By Peter Macfarlane for The Q Wealth Report

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 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.

In this article I'm going to take a look at reasons for buying gold as in investment or hedge, and give you a brief introduction and 'how to' information on buying gold. Perhaps most importantly I'm going to explain why you should consider buying and holding gold offshore rather than in your home country.

And I'm also going to explain why neither the now problematic Gold ETFs (exchange traded funds) nor the famous Australian Perth Mint Certificates are the best ways to achieve the safety and security you are looking for. In fact, they could be positively dangerous! Learn why below. Instead I will recommend more traditional ways of buying and holding or owning gold… physical gold you can actually touch and own!

If after reading the following article you are interested in knowing more about precious metal investments, please surf to other pages on this website to read up further and learn more about what we do here at Q Wealth - and more importantly, what we can do for you in terms of offshore gold information and referrals. Don't miss our free offshore wealth building newsletter, Q Bytes, in which we regularly cover various offshore wealth preservation and creation opportunities. We are offering a free 12-part course called "Secrets of the Super Rich" for all new sign ups to the Q Bytes, and it won't cost you a penny!

Why buy gold?

Gold is a traditional 'safe haven' 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, the US dollar has been falling. 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.

Katherine Yang, a fund analyst at Morningstar, says in an interview with British publication This is Money: '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. Worries about the supply of gold have also pushed the price higher - for example, the electricity shortages in South Africa has caused some unease about mine production.'

Besides being a store of wealth, therefore, gold is also an attractive commodity to invest in. Mined gold has been stagnant and a lack of new mines opening, offset against the decline in gold production, has meant a drop in supply levels.


Why buy gold Offshore?

So far, so good. There's nothing particularly new or controversial about the information above. But The Q Wealth Report, as one of the premier publishers of information dedicated to your financial and political freedom, has always taken 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 September 2008, we see the US Federal Government beginning to limit the access of ordinary citizens to gold bullion - by withdrawing new bullion coins from circulation. (Suddenly by the way the IRS also introduced a new form for reporting of foreign bank accounts, but if you are looking for five non-reportable investments for Americans, check here)

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.

Provided you don't 'look suspicious' and you can prove the origin of your funds with some documents, it is quite easy to buy gold bullion coins anonymously with cash. Some countries, like France, charge sales tax on gold and so should be avoided. Others place burdensome restrictions on export, like major gold producers Brazil and South Africa. Others, like San Marino, are simply too far from major gold markets for purchase there to be economical - you would be saddled with high transport and insurance costs.

So where should or can you go to buy gold offshore? The undisputed capital of the business is Zurich, Switzerland. There you can buy and store your gold in the free trade zone at the airport. Major Swiss banks like Credit Suisse will sell you gold directly from their branches in Zurich Airport.

Most countries in mainland Europe are good for buying gold. Luxembourg, for example, is a friendly little place where privacy is still respected in precious metals transactions.

In the Americas, Mexico is another country where you can simply walk in to a casa de cambio and buy gold 'centenarios' over the counter for cash. Mexico has suffered from so many devaluations and is also a major producer of gold and silver, so investing in bullion coins has become popular there. There has been a serious effort in Mexico to introduce silver coins as legal tender. (For info on Mexican gold coins, known as Centenarios, visit here…)

If you need contacts to buy gold, I'll be pleased to help you as part of the service we offer to our Q Wealth Members. Simply write us a mail or call the office and ask for the necessary referrals to buy physical gold in Switzerland, Mexico, Dubai or wherever else you would like. We will happily refer you to honest and trustworthy bullion dealers and there is no charge for this, provided you are one of our members.

You will also find more information on buying gold offshore in my Practical Offshore Banking Guide, available for free instant download in the member's section. You might also be interested in the free report Diamonds are Forever which covers another hard asset class. Again it is available for immediate download in the members' section. If you are not yet a member, you can sign up online right now. You can also read this article absolutely free for more general information on investing in gold, silver, platinum, palladium and more.


URGENT WARNING: Here's why you should absolutely NOT Invest in Gold ETFs

In September 2008, shareholders in ETF Securities were left high and dry - unable to trade popular commodity securities, due to concerns over the future of their backer, AIG. Overnight, banks and brokerages stopped making markets in the Exchange Traded Commodities (ETCs) backed by the troubled insurer and sold by ETF Securities (ETFS). The price of the stocks also plummeted over 50 percent due to the worries over AIG.

Gold ETFs are vastly different to holding real gold. Turbulence, such as the above in the market, can affect the value of those gold ETFs markedly. When you buy an ETF you are buying electrons on a screen. It is not the same as buying real solid gold.

If you own stock in an ETF, that means you own a stock that depends on the price of gold, rather than gold itself. No matter that corporations such as ETF Securities own gold. How much gold they own is not clearly discernable by the average "Joe Sixpack" who may own ETF stocks.

Even a downgrading by credit agencies like S&P or Moodies can drastically affect the share price in ETF Securities - as it has done! In September 2008 shares in ETF Securities products, which were backed by AIG, were down as much as 50% in one morning after the US insurer was downgraded by the rating agencies.

The cold hard reality is that if the issuer of an exchange traded note goes bankrupt, investors holding exchange traded products backed by these notes will join the ranks of other creditors hoping to get their money back. Streettracks gold ETF, for example, could go the same way. Streettrack gold shares, Streettrack gold trust, you name it. It can equally apply to the Canadian or Swiss gold ETFs, gold ETF in India, or Barclays iShares gold. Any ETF gold funds are subject to the same risk. With any gold ETF one does not own actual gold and cannot redeem gold from the fund.

Indeed, to buy gold ETFs is adventurous and courageous - one might almost say dangerous - activity, in today's economic climate, with so many Wall Street firms going under.

The same is true, in my personal opinion, to the Perth Mint Certificate Program (PMCP). This program is run by the government of Western Australia, and is offered by many gold dealers and investment advisors around the world. The problem is, when you do due diligence on the Perth Mint program, you will see that you are not really buying physical gold. You are just buying papers or 'notes', and redeeming those notes later could involve substantial bureaucratic hassle. You are also reliant on the Australian government. If, for example, the US tried to confiscate all gold held by its citizens, do you think the Australian government would co-operate? Most likely yes!

Also be aware that if you hold shares in an ETF they are reportable for tax purposes. Physical gold however is not reportable. Further information on non-reportable tax shelters is included in this blog entry from June 2008.


The difference between Pooled Gold and Allocated Gold

It's important to understand the difference between allocated storage, and unallocated - also known as pooled storage. Both these systems are used by private offshore banks in places like Switzerland.

Allocated means that a certain piece of metal (specific gold bars, coins or whatever) belongs to you. The metals are stored in the bank's general vault, rather than in a specific safe deposit boxes, but they are specifically allocated as your assets. For practical purposes, therefore, you can instruct the bank to buy and sell on your behalf without you having to travel there.

Unallocated or pooled storage means that the bank simply has X amount of gold in its vault, and allocates so many grams, ounces or kilos to your account - as part of a book-keeping exercise. But the banker cannot in this case take you down to the vault and point out your specific gold bar.

Which is better? Allocated storage is more secure of course, though you still have to rely on the co-operation of the bank in order to access your gold. What if the bank is bankrupt? Will you be allowed into the vault to recover your gold? Pooled storage tends to work out a lot cheaper in terms of the actual fees the bank charges for taking care of the metals in its vault.

Further reading and research:

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Peter Macfarlane blog
Security Privacy Freedom blog
Peter Macfarlane's QWealth Tweets