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What I Saw at the Crossroads of the World's Gold Trade

By Chris Weber, editor, The Weber Global Opportunities Report
Wednesday, October 6, 2010

One of the reasons I love the San Francisco Bay Area is that it is a crossroads of the world.
Pretty much every type of person, just about every group from everywhere on Earth, resides or visits or otherwise brushes up against one another.
During my recent time there, I liked visiting Camino Coin, the preferred gold coin dealer for me and my readers for many years. I just hung around, watching customers come in, seeing who they are and what they are buying or selling.
I've long thought that following the global flow of money (gold) tells one so very much about what nations or even civilizations are rising, just sitting still, or falling back. The groups who work hard, save, and accumulate gold are the ones on the way up. Those who do the opposite have to be prepared to see their standards of living fall.
They are distinct in their patterns. Camino is within a few minutes of half a dozen big high-tech firms. Oracle's headquarters is quite close, for instance. But all of Silicon Valley's dynamic companies are within close reach. I say this because the Indian customers are nearly all employees of these kinds of companies. They are nearly all between 25 and 35 years old. Bright software engineers, they are only in the U.S. for a set period of time before they go back to India.
They come in regularly in groups to buy gold, I'd say each time they are paid.
As for the Chinese, it is common to see two or three generations of a family coming in to buy. Usually the "oldsters" buy first, and the younger generations take their cue from them. The Indian buyers are too young to have families come in with them, but they can be clannish in their own way, with parties of several engineers pooling their money together.
So the Chinese want their families to know what they are doing, and the Indians often have no problem with their fellow workers knowing what they are doing: They are all doing it together.
This is all so different from the European or American buyer. This buyer nearly always comes in alone, and it is not uncommon for them to say, "Don't tell my wife or children what I just bought." I'd call this a huge cultural difference.
The other big cultural difference I see is that European-Americans (as opposed to the Chinese-Americans) are the only ones who are selling gold.
In a huge percent of the cases, the sellers come in with Krugerrands that their parents or grandparents bought back in the 1970s, during the last bull market in gold. They say, "I read how gold has gone up so much. How much can I sell these coins for?" Often, they need cash and see this "old" gold as a great way to get it.
Back in the last bull market, the South African Krugerrand was the only coin you could buy. Many holders did not sell them, and many died before the new bull market began about 10 years ago. Now it is the younger generation who sees them as easy ways to raise cash.
When I see the way Indians and Chinese are consistently buying gold regardless of price while at the same time European-Americans are more likely to rush to get rid of true wealth in favor of paper money that is almost certain to continue losing value against that gold, it makes me worry about the future of the U.S. Certainly gold is flowing into countries like China and India.
Hanging around a place like Camino Coin makes you see this process up close; it is happening ounce by ounce, coin by coin. And these are the very places that are becoming more dynamic, and whose citizens are enjoying rising living standards. The average American cannot say the same.
Chris Weber

Further Reading:

After purchasing gold in the 2001 bear market, Chris says, "my neighbor and good friend... looked at me like I was crazy." But gold has been rising for nine years. And it's not slowing down. Look at the incredible chart here: The Best Investments I've Ever Made.
It's not just a few Chinese expats buying gold coins here and there. Jeff Clark of Casey Research argues that the Chinese government "has the motive, means, and opportunity to push gold and gold stocks much higher." Get his three reasons why here: How and Why China Will Flood the Gold Market.

Market Notes


Today's chart shows another example of our incredible emerging market strategy at work.
OK... "incredible" might be misleading. Our emerging market strategy will actually put most folks to sleep. You see, when it comes to investing in huge and growing economies like China, India, and Brazil, there's no need to get "high tech." Just sell those folks the "basics," like soda, beer, and tobacco.
It's in the "basics" business that you can find companies with powerful brand names producing huge and predictable cash flows. After all, no new gadget is going to make having a beer after work obsolete.
You can see the power of the basics approach with the past two years of trading in "Companhia de Bebidas das Americas," symbol ABV. ABV is the largest beer company in South America. It holds almost all of the dominant beer brands on the continent. There's nothing high tech here to figure out... ABV is simply a dominant business selling a product that will never go out of style. The stock is up 45% in the past year and sports one of the smoothest uptrends in the market. The "basics" strategy may be boring, but it pays.

The big uptrend in emerging market beer

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