How to Buy Physical Gold and Why Not to Invest in Gold ETFs!

Gold:
the ultimate store of wealth that has been used since time immemorial. A hedge or in troubled times, a 'safe haven' in the current crisis. If your wealth is stored in gold, then who really cares if the financial system implodes? Empires, currencies and rulers have come and gone... but gold has always retained value and purchasing power. Of the various precious metals, gold is probably the easiest, most liquid (easily traded) asset you can invest in.Gold is a traditional hedge against inflation or deflation. Against currency devaluations. Against avaricious or incompetent governments or Central Bankers. Or shall I just say, in a less politically correct manner, that America is bankrupt and Gold is the only real money? If you invest in Gold, you no longer have to rely on the "full faith and credit" of the US government - which is declining sharply.
If you're reading this article, you probably don't need me to tell you why you should buy gold. It's actually an obvious decision in the current economic climate. The question is not so much should you buy gold, as can you afford to hang on to assets denominated in a declining currency like the dollar or the pound sterling or the euro...?
The US dollar typically rises or falls inversely with the value of gold. Recently, although there's been a slight increase recently, the trend of the US dollaris downwards. My view is that the dollar will continue to decline until the US economic fundamentals look better - till America comes out of bankruptcy, that is - and that could take some years.
In terms of your savings or retirement portfolio, this means that if you invest in things like bank deposits (CDs) the net return is most likely negative. Since the beginning of 2003, US dollars held in 3-month US Treasury Bills have yielded less than 3% per year (Source: Global Financial Data). Considering that the inflation rate over this same period of time has averaged more than 3% annually (Source: US CPI), the cash accumulated had less buying power in October 2008 than it did half a decade before.
The carnage on Wall Street, and the fallout around the world, looks far from over - despite what the Feds or the mainstream media might have you believe. Every time there is a new panic like another bank or insurer collapsing, a flurry of investors with dollars, euro and pounds start a new mini gold rush.
At the same time, demand for the yellow metal continues to significantly outweigh supply. The Chinese, for example, love gold and have plenty of dollars. China is keen to diversify its huge foreign currency reserves (by far the largest in the world) away from the dollar. A small increase in China's percentage of gold reserves would cause a huge increase in demand and consequently in the gold price. Asia, particularly the Indian subcontinent, and the Middle East (think Dubai) are also seeing large increases in domestic gold demand as disposable income increases. When people think that paper currencies will be worth less in the future, they have historically looked to place their net worth into a more stable vehicle. And gold is typically viewed as a safe form of currency, as its value isn't as affected by inflation.
Why Buy Gold Offshore?
So far, so good. There's nothing particularly new or controversial about the information above. But I have always believed in a more offshore, skeptical, pragmatic approach. Like it or not, we tell things as they are.
Can we trust government to manage our finances? I think the overwhelming evidence suggests no. History shows that gold is politically sensitive, and governments (read Central Banks, particularly the Federal Reserve) don't like to see individuals buying gold. Why? Because they can't control it. They can certainly try. For example, in an earlier article you will find here, we asked seriously Will the US Government Confiscate Gold?
Then suddenly, as of late September 2008, we saw the US Federal Government beginning to limit the access of ordinary citizens to gold bullion - by withdrawing new bullion coins from circulation. (Suddenly and unexpectedly in mid-crisis the IRS also introduced a new form FBAR for reporting of foreign bank accounts)
What we can see from all this is that the smartest strategy is to keep your gold holdings outside your home jurisdiction -- where they will be well protected against all sorts of threats from governments to predatory ex-spouses. So you need to know:
How to Buy Gold Bullion Offshore
Gold bullion is the most liquid form of gold. If you want to buy gold with the idea that you'll ultimately sell it, then you will want to buy gold bullion. Bullion means either bars or coins. Fortunately, you can easily buy gold this way and just as easily sell it again anywhere in the world. If you need to break it into smaller denominations, you can for example exchange gold easily for silver coins like Panama's old Silver Balboa or Mexico's silver coins.
You can buy gold bullion by looking for offshore dealers. If you have a particular kind of coin in mind - like the Canadian Maple Leaf or South African Krugerrand, to name a few of the most popular gold coins - then do a search for that particular coin, or find the official mint websites. For example, check out the South African Mint or the Royal Canadian Mint. An interesting and more private option for Americans is restricted circulation coins. When you want to buy gold, these sites all contain helpful tools for finding local and international dealers of gold coins.