The Golden Rule: Safe Strategies of Sage Investors

By Jim Gibbons

Everything the independent investor needs to know to effectively invest in gold

With today's increasing economic uncertainties, a strong investment strategy is to put a portion of your net worth in gold. However, given investors' overall lack of knowledge about gold as an investment, as wealth insurance, or as a store of value, many are hesitant to enter this arena.

That's why Jim Gibbons has created The Golden Rule. This book answers many questions, including: How do you purchase gold and in what form? Why gold now? When should you buy? And, most importantly, from whom? Throughout the book, Gibbons puts gold in perspective and shows you why it belongs in every investor's portfolio.

• Provides practical gold investment insights from New York Times bestsellers Peter Schiff, William Bonner, Doug Casey, Addison Wiggin, and James Turk as well as from leading experts in this field including: Congressman Ron Paul, Rick Rule, Adrian Day, and many others
• Demystifies gold by putting it in the context of twenty-first century economic realities
• Highlights a variety of ways to invest in gold-from mining stocks to buying gold coins and bullion

With the financial markets more erratic than ever, gold appeals to investors looking for a safe haven for their assets. With The Golden Rule as your guide, you'll quickly learn how to make the best decisions possible with regards to this precious commodity.

• Language: English
• Publisher: Wiley
• Release date: Apr 7, 2010
• ISBN: 9780470630945

Book preview

INTRODUCTION

THE TIE THAT BINDS

¹

Jon Nadler

Kitco Precious Metals

The desire of gold is not for gold. It is for the means of freedom and benefit.

—Ralph Waldo Emerson, philosopher and poet (1803-1883)

Jon Nadler has focused exclusively on precious metals and their related investment products his whole working life. After graduating from UCLA Jon established and managed several precious metals operations at major U.S.-based financial institutions including Deak-Perera, Republic National Bank, and Bank of America.

Jon’s current role is that of Metals Market Analyst and Public Relations Head for Kitco, one of the world’s premier retailers of precious metals. Jon’s market commentaries, often on gold, are frequently quoted by the U.S., Canadian, and global financial media including the BBC, the Wall Street Journal, Bloomberg, Reuters, and many others. Barely a day goes by in which I haven’t logged onto Kitco.com to check on the markets, read Jon’s latest precious metals commentary, or one of the other many commentaries that Kitco provides.

With over 30 years working with gold and precious metals, one might wonder what inspired such passion. Have you heard the expression a picture is worth a thousand words? People remember it for its truth. Jon’s contribution paints that kind of picture. If you remember just one contribution from this book or one lesson from these pages, it should be Jon’s.

This is a story about gold. This is also a story about ordinary people and about survival. This is not a story of the gold markets, or of gold prices. This is a story of how this prized element, for which wars have been waged and in search of which continents have been discovered, has played a crucial role in the lives of a lucky few. . . .

People often ask me why I chose gold as an occupation for the past three decades. I hope to be able to best give you the answer to that question at the end of this chapter. For now, let me begin by first reaching far back in time, very, very far. The diary begins thusly:

The year is 105 CE. Roman occupation of the richest gold-bearing area in Europe is well under way. Home to the ancient Thracians in what is now modern day Romania, this is a scenic land of untold riches. The Romans exploit the province extensively, building roads, forts, bridges, and new mines.

A hamlet named Rivulus Dominarum (The River of the Young Ladies) thrives because of what lies under its neighboring hills. Enough gold is extracted from the area to be able to lay down a 1500 kilometer - long highway of pure gold—all the way to Rome.

113 CE. Emperor Trajan (Marcus Ulpius) builds the famed Basilica Ulpia and Trajan’s Column with funds from the Dacian gold trove. The Roman occupation eventually ends and the Mongols overrun the land leaving it in ruin. The gold remains locked in the hills. A millennium passes.

896 CE. The Magyars, the last of the migratory tribes to establish a state in Europe, settle in the Transylvanian basin.

1003 CE. King Stephen I integrates Transylvania into the Hungarian Kingdom. All the while, the mining of the gold continues. . . .

1899 CE. Thirty-three years after the Austro-Hungarian Empire is established, the rich flow of gold from Transylvania continues. In the village of Felsobanya (Upper Mine) lives a 30-year-old man named Johann. Johann is a gold miner, like his father before him. Johann’s wife is with child.

1900 CE. Johann hopes for his newborn son Johann II to become somebody other than a mineworker. Thus, he dutifully saves gold coins for his future. He knows firsthand how hard gold is to obtain. Life in the village is tough for Johann; life in the mines, tougher still.

Little Johann II grows up. He now dreams of a day when his father does not have to leave the house before dawn and return way after sunset, of a day when his father’s clothes aren’t filthy and his hair does not reek of the carbide used by miners to throw light from their helmets underground. He dreams of days like Sundays, when his father climbs the hills under which the gold lies to pick wild strawberries with him. There are too few Sundays in the year for little Johann.

1905 CE. In a village that is just kilometers away from Felsobanya, another little boy is born. His name is Nicholas.

1910 CE. Johann receives gifts of beautiful minerals from his father on most of his birthdays: pink quartz, needle-like stibnite blossoms, and lots of shiny pyrite. Fool’s gold looks very real to a child, you know. He collects them all. But sometimes, Johann receives a real gold ducat, like the one that is bestowed upon him for his tenth birthday. That gift is for keeps. He knows of a certain coal iron that his father and mother keep in the attic. He has never seen its contents, but knows they must be very special. He saves his special coins in a can of Ovomaltine that he hides in the chicken coop. Called Ovaltine today, it is a brown powder to be mixed with water/milk etc. to offer decent nutrition.

1912 CE. A familiar deep boom echoes through the hills one day. The miners are dynamiting new shafts deep in the ground. But the earth keeps shaking for far longer than normal. A heavy silence descends over the village. Johann’s father does not come home that night. He never does again, nor is he ever found.

1913 CE. Young Johann must go to work in the gold mines at age 14, as his mother’s health is failing. Johann demands that he get paid in gold coins for both himself and for his father’s widow’s payments. Johann works very hard over the next two years, sometimes for 16 hours a day. Disaster strikes again, out of nowhere. A rusty old mine cart breaks loose and runs downhill. He attempts to stop it, in vain. The wheel amputates most of his right foot. Johann cannot return to work for nearly a year. It is the bleakest of times.

July 1914. The Great War erupts. Johann is spared military duty as local officials divert those like him with lesser physical abilities to dig for more gold, lead, and copper than ever before. One and one half million Austro-Hungarians perish in the conflagration. Johann works for 16 little gold ducats per month. He saves almost all of them. Now a coffee grinder and a teapot are also needed to hold the growing savings of gold. Unbeknownst to him, they will become instruments of salvation.

1919 CE. The Austro-Hungarian Empire is relegated to the history books. Hungary feels the full impact of the post-war environment. Inflation runs rampant, wages are frozen, and food shortages develop. Miners now routinely take small gold nuggets home. Otherwise, they face starvation for their families.

1921 CE. A severe case of hyperinflation takes place as the Austrian economy collapses. Prices as measured by government issued paper currency rise 14,000-fold during the inflation. In Hungary prices rise 23,000-fold. In Poland prices rise 2.5 million-fold. In Russia prices rise 4 billion-fold. And in Germany, prices rise 1 trillion-fold. Thank God for the gold. The coins in the attic save the family as some are bartered every month with local shopkeepers, farmers, and doctors. Many of Johann’s friends have to take to the road after selling everything for food. Johann cuts firewood on his way home from work and sells it in town.

1923 CE. Johann’s mother dies. She is laid to rest next to the empty grave of her husband. Johann soon marries an orphaned girl named Rose. They have only his mother’s adobe house and the gold coins in the attic to their name. Not only his gold ducats, but those that his parents had saved and hidden in the attic, too. Soon, they will have a little girl. They will name her Roza. The gold, and her father’s complete faith in it, will be her legacy.

1923 CE. The scene: the town of Sighet (Island), birthplace of famed writer and Nobel laureate Elie Wiesel. A boy named Eugene is born as the youngest of six kids. His father, Leopold, a Hungarian Jew, is a schoolteacher. His mother, Irene, has her hands full. Life in the little town is difficult after the Great War. Eugene delivers seltzer water to the neighborhood from a horse-driven cart after every school day. He grows up having to work in his spare time to help the family. Everyone pitches in.

1939 CE. Sixteen year-old Eugene is now ready to begin work in the Phoenix refinery in neighboring Nagybanya (Big Mine) as a junior chemist. He apprentices while going to school at night.

August 1939. Germany attacks Poland. The greatest conflagration the world has ever seen is unleashed. Nothing will ever be the same again, for Eugene, his family, or for the rest of the world.

December 1941. The front is still a distant event for many. The news from Sighet is that a man named Moshe escaped and came back from some kind of super-prison far away, in Chelmno, Poland, and he had stories of horror and death to relay to the townspeople. Nobody believes Moshe. After all, Hungary and Romania were part of the Axis since late 1940. Why would anyone be killing the citizens of an allied power? Nah, Moshe must be crazy. What death camp is he possibly imagining?

May 1943. On one of his rarely free but never worry-free Sundays, Eugene meets a young girl on a tennis court not far from his workplace. It is Roza, daughter of Eugene and Rose. They fall in love. The madness of the war around them grows larger and ever closer to