Gold and Energy Advisor: Real Wealth #231, 06/04/2009

Dear Subscribers,

One of the most beautiful gold coins ever produced by the United States Mint are the American Buffalo one ounce $50 gold coins.

The minting of these magnificent gold coins was authorized by on December 22, 2005. The obverse and reverse designs feature images originally prepared by noted American sculptor James Earle Fraser, and was first used for the Buffalo, nickel series struck from 1913 through 1938.

These Buffalo 1 ounce gold coins were the first .9999 fine 24-karat gold coins ever struck by the United States Mint and offered for sale through a network of Authorized Purchasers. The coins have been struck from 2006 through 2008 but it appears the U.S. Mint has been so over whelmed with demand for its gold coins that it has chosen to discontinue the Buffalo gold coin program and will only strike U.S Eagles.

This news of the mints decision to stop striking the Buffalo Gold series has resulted in a mad dash by collectors to scoop up every available coin. Finding these coins at a reasonable price has become very difficult.

We still have in our Finest Known inventory 125 of these Buffalo 1 Ounce .9999 fine 24-karat gold coins that are ALL graded FLAWLESS GEM Uncirculated MS70 by the Numismatic Guaranty Corporation. I believe the premiums on these gold coins (what collectors will pay over the price of gold) could double even triple so as a strict gold play this is really a great opportunity.

These gold coins are now selling for as much at $1950 a coin by retail dealers. Our group is available for just slightly more than the regular U.S. 1 ounce Gold Eagles are selling for... Call 866-697-4653 for our up to the minute quote.

Remember we have just 125 coins left call quickly. Don’t miss out on this special group.

The following article on gold was contributed by John Myers.He has been a resource writer and analyst for 25 years. He is an American citizen residing with his family in Calgary, Canada.

Treasury Secretary tries to Pump-up the Greenback with Words Rather than Deeds

This week U.S. Treasury Secretary Timothy Geithner reiterated the importance of America and the dollar as the centerpiece of the world’s economy.

Speaking directly to dollar bears that are again pounding the currency, Geithner said that it is in the interest of all that the U.S. dollar remains the world's main reserve currency for a long time to come.

His comments on Tuesday were also aimed to counter an idea floated earlier by Chinese central bank governor Zhou Xiaochuan who spoke of replacing the U.S. dollar with the IMF's Special Drawing Rights as the world's main reserve currency.

"I believe the Chinese expect the dollar to be the principal reserve currency for a long period of time, as do we," Geithner said in Beijing.

Geithner also said that China should be more interested in America's economic outlook rather than the government's ballooning budget deficit.

I wondered if Shakespeare might say: The Treasury Secretary doth protest too much.

But what’s incredible is not what the Treasury Secretary said, but the fact that he had to say anything at all. It’s been 75 years next month that the Bretton Woods Agreement was signed. For three-quarters of a century questions have never been asked about the stability of the U.S. dollar. That is until now.

Last March Zhou gave a speech titled Reform the International Monetary System. In it he pointed out that the United States has chosen to jumpstart its economy with the excessive creation of dollars, thereby exporting inflation around the world.

Here’s the rub: if even a monolithic Communist government can recognize that a capitalist instrument like the dollar is defunct, so too can and has just about everyone else.

The chart below shows the dollar’s descent since 2002. The deflation scare that began last spring and summer boosted the buck back up to the range of 90 against a basket of other currencies. Yet the greenback has broken down again this spring and has fallen well under its long-term moving average. The dollar may yet touch its all-time lows and there is no guarantee that it can even hold at that level – 70.1 set in March 2008.

That is because Secretary Geithner and the Treasury are saying one thing about the future strength of the dollar and then carrying out policies that undercut the buck. While the Fed has pushed interest rates down to levels not seen since the Great Depression, the Treasury continues to increase the money supply at nearly double-digit rates.

The dollar’s demise will only be hastened as traders and even nations begin to move away from it.

Consider the chart below. It shows that the greenback makes up $5 trillion worth of the world’s currency reserves. You can also see that over the past decade, the euro is making up a larger piece of that pie. As more money moves into euros, the worse the dollar will fare.

“There has been an unprecedented rise in global liquidity around the world,” said Joachim Fels and Manoj Pradhan of Morgan Stanley late last week.

In Global Liquidity Cycle Revisited, they write: “Our excess liquidity metric confirms that a powerful liquidity cycle is (now) underway, with excess liquidity at record-highs, both in the advanced and emerging economies. Excess liquidity has been a key driver of asset booms and busts in the past, and this time appears to be no different.”

The question that has riveted so much of the market’s attention since the collapse of Lehman Brothers last year – deflation or stagflation – appears to have been answered and answered in spades on the side of stagflation. This fact is not only showing up in currency markets but also for gold.

At mid-week, gold was at $985 per ounce on the Comex. That puts it within one day’s striking distance of gold’s long-term resistance and the all-time high of $1,011 per ounce.

And as the gold price chart above shows, bullion has broken above its moving averages and is almost touching record highs. It won’t take much economic or political news to propel the Midas metal above $1,011 per ounce, thereby freeing it for a move towards $1,200 and perhaps ultimately $2,000 per ounce.

The bottom-line: gold is a rare resource. Each year all the gold mines in the world produce about 80 million ounces. A world-class gold discovery yields a million ounces, and they are rare. When you consider that the world’s three largest gold mining companies produce less than 20 million ounces a year, you get the picture.

For instance, South African production peaked in the 1970s, while Canadian gold production has been in decline since 1991. The truth is that it is getting harder each year for blue-chip gold companies just to replace their reserves.

Right now, the mining industry is on a treadmill, desperately harvesting 80 million ounces just to stop world supplies from shrinking. With larger discoveries harder and harder to find, it is almost certain that world gold production will decline during the years ahead.

And remember, these fundamentals are impacting a very thin gold supply. If just a fraction of money from anxious Treasury holders or central banks is diverted into gold, the price of the Midas metal would soar.

Action to take: Buy and hold physical bullion in the form of 1-ounce coins. Choose either from American Eagle, Krugerrand or the Canadian Gold Maple Leaf coins. Safe storage can be arranged by most dealers or you can take possession of coins and store them in a bank safety deposit box. These boxes are not affected by bank closures and I consider them safe from economic events.

The Last of the Buffalo $50 U.S. Gold Coins