Rudy Martin: In a shot heard round the world, Germany has fired off a request to repatriate about 675 tons of its gold by 2020, starting this year.
That’s about 50% of its total gold reserves. And guess where a big chunk of that gold is coming from?
The Bundesbank has requested a phased relocation of the gold, currently worth about 27 billion euros ($36 billion). Three hundred of those tons currently live at the New York Federal Reserve, with 374 tons residing at the Bank of France. Interestingly, its holdings at the Bank of England will remain unchanged.
This monumental transfer of countries’ physical wealth could be the beginning of a trend … one that could have devastating long-term implications for the United States.
But for investors, I see a tremendous opportunity to make money, even and especially as the U.S. dollar feels the impact.
Some will ignore this and downplay it, saying “it’s just prudent” or “it’s really based on German politics and fear” or “central bankers just want to show off their reserves.”
This move says two things to me:
- Germany no longer depends on France or the United States as financial centers to exchange gold.
- Germany could choose to back its troubled shared currency (the euro) with this gold.
Either way, this delivers a crushing blow to the already weakening U.S. dollar … further fueling the growing belief that gold is the true world reserve currency.
The Rest of the World is Watching …
Here’s Who YOU Should be Watching
While Germany is busy repatriating its gold and Washington worries that other countries will follow suit, several developing economies are ramping up both their gold production and their reserves.
And that’s the best kind of news that a long-term global investor could want to hear.
The biggest non-U.S. gold producers, in order, are China, followed by Australia, South Africa and Russia.
And these countries, unlike the U.S., Europe and Japan, aren’t printing the value right out of their currencies.
In fact, over time, those countries could see the value of their currencies and stock markets surge relative to other, more-developed economies. And gold could play a tremendous role in this important shift.
Plus, for countries with surplus funds, it would be natural to expect the central banks to acquire physical gold to back up their currencies.
A Growing Global Gold Grab
China in particular is competing with India to become the world’s biggest gold consumer; next week’s numbers from the World Gold Council will confirm whether it takes that title.
Meanwhile, Russia has been the most-vocal of these countries about building gold reserves. It boosted its holdings to more than 950 metric tons as of late last year.
But the new buyers now also include South Korea, Turkey, Russia, the Ukraine and a growing list of fast-developing economies.
But does that mean it’s …
Time to Add a Global Metals Play?
Normally, I would suggest a gold miner or two as the ideal way to profit from gold via the developing markets.
But in this case, gold is NOT part of a cyclical industry pricing turn based on supply. The change is on the demand side, so it’s the financial equivalents to gold and alternatives that are likely to hold higher return potential.
In terms of recent performance, some of the best gold investment products range from a triple-leveraged, gold-futures ETN to an ETF that stores gold bars exclusively in Switzerland.
Despite the individual uniqueness of the top-five performing gold products, they all share two elements:
- A focus on gold prices, and
- No exposure to gold stocks.
There are several ways to get some global gold exposure using ETFs. Here are a handful worth taking a look at.
- VelocityShares 3x Long Gold ETN (NYSEARCA:UGLD)
- PowerShares Deutsche Bank DB Gold Double Long ETN (NYSEARCA:DGP)
- ProShares Ultra Gold ETF (NYSEARCA:UGL)
- iShares Gold Trust ETF (NYSEARCA:IAU)
- ETFS Physical Swiss Gold Shares Trust (NYSEARCA:SGOL)
Gold is just one small part of a massive global-investing story that is already starting to play out in 2013. In fact, today at noon Eastern, I’ll be unveiling the the four global mega-trends that can power your portfolio for the next year and beyond.
Uncommon Wisdom (UWD) is published by Weiss Research, Inc. and written by Sean Brodrick, Larry Edelson, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in UWD, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in UWD are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Andrea Baumwald, John Burke, Marci Campbell, Selene Ceballo, Amber Dakar, Roberto McGrath, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Marty Sleva, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.
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