discipline of gold.

Russia is a major gold producer with large untapped reserves of ore so it has a clear interest in promoting the idea. The Kremlin has already instructed the central bank of gradually raise the gold share of foreign reserves to 10pc.

China's government has floated a variant of this idea, suggesting a currency based on 30 commodities along the lines of the "Bancor" proposed by John Maynard Keynes in 1944.

By Ambrose Evans-Pritchard
Read more about this article at
http://www.telegraph.co.uk/finance/financetopics/g20-summit/5072484/Russia-backs-return-to-Gold-Standard-to-solve-financial-crisis.html