Try Buying Gold in the Real World - Mike Swanson (05/08/2014)

We got a little pullback in gold yesterday. I got a couple of emails from people scared about that daily drop. One person asked me if the HUI goes through 220 should we all sell?

Well I thought to myself this is a good day to buy more!

So I tried to buy physical gold in person and had a very tough time of it.

I have bought gold and some palladium on the internet, but I had never bought in person from a gold dealer before.

I don't like to carry around much money. I actually don't like paper money at all, because it doesn't do anything.

Saving money is useless. I got a drawer full of German marks that say they are worth billions on it, but they are worth nothing.

One has a picture of that jackass Adolf Hitler on it.

My grandfather was in WWII and invaded Germany with Patton's army.

It was him and two other guys working together as forward observers for artillery.

In a lull in fighting they were in some city square and went into an abandoned bank and took some Hitler money.

That's hyperinflation and when governments go nuts their money goes to zero.

I also got some Confederate money in a drawer in my house. The bills are in perfect shape and you'd think they would be collector items, but they are worthless.

The Confederacy was a vile government and they hyper-inflated their currency during their war game too.

Their are still rednecks in the south who think the Confederacy was protecting "rights," but if you actually look at the history Confederate government it treated its citizens like crap was a hellhole.

Paper money is good for one thing - spending.

Think about it if you got a stack of newspapers and a stack of dollars sitting on your counter they both are doing the same thing - NOTHING.

And in time they will lose value.

That's why so few people save money. They just spend it on stuff - usually useless crap.

I like to use it though to buy things that will go up in value and build real wealth.

You don't need to waste money on junk.

Money turned into real estate is neat.

Money turned into the right stocks is exciting.

And money turned into gold that is then stored in a safe place is a safe haven.

Right now investing in gold makes all the sense in the world to me.

So I decided I would take a drive down the road to Greensboro NC and buy some gold bullion.

I took a few thousand dollars and put a gun on the passenger seat.

These are crazy times.

I went to three gold dealers and not a single one of them had any gold bullion bars.

They mostly sold collectible coins.

They told me that whenever someone comes in and sells them bullion that it just sells out within a day or two so they cannot keep any in inventory.

I told these guys I invest in mining stocks and wanted to now invest in physical gold too, because I thought a bull market was coming.

They had no reaction to that at all. They didn't seem to care whether the market goes up or down. Their world was really collectible coins and catering to collectors.

It was a fascinating contrast to the internet gold bugs world - where everyone is scared to death whenever gold goes down on any given day. It's basing up and down going sideways and when it and the gold stocks break to the upside both will start a bull market that will take everyone by surprise.

Over the past two months though it hasn't done anything but go up and down in a range. But those down days terrify stock market players in gold, because they all have been trained by the bear market cycle of 2011-2013 to fear another collapse.

So I communicate via email with people scared to death every morning.

So that's a big contrast with going to a gold dealer store and not being able to get any bullion at all and talking to people who seem to be oblivious to the gold market trends.

Silver is tough to find too apparently.

One store I went to had a single one ounce silver bar for sale. The other guy had twenty. So I bought them.

Silver is good to own too.

So from my experience it's hard to hop in your car and buy gold. You can get it on the internet though from gold dealers like Regal Assets, Kitco, and etc.


The market dropped and the Fed spoke to keep interest rate low and support on the economy and the market went up. Gold dropped. This all seemed the market reacting to news.

It is funny that you carried a gun, but left it and not brought it into the gold dealers...

Some says JP Morgan had been buying silver in 2013 like crazy.

As you said, their focus is collectibles, which is probably why they got in the business in the first place. The two shops I've talked to in this area seem to think of bullion as a hassle, but necessary to please customers. Notably, they charge a 10% premium to buy your stuff. This supposedly protects them from volatility ("I'm just a small businessman") so they can ignore the short-term POG. So, if/when gold goes up to $2000, I will lose $200 on every coin I sell them, whereas with, I will lose only $15.


In one of the stores as soon as I asked if he has any gold bullion the guy said no, then I said do you got gold eagles.

He said he didn't have any of them either then he got out a thing of gold coins and showed me one real tiny one and said I have this one, it is fake but rare I'll sell it to you for $400.00.

I was thinking to myself huh?

They had silver dollars and stuff like that on display.

Use CMI in Phoenix.


Unless you buy with cash at the point of sale, all other financial transactions are traceable.

As far as I know, there's still no automated way to notify the IRS (for example) that you bought or sold bullion. The companies that do not keep lasting records are worth doing business with, because (a) they have the right attitude and (b) they make it quite difficult for the goons to figure out who did what.

It can be argued that the sheer volume of snooping being done on us, and our financial transactions, works in our favor. The challenge for the snoopers is to somehow identify what's worth going after among the millions of suspicious transactions that are auto-captured each day. We can take comfort in the fact that government/military IT systems are historically far inferior to the state of the art (except, perhaps, for reverse-engineered alien technology). This would explain why they need a bank officer to file reports on suspicious (e.g., $10,000) transactions. The AI just isn't there, and it may never be.

Of course, I would never try to dodge my patriotic duty to declare everything.


We hear so much about all the gold buyers China, India, Central banks but when gold goes down $20.00 in a day who is doing all the selling?

of the HFT algorithm trading variety. You have to understand that when people talk about China and India buying gold, they are referring to physical gold. What happens in the physical gold market has, for the time being, very little impact in the price of gold. The price of gold is established in the London fix and is purely related to the gold paper market at the Comex.

The Comex is vastly dominated by JP Morgan and technical funds. I think JPMorgan controls about a third of all long contracts in Gold and a similar amount of shorts in Silver. When your presence is so large, it is not difficult to have control over the price. If buyers come in and the price starts rallying, JPMorgan quickly becomes a seller of last resort, dumping a large amount of contacts at the same time. As the price spikes down, technical funds automatically start selling as stops get triggered, and the price declines further. Once the price is attractive enough, then usually is JP Morgan one of the main buyers.

This is a simplification, of course, but gives you an idea of the dynamics of the gold market. At some point, though, either JPMorgan itself will decide it can benefit from higher prices and will stop capping the rallies, or renewed interest in the gold market will bring enough new buyers to overcome the control JPMorgan currently has.

But back to your question, physical buying is mostly unrelated to gold price right now.



if you google jp morgan how they drove down silver, perhaps that would be 1 explanation.

Also, pay attention to currencies ( The dollar and euro bounced today. I reckon that this by itself would stimulate "algo" selling.


Mike, I agree that investing in gold makes sense right now. This is supported by the fundamental and technical reasons. My issue with buying and selling physical gold is that the dealers/stores will always charge you a premium. Example: if you wanted to sell your gold bullion in 1980, when gold hit $850 an ounce, you probably would not be able to do so, because you would have to drive to the store, offer your gold and ask how much they would take for it. Whereas if you own gold ETFs or stocks right now you could sell at any point of any given day as long as you have internet access.

As far as timing the bottom, you have been wrong twice, in August/2012 and September 2013. However, looking at your reasons for picking those bottoms, I don't blame you. It seemed very logical during those times to assume that those were real bottoms. For instanse, the August 2012 chart looked very similar to October/2008. And the September/2013 chart of gold looked like it was busting through its 50-day MA.

So is this the real bottom? Time will tell. I personally will not buy until gold breaks through the 200-day MA, the 200-day MA curves up, and gold pulls back to it. Something similar to what happened in 2002.

Keep up the good work Mike. I appreciate the fact, that you put your reasoning out there in public, stick to it, and are not afraid to admit, if and when the market moves against you.

What is interesting is why he bailed on those previous bottoms, but is willing to average down on this one.

The main difference this time, I think, is the flattening out of the 200dma. I guess that Mike sees that as a sign that the selling is exhausting itself, and thus doesn't see much down side here.

But it will always be guesswork.

Mike also said the volume increased this time.

there was no long drawn out base those times than like there is now... and the gold stocks didn't really perform better than gold... now that relative strength ratio is going sideways and looks like it will turn up - its not going down.

August/2012 and September 2013, I think he got out with a small loss. So he was wrong, then right again. I did not sell, and so am sitting on 50% losses.

one thing about gold - I first got interested in the gold market in 2002 and traded in and out of it over the years in the gold stocks. If I had simply bought gold itself starting back then when it was $300 an ounce and kept buying every month I would have made more money than all of stock market trading I had done over that time most likely. But that's hindsight..

The thing is gold and silver even though they fell in 2012 and 2013 are still up more than just about anything else since 2002. Everybody loves the SPX and DOW, but if you bought gold starting in 2002 you would be up 4-5X your money right now. In SPX and DOW you lost twice and just made back your money twice.

Mike, your logic absolutely makes sense. Here is a question. And you can either answer it now, or you can put together a video outlining all of the pro's and con's. What makes you believe that the blow off in gold in September/2011 was not the final end of the gold bull market? By the way, I am neither in favor nor against this opinion. I came across this view. Obviously you don't share it. However, I would be very interested in hearing a thorough discussion stating, considering, and refuting all of the arguments on both sides of the spetrum.

Thank you.


* Join and receive the Two Fold Formula guide to picking stocks and combine tested fundamental valuation metrics with technical analysis.

*Align yourself with the big trends of the stock market and be alerted when these trends change.

*Receive free updates when we see an investment opportunity in an emerging sector before the crowd gets in.