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"Precious metals have had value in all civilizations, have survived all financial crises, and can be expected to do the same in the future. However, it is to all investors' interests that they know what they are doing before investing in
precious metals."


Bill Haynes
President
CMI Gold & Silver, Inc.

Does your gold have to be reported?

NO!

Gold purchases do not have to be reported. This myth is so pervasive that CMI feels obligated to clarify this misunderstanding repeatedly.

See Myths, Misunderstandings, and Outright Lies to learn about the pitfalls of investing in precious metals.
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A Lot of Gold
(but not much money)

November 15, 2002

Wednesday, on news that Iraq would accept UN inspectors, gold dropped $5.80 (but silver only four cents). Some analysts saw the drop as gold losing its "war premium," which is to say that the prospects of war with Iraq had been built into the price. Other analysts asserted--and perhaps accurately--that Wednesday’s drop was evidence that the gold bears are still a force in the market.

It was a "given" that Iraq would say that it will comply with the latest UN resolution. So, why were gold investors surprised at the announcement and why did they sell? Actually, gold investors did not sell. Large gold speculators sold. These players look for every opportunity to play $5 to $10 moves in the price of gold. The Iraqi announcement was a perfect set up. Investors need to look at "the big picture" and not worry about intermediate price swings. Gold’s relationship to the dollar is part of the big picture.

Gold investors know that gold is the ultimate money, that it has value because of its intrinsic properties. Most investors know also that gold never became money because some government declared it such but because people used it to facilitate commerce. Before paper money, when the world was on a pure gold (or silver) standard, commodities were measured by gold (or silver) required to buy the commodities.

It did not matter if the units were ounces, grains, grams, or talents. What mattered was that the seller received gold or silver of a known weight and fineness. When gold and silver were used for money, buyers and sellers exchanged one useful commodity for another, and the value of goods were determined by how much gold or silver that the selling merchant wanted for his goods.

Today, however, gold is measured (in the US) by the number of dollars it takes to buy one troy ounce. When gold is $320, no one says that a dollar is worth 1/320 of an ounce of gold, but that an ounce of gold is worth $320.

When the price of gold rises, no headlines declare that the dollar has fallen. News reports simply say that the price of gold has gone up. Likewise, when gold falls in price, no one says that the dollar has risen in value.

The dollar is the yardstick by which we measure the value of our financial investments. For instance, according to the World Gold Council, in 2001 investors and consumers bought 3732 metric tons of gold for about $32.5 billion. That’s a lot of money, right? Well, let’s see.

Over the last twelve months, M1 money supply increased $525.5 billion. At $320 gold, that’s enough to buy about 51,000 tons of gold. In only twelve months, the Federal Reserve--and our fractional reserve banking system--created enough dollars to buy more gold than the world’s central banks claim to own, which is less than 33,000 tons.

In 2001, 3732 tons of gold exchanged hands. However, the $32.5 billion it took to buy and sell that gold was not much money, when compared with the $525.5 billion created over the last year.

Gold investors should not be overly concerned about daily fluctuations in the price of gold. They need to keep the big picture in mind. Until the world’s economic and financial problems are resolved, gold and silver remain the most conservative investments. Actually, after the world’s economic and financial problems are resolved, gold and silver will probably remain solid investments because they may be part of the solution. The world’s problems are such that returning to the gold standard may be the only solution.

Call CMI at 1-800-528-1380 for answers to any questions or clarifications.  Our hours are 7:00 a.m. to 5:00 p.m. Mountain Standard Time, Mondays through Fridays.  Our offices are in the middle of the Phoenix, Arizona financial district.  CMI has had the same bank account since its inception in 1973.  References available on request.  http://www.certifiedmint.com

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