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At the Crossroads of the World's Gold Trade

Commodities / Gold and Silver 2010 Oct 06, 2010 - 10:53 AM GMT

By: DailyWealth

Commodities

Chris Weber writes: One of the reasons I love the San Francisco Bay Area is that it is a crossroads of the world.

Pretty much every type of person, just about every group from everywhere on Earth, resides or visits or otherwise brushes up against one another.


During my recent time there, I liked visiting Camino Coin, the preferred gold coin dealer for me and my readers for many years. I just hung around, watching customers come in, seeing who they are and what they are buying or selling.

I've long thought that following the global flow of money (gold) tells one so very much about what nations or even civilizations are rising, just sitting still, or falling back. The groups who work hard, save, and accumulate gold are the ones on the way up. Those who do the opposite have to be prepared to see their standards of living fall.

They are distinct in their patterns. Camino is within a few minutes of half a dozen big high-tech firms. Oracle's headquarters is quite close, for instance. But all of Silicon Valley's dynamic companies are within close reach. I say this because the Indian customers are nearly all employees of these kinds of companies. They are nearly all between 25 and 35 years old. Bright software engineers, they are only in the U.S. for a set period of time before they go back to India.

They come in regularly in groups to buy gold, I'd say each time they are paid.

As for the Chinese, it is common to see two or three generations of a family coming in to buy. Usually the "oldsters" buy first, and the younger generations take their cue from them. The Indian buyers are too young to have families come in with them, but they can be clannish in their own way, with parties of several engineers pooling their money together.

So the Chinese want their families to know what they are doing, and the Indians often have no problem with their fellow workers knowing what they are doing: They are all doing it together.

This is all so different from the European or American buyer. This buyer nearly always comes in alone, and it is not uncommon for them to say, "Don't tell my wife or children what I just bought." I'd call this a huge cultural difference.

The other big cultural difference I see is that European-Americans (as opposed to the Chinese-Americans) are the only ones who are selling gold.

In a huge percent of the cases, the sellers come in with Krugerrands that their parents or grandparents bought back in the 1970s, during the last bull market in gold. They say, "I read how gold has gone up so much. How much can I sell these coins for?" Often, they need cash and see this "old" gold as a great way to get it.

Back in the last bull market, the South African Krugerrand was the only coin you could buy. Many holders did not sell them, and many died before the new bull market began about 10 years ago. Now it is the younger generation who sees them as easy ways to raise cash.

When I see the way Indians and Chinese are consistently buying gold regardless of price while at the same time European-Americans are more likely to rush to get rid of true wealth in favor of paper money that is almost certain to continue losing value against that gold, it makes me worry about the future of the U.S. Certainly gold is flowing into countries like China and India.

Hanging around a place like Camino Coin makes you see this process up close; it is happening ounce by ounce, coin by coin. And these are the very places that are becoming more dynamic, and whose citizens are enjoying rising living standards. The average American cannot say the same.

Regards,

Chris Weber

Editor's note: For Chris' complete writeup of this situation, we encourage you to read the October 1 issue of The Weber Global Opportunities Report. Chris uncovers one of the best opportunities we've ever seen for folks looking to diversify their wealth. You can learn more about The Weber Global Opportunities Report here.

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The DailyWealth Investment Philosophy: In a nutshell, my investment philosophy is this: Buy things of extraordinary value at a time when nobody else wants them. Then sell when people are willing to pay any price. You see, at DailyWealth, we believe most investors take way too much risk. Our mission is to show you how to avoid risky investments, and how to avoid what the average investor is doing. I believe that you can make a lot of money – and do it safely – by simply doing the opposite of what is most popular.

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Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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