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S E C T I O N N A M E | Story Name
2 | American Hard Assets www.ahametals.com

www.ahametals.com American Hard Assets | 3
40 - At the Crossroads
6 World News
SpECiAl fEAturES
12 Going for Gold in Alsaka
18 Investing in Film
numiSmAtiCS
24 American Coin Designs
hArd ASSEtS
30 2014 Silver Preview
34 Bail-Ins
40 At the Crossroads
54 Platinum
58 Market Predictions
64 Bitcoin Controversy
lifEStylE And luxury
48 Elegant Fountain Pens
66 Real Estate Star Joe Farrell
68 Art Market in 2014
74 Step up to the Plate
81 Discovering Baseball Gold
mininG & minErAlS
84 Mining News
rEfErEnCE
90 Preferred Dealers
94 Events
96 Hindsight
Adjusting New Reality
Having emerged from a decade long
stint in the doldrums, gold prices began
to gather steam in first years of the new
millennia.
58 - market predictions
AHA sat down with Michael Haynes,
CEO of APMEX, to answer five
questions about the upcoming year
and to provide some 2014 Predictions
for the metals market as well as the
economy in the year to come.
30 - Silver preview
Silver had a turbulent year in
2013. Will 2014 bring the relief of
smoother skies?
The Most Elegant weapon
48 - fountain pens
18 - investing in film

e D i t O r ’ S N O t e
Happy New Year
H
appy New Year to all of our readers. We here at American
Hard Assets hope you and yours had a prosperous holiday
season.
In this second year of American Hard
Assets magazine, we’ve seen our
readership increase both in print and
online, via our website www.ahametals.
com. There you will find the great
content you’ve come to expect from
AHA along with interesting stuff from
our partners, real-time updates,
exchange rates, metal prices, and
more.
To kick off 2014, we’re bringing you
a Gold and Silver forecast along with
predictions from industry experts.
We know you have come to expect great content based from
the American markets, but we’ve also included international market
content as well and have beefed up our World News.
Aside from the core metals markets, we’re continuing our
commitment to the most interesting hard assets coverage you’ll
find on the newsstand. Find out about what to expect from the
art market in the New Year as well as the latest in numismatics.
Cinematic investment is always a very interesting topic and we find
out this issue about a new reality to investing in that genre.
So, we’re all set to put a bow on 2013 and to ring in the New
Year with our best issue yet. As always, don’t hesitate to give us
feedback on the magazine or online to help us get better. We want
to bring you the content you need to see. Thanks so much for
making our first year memorable and keep up with American Hard
Assets for all your investment news in the future.
Good Investing!
Bra� Has�ed�
American Hard Assets
In this second year of American Hard
Assets magazine, we’ve seen our
readership increase both in print and
online, via our website
com.
content you’ve come to expect from
AHA along with interesting stuff from
prESEntEd by: AHA Metals, LLC
mAnAGinG Editor: Brad Hastedt
EditoriAl Support: Kevin Thompson
vp SAlES & mArkEtinG: Mike Obert
SubSCriptionS: Leigh Chamberlain
CirCulAtion mAnAGEr: Jennifer Cunningham
GrAphiC dESiGn: Noel ‘Kip’ M. Macasero
GEnErAl mAnAGEr: Josh Eells
dirECtor of opErAtionS: Mike Boniol
CuStomEr SErviCE: Sandi Heuerman
fEAturE WritErS: Fred Reed, Nic Forrest, Ed Estlow,
Mark O’Byrne, Michael Haynes, Gabriel Benson, Eavan Moore,
Jonathan Kosares, Louis Golino, Scott Wayne
ContributorS: Grierson, Greg Canavan, The Bullion Baron,
Hector Cantu, Alistair Bailey, Mike Woodcock, Daryl Middleton,
Michael Moore, Christy Stewart, Jonathan Kosares, Tom Genot
diSClAimEr: American Hard Assets is 100% American owned. All
contents of American Hard Assets (AHA) are for information purposes
only. AHA does not guarantee the accuracy, completeness or timeliness
of the contents. None of the information contained herein constitutes a
solicitation, offer, opinion, or reccomendation by AHA to buy or sell any
security or commodity, nor legal, tax, accounting, or investment advice or
services regarding the profitability or suitability of any security, commodity
or investment.
All commentary and advice in this publication is of a general nature
only, and doesn’t consider your individual circumstances or financial
objectives. You should always consult a licensed financial advisor for
your personal investment advice. Please do your own research.
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American Hard Assets is a bi-monthly publication and subscriptions are
available for one year at $29.99.

Story Name | S E C T I O N N A M E

H a r D a S S e t S u p Dat e S | World News
A
rare St. Louis coin collection that sold for more than $23
million at a two-day New York City auction can be traced to
when the collection’s 102-year-old owner received an 1859
one-cent piece more than nine decades ago from his grandfather.
Retired St. Louis lawyer Eric P. Newman only paid about $7,500
for the 1,800 piece collection of early American coins that sold
for much more at the auction. Most of the coins had been off
the market for 50 years. Auctioneer Jim Halperin said the items
represent just one-third of Newman’s total collection.
Another auction of foreign coins is planned for January and is
expected to garner at least $10 million, Halperin said.
Proceeds from both sales will go toward supporting the nonprofit
Eric P. Newman Numismatic Education Society. The society
operates the Newman Money Museum, which is part of the
Kemper Art Museum at Washington University in St. Louis.
Newman is a 1935 law graduate of the school.
“His feeling was that it would be a win-win situation of having these
wanted items back in the hands of collectors who appreciate them,
not just sitting in bank vaults,” said Andy Newman, a trustee of his
centenarian father’s charitable foundation.
The auctioned items included a 1795 U.S. silver dollar in almost
pristine condition that sold for $910,625 and another one from
1799 that sold for $822,500. A rare quarter-dollar from 1796,
the first year the denomination was produced by the U.S. Mint,
sold for $1,527,500 — compared to the $100 initially paid by
Newman.
Halperin, co-chairman of Dallas-based Heritage Auctions,
called Newman one of the world’s most accomplished
numismatists, or professional coin collectors. He’s written
at least five well-received books and countless articles on
the topic in a journey that began with a present from his
grandfather when Newman was just seven.
Much of his recently-sold collection was obtained in the 1930s
from the estate of a colorful collector, Col. E.H.R. Green, whose
wealthy mother, Hetty Green, was known as “The Witch of Wall
Street.”
“He helped invent it. He saw the future before anybody,”
Halperin said of Newman’s early forays into collecting coins.
“He really predicted what future tastes would be like.”
1,800 Rare U.S. Coins
Valued at $23M (Source: Associated Press)
World News Updates

World News | H a r D a S S e t S u p Dat e S
I
t is a business worth $50 billion a year in gems built on
mankind’s desire, sometimes a dark passion, for rare stones of
brilliance and beauty.
As supply from the mines to market fails to match the world’s
growing appetite, the market is booming, confidently expecting
that next year the trade will become more valuable than ever
before.
In 1,500 diamond offices, eight thousand people, representing
160 nationalities, handle diamonds worth $139 million every day.
Inside their safes are uncut, cut and polished gems worth
hundreds of millions more. Indirectly away from the scene, 25,000
insurers, bankers, security guards and drivers take part in a
business that is worth five per cent of Belgium’s exports.
The hub of diamond prospectors, cutters and polishers can trace
its origins back to the 16th century but took global pre-eminence
in the 19th century when a combination of low wages and relaxed
regulation pulled the trade to Antwerp from Amsterdam.
Even when the guest of a well-known diamond trader, security
when entering the Antwerpsche Diamantkring, at number 2
Hoveniersstraat, is tighter than at any global summit of world
leaders.
Visitors must hand over their passport and have the print of their
right index finger scanned before receiving a swipe card. The
details are then checked on criminal record databases.
Terrorists too have struck at the diamond trade’s Jewish
community. On October 20, 1981, a car bomb exploded near
a synagogue in the Hoveniersstraat. Three people died and the
street was devastated.
As well as a security born from the threat from armed robbers or
terrorists there is an all-permeating culture of secrecy as many
traders seek to hide their glittering trade from another predator,
Belgium’s tax man.
Beyond the security barriers the Diamantkring is like any other
office block, with its empty, slightly shabby strip-lighted corridors
and nondescript company name plates on the doors.
The rooms and desks are stark. Sitting around desk lamps
equipped with a special “northern light”, Indians, Jews, Russians
and others sit with their eyes glued to a jeweller’s “loop”
scrutinizing, and usually rejecting, uncut and polished diamonds.
The gems are wrapped in “parcels”, the uncut in folds of the
kind of paper you usually see in a cheesemongers, the cut and
polished diamonds carefully arranged in padded boxes to avoid
scratching.
Vashi Dominguez, a Spanish-Indian entrepreneur and founder
Antwerp’s Secret
Heart of the $50B
Global Diamond
Trade (Source: Telegraph)
World News Updates
based in London, granted The Telegraph rare access to the
beating heart of the diamond trade. He estimates that for
every carat, a fifth of a gram, of rough stone scattered in front
of the men grading them, up to 1,750 tons of earth has been
mined to get at them. The owner of Vashi.com and Diamond
Manufacturers Ltd, Mr Dominguez has built his business on his
contacts in Antwerp and the cutters of stones in Mumbai and
Surat in India.
He explains the rigid concentration of those sorting rough
diamonds, for valuation ahead of cutting and polishing, a task
that only a skilled human perform. “Diamonds come in over
16,000 different categories and there is no technology where
you can just analyse what the criteria are. Technology can tell
you the size and the shape but not the color and clarity. That is
not an exact science, it is more like an art that will always require
human interaction,” he said.
“All diamonds are different. Even with those 16,000 categories
there are many others. If I’m buying a parcel of diamonds they
are all different.”
This is the exciting moment, he explains, when, tumbling from
a folded piece of paper, an exceptional diamond can cross
a trader’s desk. “I find this so exciting because all diamonds
are different. They are like fingerprints. So every time you look
at a diamond with a loop or a microscope you are looking
at something unique. Every single day you see something
different,” he said.
“There are very few jobs or industries that inspire this passion.
If you are not excited about this industry, what are you going to
get excited about? The rough diamonds look a bit like broken
glass but once they are polished you can see all the lustre,
sparkle and brilliance, the life and color. For me, even after 15
years in the business it is sheer excitement.”
“Retail demand is outstripping demand. This is a situation that all
major producers forecast will continue,” he said.
“Demand is getting stronger than ever, supply is shorter, known
reserves are declining and with all these factors, prices are going
to go up. There has never been a better time to invest.” Amid
a financial crisis that wiped trillions off the value of assets and
investments, diamonds promise astonishing returns. “When we
look at one to five carat diamonds over the last five years they
have produced an average compound return of 11.6 per cent.
That is across all categories, the best are even higher,” he said.

World News Updates
J
ohnson Matthey and Norilsk Nickel all seem to be basing
their conviction that the stockpile is finally nearing depletion
on the fact that Russia has been releasing lower and lower
amounts of palladium for the past few years.
For instance, at the beginning of the year, Bloomberg quoted
Johnson Matthey as saying that 2012 stockpile sales came in at
250,000 ounces, down from 775,000 in 2011 — that’s a decline
of 68 percent. The firm is certain that sales this year will follow
a similar downward trend, sinking to around 95,000 troy ounces.
“Russian state stockpiles have been dwindling and are now
pretty much exhausted,” said Peter Duncan, Johnson Matthey’s
general manager of market research.
Similarly, Anton Berlin, Norilsk’s market strategist, said at a
conference last week, “[i]n the last couple of years, the stream
has become really thin. We view this as a very good indication
that the stockpile is depleted,” as per International Business
Times.
Barclays, on the other hand, cites Swiss trade data as indicative
that the stockpile is nearing depletion. Most palladium released
from the stockpile is thought to move through Switzerland, Kitco
News states, and Barclays said during the summer that in July,
“Russian shipments into Switzerland were around 6,400 ounces
… consistent with last year’s run rate.”
Is Russia (Finally)
Running Out of
Palladium?
Dubai’s $7 Billion Expo
2020 Could Become a
Glittering White Whale(Source: Resource Investing News)
(Source:Gizmodo)
Populous
The key benefit of the stockpile’s end will be, in the words of Will
Rhind, ETF Securities’ managing director, “full transparency in the
palladium market for once.”
While the stockpile is operated by Russia’s finance ministry, which
according to RT, releases material only when the government needs
to “soothe any outstanding budget deficits,” such releases have not
been without side effects.
If past years are any indication, data on the amount of palladium
released this year from Russia’s stockpile should be made available
in January — though even if the amount comes in at zero, it will be
impossible to know whether the country still has more sitting in the
wings.
At this point, however, Norilsk Nickel believes that is no longer an
issue. As Berlin said last week, “we don’t expect that the Russian
government sales will have any influence on the market this year or
in any following year.” The end is effectively here, he believes, no
matter what the Russians say — or don’t say.
I
n 2020, Dubai will host roughly 70 million tourists to its first World
Expo, housed inside a gigantic, brand new, solar-powered city.
But exactly how smart of an investment is an Expo, these days?
And can economically volatile Dubai handle the $7 billion cost?
Dubai beat three other cities to clinch the bid—Ekaterinburg, Izmir,
and São Paulo. The projections for how it could help bump up
Dubai’s GDP are optimistic: it could add as many as 200,000 jobs,
and boost the city’s GDP by one percent every year until 2020. But
there are also plenty of troubling projections. Like so many other

World News | H a r D a S S e t S u p Dat e S
World News Updates
(Source: USA Today)
cities that have eagerly hosted Expos,Olympics, and World Cups,
the ROI is not always what it’s cracked up to be.
The forthcoming site of the 2020 Expo will add another 1,000
acres of new buildings to the market—at a cost of between $7
and $9 billion over the next seven years. Keep in mind that roughly
$42 billion of the city’s current debts will come due during the
same period—shaky ground, indeed.
So what are those billions going to? 45,000 new hotel rooms, for
one thing, not to mention an extension of the city’s subway system
(plus roads, tunnels, and other infrastructural investments). Then
there are the 12.9 million square feet of exhibition space, designed
by the Dubai office of American architecture firm HOK, which
worked alongside a design team from Populous.
Under these “souk-like” canopies, exhibitors from more than 150
countries will set up shop during the fair, inside what the architects
describe as “innovation pods” and “best practice areas:”
One major unanswered question regards who will be building
these massive structures—and how they’ll be treated. Dubai, like
its neighbor Qatar, has a less than pristine record when it comes
to the human rights abuses of migrant construction workers.
Another super-expensive, super-fast tracked construction project
is not likely to improve that reputation.
And then, of course, what will happen to these massive spaces
in 2021, when the tourists go home and the city is left with even
more housing and commercial stock? According to HOK, the site
will become a “Museum of the Future.”
T
here’s considerable debate about where bitcoin will find
its niche in spite of its growing popularity. Those who flush
valuable Bitcoins are creating new products designed
to simplify the technology and spread Bitcoin mania into the
modern American mall.
While the number of Bitcoiners has grown, and some have
become instant millionaires, the currency has yet to gain
traction among American consumers and businesses.
“If you want to make it popular, you have to make it easy,
consumer friendly,” says Rob Banagale, who designed Gliph,
a mobile phone application that allows people to send or
receive Bitcoin via text message, bypassing the sometimes
cumbersome transactions through Bitcoin exchanges.
“Technology always starts off a little rough. We’re trying to sand
off the edges.”
Even as more people acquire the Bitcoins, one of the greatest
challenges is finding a place to spend them. About $7 billion
worth of Bitcoin is now in circulation.
Bitcoin:
Super Currency or
Super Fad?

World News Updates
Some initial Bitcoin users traded their dollars, euros and yen
for Bitcoin to do business on black market Internet exchanges,
such as Silk Road and Black Market Reloaded, where vendors
who dealt in illegal drugs and services demanded Bitcoin.
As the number of Bitcoin users has grown, so has the need for
legitimate markets in which to spend them.
Colleagues Michal Handerhan, a social media and website
manager, and Tim Sidie, a computer programmer then working
at NASA’s Goddard Space Center mused at lunch one day
in March about where they could spend their Bitcoin. They
created BitcoinShop.us, a website that lists goods for sale on
Amazon, eBay and other retailers, available for purchase by
Bitcoin. To work around Bitcoin’s volatility, they had to design a
computer program that recalculates prices on the site every 15
minutes. They charge a 10% transaction fee.
The site filled its first order in September and has logged more
than 600 transactions worth $120,000 for goods in every
category since then. Transactions are large and small. A non-
profit organization spent $16,000 on computers, tablets and
office furniture.
They have sold snow blowers, an industrial sewing machine,
a 3-D printer, condoms, an acoustic guitar, pearl earrings
and toys, including My Little Pony and Star Wars Lego. On
Thursday, a customer bought pumpkin spice coffee with
Bitcoin.
Expansion plans include expanding shipping from the U.S. to
Canada and Australia and carrying merchandise from Macy’s
and QVC, Handerhan said.
Sidie calls Bitcoin “a huge evolution” in the history of money
that he expects to thrive.
“The rate of people who accept Bitcoin as payment is
skyrocketing,” Sidie said.
Part of the effort to move Bitcoin into the marketplace also
means persuading people the cyber currency is legitimate, safe
and has a value.
Dave Smith, 32, of Lansing, Mich., created GoGiveCoin.com to
encourage Bitcoin users to recruit others into the fold.
“I’m a free market guy. I never liked the idea of the Federal
Reserve,” he said. “I was excited about the idea of Bitcoin.”
T
he gold refinery of Ohio Precious Metals, LLC (OPM
Metals) of the United States of America has been added
to the LBMA’s Good Delivery List for gold with effect from
19th December, 2013.
OPM Metals has satisfied the LBMA as to its ownership, history,
production capability and financial standing. It has also passed
the LBMA’s exhaustive testing procedures, under which its gold
bars were examined and assayed by independent referees, and
its own assaying capabilities were tested.
OPM Metals is located in Jackson, Ohio. Its primary sources
of feedstock include dore, scrap from the jewellery sector and
dishoarded bars. OPM Metals’ refined gold output is in the form
of investment bars, grain, coins and medallions.
Background
The London Good Delivery List of Acceptable Refiners of
gold and silver is maintained by the LBMA, by whom it is
copyrighted. It lists those refineries whose gold and silver bars
have been found, when originally tested, to meet the required
standard for acceptability in the London bullion market. The List
now includes 67 gold and 77 silver refiners.
About the London Bullion Market Association
The LBMA is the international trade association that represents
the wholesale over-the-counter market for gold and silver
bullion. The LBMA undertakes many activities on behalf of its
members, including the setting of good delivery and refining
standards, the organisation of conferences and other events,
and serving as a point of contact for the regulatory authorities.
Ohio Precious Metals added
to the LBMA’s Good Delivery
Gold List (Source: Stewart Murray, Chief Executive)
The site, which launched in November, allows Bitcoin users
to give Bitcoins as gifts, even to those who don’t have the
electronic wallets and have never used Bitcoin before. He
has had two sales so far: one to a relative and another to an
audience member at a talk he gave.
He said he’s not discouraged by the slow start.
“It’s like being on the ground floor of the Internet 20 years ago,”
Smith said. “Bitcoin is going to be transformative.”

S p e c i a l F e at u r e | Alaskan Gold
F
ighting reckless battles against ice, excavators, and their
own crew members, the gold miners on Alaska-focused
reality television shows paint a dramatic picture of life in the
resource business. Recent high gold prices drew dreamers to
Alaska, and shows like Gold Rush Alaska and Bering Sea Gold
have helped fuel a surge of interest among would-be placer
miners. But industry veterans say the shows fail to capture the
truth of placer mining. Success, to them, means earning enough
to live off during the winter season – and the chief threat to their
existence isn’t snow or equipment catastrophes, but paperwork.
The real gold fortunes come from major metal deposits owned by
explorers patient enough to spend years on workable mine plans
and secure investors as committed to the region as they are.
Placer Miners
“It seems like everybody wants some Alaska-based TV show
or something or other right now,” remarks Steve Herschbach, a
prospector and writer whose previous business, Alaska Mining
and Diving Supply, saw an uptick in mining equipment sales after
the shows started airing several years ago. “But also, of course,
mining has certainly been undergoing quite the boom due to the
gold prices for the last few years….What really drives the sales is
more the price of gold than anything, and the TV shows are just
capitalizing on that.”
What they also have to capitalize on is one of the few remaining
placer mining industries in the world. Placer miners are different
from prospectors, explorers or industrial miners; they obtain free
gold in creek bottoms without trying to trace it back to a large-
scale deposit. Their methods are simple: strip the upper layer
of earth to get to the bedrock, collect gravel, wash it, and settle
out the heavier gold particles, all without resorting to the more
intensive crushing and leaching used by big operations. Placer
miners don’t earn much in a year; most live off the proceeds of a
short season that begins when the ice thaws in April or May and
ends by October when waterways freeze again.
Going
for
Gold in
AlaskaBy Eavan Moore

It’s a tough life, but satisfying for people like Sheldon Maier, a placer
miner in the Fortymile district, and the 450 other permitted miners
scattered throughout Alaska. Unfortunately, Maier says, the industry
is threatened by regulatory requirements too onerous for these
small-scale miners – and the TV shows aren’t helping.
“My dad watches the show,” says Maier. “He says it’s entertaining,
but they dramatize everything a bunch. It has brought the regulatory
branches down on us harder because what they’re showing is that
these guys aren’t always operating safely, and they don’t always
care so much about the environment. They’re just trying to extract
as much gold as they can.”

Tom Irwin, current vice-president of International Tower Hill Mines
(ITH), spent six years as a commissioner at Alaska’s Department
of Natural Resources. He watched one episode of Gold Rush
Alaska. “Their kind of gold mining isn’t what people do up here,”
he says, explaining that miners go in with formal, permitted plans.
“It’s not helter-skelter, it’s not at risk of losing a pump or a hoe in the
water, or catastrophic failure. They care about personal safety and
environmental safety and wouldn’t make a very good TV show.”
That said, not all the requirements for regulatory compliance are
realistic for small-timers. To maintain their Mine Safety and Health
Administration (MSHA) certification, miners regularly go through
training classes. Funding cuts for education have made it more
difficult for miners to afford compliance, says Maier. “They cut
the funding for the classes and redirected it to enforcement,”
he says. “So they’re hiring more enforcement people to enforce
the regulations rather than help us to comply with them.” Maier
says a number of people have quit rather than fill out the required
paperwork.
“Oh my gosh, the paperwork is just getting ridiculous,” agrees
Herschbach. “I toyed around with the idea of being more serious,
but it’s amazing when you start looking at what happens these days
if you start trying to get into running just a little bit of equipment. The
various governmental agencies that are starting to get involved, in
particular MSHA, have got so many rules that are designed for
huge mines, great big multibillion-dollar mining operations.”
Herschbach thinks the time will come when there are no
small miners and prospectors. “It’s all going to be just big
operations,” he says. “The ability for the individual to get out
there and do it is dwindling fast because of the permitting.”
In practice, many Alaskan miners continue to operate while
out of compliance – with the blessing of regulatory agencies
that recognize many changes have happened in short order,
says Leslie Tose, project manager at the U.S. Army Corps of
Engineers. For example, rule changes in 2006 and 2008 added
new requirements for streams and wetlands preservation that
miners are still struggling to fulfill. Her office has been holding
off on making certain demands while working on a simplified
permit application for the small-scale miner that will cut down
on stacks of paperwork. “It’ll be like a cellphone,” she says.
“He can stick it in his pocket.”
Maier nonetheless feels that enforcement has been more
vigorous since the TV shows’ advent and since President
Barack Obama took office in 2009. “Right now, we’re dealing
with the Interior Department, the Corps of Engineers, and the
Environmental Protection Agency,” he says. “They’re telling us

Alaskan Gold | S p e c i a l f e at u r e
that these regulations have already been there but now they just
have a directive from the White House to enforce them. [MSHA is
also] cracking down harder and coming down on us small miners
here because they see these things going on the TV and they
think that all of us are being really unsafe and they’re trying to
protect us.”
Disregard for the environment is not an accusation Maier would
accept. “Those of us that have been doing this for a long time,
we care deeply for the land,” he says. “Myself, I’m 30 miles off
the highway. I live in the mountains for months at a time. And we
do that because we love to and we choose that. We subsist off
the land; we hunt, we fish. We drink the water.”
The fact that miners work directly in streams means that
numerous laws bear down on them: questions of water
withdrawal, water quality, fish habitat, and so on are managed by
different people and offices with different requirements. Tose says
she’s excited about an initiative to allow small miners to do their
own wetlands mitigation rather than paying into a mitigation bank
as more well-heeled companies do.
But Tose, who has been working in Alaska since 1995, has
another comment. “What I think is that small miners really like to
complain a lot,” she says.
High Cost of Doing Business
Even in Alaska, placer miners represent a small fraction of gold
production, contributing only 85,000 ounces in 2012. The rest
originates from a few major mines: Fort Knox, Kensington, Pogo,
and Greens Creek. The state’s suspected mineral resources could
support more mines, but getting new projects to production
is a tough proposition in Alaska. For one, the days of surface
prospecting are probably gone: the world is running out of
shallow deposits, and Alaska is no exception. Herschbach sees
his own prospecting work as a fun sideline.
“In the mining industry we use geophysical surveys geared
towards looking for metallic minerals,” explains Steve Todoruk,
investment executive at Sprott Global Resource Investments.
“Those are expensive surveys. A prospector doesn’t have that
kind of money.”

S p e c i a l F e at u r e | Alaskan Gold
That leaves discovery to the companies that are able to raise
funds in what is currently a very difficult financing climate. Todoruk
suggests that explorers fortunate enough to raise money are more
likely to look in less expensive jurisdictions: fuel and supplies add
up to a 30-40% tax just for the privilege of operating in the remote
north.
But Alaska’s mineral potential, stable permitting environment, and
supportive state government do have their attractions, and several
companies continue to do advanced exploration work. From
them, investors like Sprott are asking for very strong deposits. “If
it’s open-pit, I’d say in Alaska you want it five million ounces over
two grams per ton gold at least,” he says. “If it’s going to be an
underground mine, ideally you want five million ounces at better
than ten grams per ton.”
It’s not impossible to get a lower-grade project built, but someone
might have to pay a price for it. Todoruk says that Kinross’s low-
grade Fort Knox property near Fairbanks was acquired for pennies
on the dollar from a company in financial difficulties. “That’s the
only reason it worked,” he says. “If Kinross went out and found
that deposit today, they couldn’t justify building it.”
Irwin has a different viewpoint on grade, having worked on the
Fort Knox project during his earlier career at Kinross. “When we
came to do Fort Knox, there were a lot of questions - can you do
a low-grade mine in Alaska? Can you get the supplies in? Can
you operate in these cold temperatures? Do you have a quality
workforce? Yes, you can. …Fifteen years later it’s still doing
exceptionally well, and they’ve made it better.”
He finds Fort Knox a useful example in discussing ITH’s
Livengood project, 45 air miles away. A July 2013 feasibility
study put Livengood’s proven and probable reserves at 9
million ounces averaging .69 grams per ton. Irwin says that
using the mine plan in the current study, the company would
need gold to sit at $1700 an ounce, a far cry from 2013’s lows
under $1300. But ITH has been discussing – with entities
under confidentiality agreements – ways to optimize the mine
plan and bring up the grade while conserving cash, which
Irwin expects to last into the third quarter of 2015.
Like most hopeful miners, ITH will need a larger company
to partner with, and that can take time. Garfield MacVeigh,
president and CEO of Constantine Resources, says finding
the right partner was critical to his Palmer copper-zinc project.
Dowa Metals and Mining Co. of Japan plans to spend $22
million over four years in return for a 49 percent interest in
the project and guaranteed concentrates for its Japanese
smelters. “We spent probably $10 million of our own money
to make the initial discovery and advance the project, which
allowed us to finally make a very attractive deal with a partner,”
he says. “For us to try and raise the money that we would
have needed to move the project ahead 100% -- I mean,
maybe we could have found the money to do it, or maybe
the company would have been diluted too much to make any
sense to our shareholders.”
The Pebble Effect
“The most significant new discovery in Alaska in recent history
is the Pebble copper-gold deposit,” says Todoruk. Vociferously
opposed by those who rely on nearby salmon fisheries, the
Pebble project has polarized Alaskans, made global headlines,

Story Name | S e c t i O N N a M e
and worried miners who see it as a bad press or bad precedent
for their jurisdiction. After spending six years and $541 million on
the project, joint venture partner Anglo American walked away in
September, leaving junior explorer Northern Dynasty to find a new
partner or buyer.
Todoruk suggests a junior who is fortunate enough to raise
money in a difficult market will be warned off by the Pebble saga.
“The message is if we find something, there’s going to be huge
opposition to it. Why do we want to go there?”
But what Pebble’s reception – and its still-to-be-released EPA
report – means for other companies is still unclear. Environmental
groups hailed Anglo American’s departure with cautious optimism,
while the industry watched with discomfort.
“EPA has been conducting an assessment of the area over the
past few years and has said that they will use this assessment
to decide if they’re going to veto their permits,” says Deantha
Crockett, Executive Director of the Alaska Miners Association.
Knowing that an already permitted project can be vetoed, she
says, is “a gigantic red flag for people that are considering
investing in Alaska. It’s a very scary thing for me as an Alaskan.”
Although the economic and environmental impact of Pebble is
worlds away from placer mining, even Maier fears the outcome.
“I would say I’m not personally a supporter of multinational
corporations,” he says. “And let’s face it, a lot of these large
mining outfits have had a bad history in the past of leaving
environmental catastrophes behind. But if these environmental
groups are able to shut it down without seeing a permit and
having it processed, our industry will just be a bug on the wall,
because it’ll be easier for them to shut us down.”
“A lot of the time, our industry gets lumped in with those large
mines,” Maier adds. “We’re just small business owners trying to
carve out a living and live off the land and be good stewards and
take care of it.”
Irwin believes that it’s possible to mine responsibly on a large
scale. And he, too, emphasizes the quality of life that draws him
to work up north despite the challenges. “Alaska’s a great place
for raising a family,” he says. “In this kind of [winter] weather, if
you’re out on the highway and have a car problem – I say this as
a compliment – sometimes the biggest problem you have is the
number of cars stopping to see if they can help you. The outdoor
activities allow family to appreciate and enjoy what God has
created. We love this place.”

I
once asked an investor I knew, who in my mind had invested in
plenty of things that I thought were borderline crazy, if he wanted
to invest in an independent film that I was looking to finance.
The investor did everything but laugh in my face.
Was this investor right that investing in film is the same as just
throwing your money away? A quick search online of investor
websites seems to share this opinion.
“As the economy struggled, it became difficult to get investors
to put their hard-earned capital into a project that lacked a
clear path to success,” says Steve Hummell, Managing Partner
Of Capital First Investment Group. “But as the economy has
improved and discretionary cash is loosed up from stock profits,
it is possible to think about investing in film again. But I would
need to show my clients a solid game plan.”
INVESTING IN FILM
Adjusting New Reality By Gabe Benson

Investing in Film | S p e c i a l F e at u r e
As the world of independent film financing has changed so
dramatically over the past several years with newer distribution outlets
such as Netlfix, Hulu and ITunes all hungry for material, why hasn’t
investing in film become a bull market for investing?
The answer is, as always, in the business plan.
THE TEMPTATION
Just a few short years ago, a director name Oren Pei directed
a found footage horror film for around $15,000. The film got
into a few festivals, got great word-of-mouth reviews and was
eventually purchased by a major studio for $350,000. The
studio put some work into the picture, and eventually the movie
was released and went on to gross over $200 million.
The film was called Paranormal Activity and the fourth film in the
franchise will be released in early 2014.
To date the Paranormal franchise has grossed over a $500
million world wide. I would imagine if you had put up that initial
$15,000, you would feel pretty good about your ability to pick a
winner.
And there are plenty of other success stories. According to Box
Office Mojo, some other independent success stories are My Big
Fat Greek Wedding (over $368 million), Saw (7 films and over
$415 million), and The Blair Witch Project ($248 million). Each of
these pictures struck a nerve in the public consciousness and
raked in some serious cash.
So with the potential for gigantic returns, on top of the advent of
new distribution outlets needing to fill slots for hungry viewers,
the question remains why aren’t more people investing in film.
On top of the advent of new
distribution outlets needing to fill slots
for hungry viewers, the question
remains why aren’t more people
investing in film.

S p e c i a l F e at u r e | Investing in Film
THE RISK
The problem is the business plan. Too many times, the
film’s producers either don’t have a business plan or are
not realistic about their chances of success.
“For both the investor and the group looking for financing,
it is important to treat your film as a business. Too
many groups approach me looking for financing for an
entertainment project without having solid fundamentals,”
says Steve Hummell, Managing Partner of Capital First
Investment Group. “Who are the principles involved?
What is their experience? What is the marketing plan?
How are they bringing the film to the market? Put your
film plan together just like you would if you are trying to
start any business, because that is exactly what you are
trying to do. You aren’t making a movie, you are starting a
business.”
And after you do that, you have to look at your business
plan objectively. And from a producer’s point of view-you
have to take the creative side of it out of the equation.
If you can’t get your film in front of
the right amount of eyeballs, your
movie won’t make any money.
You can’t just assume that because you think it is the
greatest story ever, it will be found and loved by millions.
If your budget is too small, are you doing a disservice
to the picture? Are you cutting so many corners that
the film just doesn’t work? Is your budget too high for
the type of picture you are making? Historical models
show what types of movies gross what in certain
environments. You certainly don’t want to tell a small
personal story on a blockbuster budget.
Sometimes the numbers just don’t make sense.
Sometimes movies, like products, just don’t make

sense financially. The world’s greatest lightbulb
won’t sell for $1,000 a piece, and sometimes
movies just can’t find the right budget.
And then you have to look at what to do with your
movie once it is completed. Do you have the
money to get it seen?
“Sometimes the problem is the marketing dollars
aren’t allocated in the initial budget. And I’m talking
about more than money to advertise to the public,
I’m talking about the money needed to market
your finished film to distributors,” film and television
producer Shaun McLaughlin says. “It takes money
to set up screenings, submit and show at festivals,
even to send out DVDs of your film. I’ve worked on
too many projects where at the end of the day the
film just languishes because all the focus went on
getting the film made and not enough on getting it
seen.”
And if you can’t get your film in front of the right
amount of eyeballs, your movie won’t make any
money.
Sometimes movies, like products,
just don’t make sense financially. The
world’s greatest lightbulb won’t sell
for $1,000 a piece, and sometimes
movies just can’t find the right budget.

S p e c i a l F e at u r e | Investing in Film
THE REWARD?
But it would seem that with the new onslaught of new
distribution sources-both digital and traditional-that your movie
would have a better chance of being seen.
“With the new distribution outlets available, there seems to be
more ways to see a return on your investment assuming the
production costs can be kept relative to the return that these
new distribution sources can bring,” says Hummell. “The good
news is that there is less of a chance for the investment to sit
on the shelf for years without distribution, but the returns are
also potentially lower as these new media sources (Netflix,
iTunes, and VOD) don’t bring in as high a purchase price.”
And this is where your business plan needs to be scrutinized
and every cost must be attributed in your analysis. Remember
the $248 million that The Blair Witch Project made at the box
office? Well, first you have to subtract 50% for the cut for the
theater owners. So, then from your $124 million you have to
subtract fees for your distribution company, sales agent, back
end talent deals and marketing costs. Then with whatever
is left over, you have to reimburse your investors and share
On a small production budget you still
end up on the plus side, but if your
movie only grosses a smaller portion of
that, the numbers can get pretty tight.

profits. On a small production budget you still end up on the plus
side, but if your movie only grosses a smaller portion of that, the
numbers can get pretty tight.
If your picture can’t secure a feature release slot, there is still life for
your investors in VOD or Netflix, but the guarantees are lower and
it will take your film that much longer to reach profitability if it ever
does.
The bottom line is that making money in independent film
financing isn’t impossible. There are individuals who have
mastered the market and found the sweet spot in their
budget that allows for them to make the movie necessary to
reach profitability. But it is difficult.
You know what else The Blair Witch Project, My Big Fat
Greek Wedding have in common? They all prove that there
isn’t a winning formula. Each of the creator’s next projects
cost more and grossed significantly less.
There are individuals who have
mastered the market and found the
sweet spot in their budget that allows
for them to make the movie necessary
to reach profitability. But it is difficult.

S e c t i O N N a M e | Story Name
A
ccording to a report published on October 28 in Coin World
that was based on an October 18 meeting held by the Citizens
Coinage Advisory Commission, the CCAC has rejected a
proposal by the U.S. Mint to reissue various classic U.S. coins in
platinum. The CCAC advises the Secretary of the Treasury on the
designs and themes of U.S. coins and medals.
The Mint’s proposed addressing lagging sales of precious metal
numismatic coins in recent years by issuing a new multi-year
platinum American eagle series that would reuse classic coin designs
like the Morgan dollar, Draped Bust dollar, and Standing Liberty
quarter. The Mint also proposed issuing a platinum proof coin in
2017 for the 20th anniversary of the platinum eagle program that
reissues the design of the Augustus St. Gaudens $20 gold coin,
whose obverse design currently graces gold eagles. It would be the
only coin in the platinum program not to use the modernized Lady
Liberty obverse.
The CCAC countered that such a series would be a move in the
wrong direction, moving away from its preference for the issuance of
more contemporary coin designs. The CCAC’s members believe on
the whole that the reissuance of classic coin designs has been
overdone, but most coin collectors disagree and are eager to see
more classic designs.
The issue will be revisited in future meetings of the CCAC, but
the tension between the preference of collectors for more classic
coins and that of the CCAC for more modern ones is likely to
continue, and it could pose ongoing challenges for the process of
coin issuance going forward.
Classic coin designs are extremely popular with collectors of
modern U.S. coins (and modern world coins too, as seen in the
numerous classic world coins reissued in the last couple years).
There are several reasons for this such as the fact that the old
designs are in so many cases very powerful artistically and are
inspiring representations of perennial American themes, especially
the allegorical Lady Liberty. There is also the fact that many
people cannot afford to collect many of the original classics such
as Gobrecht collars, which is another design the Mint proposed
reissuing in platinum, or would enjoy seeing such designs in a
larger format and made to modern quality standards.
American Coin
Designs
Classic and Modern Have Their Place
By Louis Golino

N u M i S M at i c S | American Coin Design
But the appeal of the classics also has a lot to do with the
fact that modern designs on circulating, numismatic, and
commemorative U.S. coins have for the past couple decades
not been terribly impressive, and in some cases are not very
good at all, in the view of a wide number of collectors. A
good example of such mediocre art work is the 2012 Infantry
Soldier silver dollar. If recent modern designs were on the
whole of higher artistic quality, were not so one dimensional
like many of the state quarters, and were produced with
higher standards of engraving and with finer detail like many
modern world coins are, people might feel differently. We can
do better, and if we are going to issue lots of collector coins
with modern designs, they had better be good ones, or they
will continue to sell poorly like many recent commemorative
issues.
And it is also true that a number of classic coin designs have
already been reissued to great success in recent years. The
most significant cases are of course the obverses of the
American silver and gold eagles and the Buffalo gold coins
issued since 2006, as well as the 2009 Ultra High Relief
Double Eagle gold coin and the four Liberty-themed First
Spouse gold coins. There are a couple others like the San
Francisco Mint silver dollar commemorative that reuses the
Morgan dollar reverse.
It is important to note that all of these coins are very popular
precisely because they reissue the old designs. One wonders,
for example, if the silver and gold eagle bullion and numismatic
programs would have been so successful if they did not depict
popular designs from the past, particularly the two used on
these coins that are so widely acknowledged as excellent. And
I hear on a regular basis comments from collectors that they
would like to see more classics reissued, so there is clearly
demand for such coins beyond the coins that have already
been issued.
It is therefore easy to understand why the Mint would want to
satisfy collectors’ demand for classic coin designs by making
more of them, especially since turning a profit is a major part
of the Mint’s mandate, and the Mint strives to address the
interests of collectors. But in the view of Scott Barman, who
writes the Coin Collector’s Blog, and who ran for ANA governor
earlier this year: “This sounds like a case of the marketing
trying to dictate the artistic integrity of the U.S. Mint. The
CCAC is right to tell them to come up with something better.
I think if the marketing folks let the artists be creative they will
come up with something far more interesting.”
Mr. Barman also said: “While a lot of people love the classic
designs, myself included, there comes a time to move forward
and come up with something different and fresh. Although I
have not agreed with some of the CCAC’s decisions, I agree
that CCAC Chairman Gary Marks is right when he said, “Let’s
If recent modern designs were on the whole
of higher artistic quality. . . were produced with
higher standards of engraving and with finer
detail like many modern world coins are, people
might feel differently.
. . . commemorative U.S. coins have for the past
couple decades not been terribly impressive,
and in some cases are not very good at all, in
the view of a wide number of collectors.

N u M i S M at i c S | American Coin Design
do something modern, something new. The problem
with the U.S. Mint chasing classic designs is that it is
already being done on the First Spouse gold coins when
the corresponding president was single or widowed
while in the White House, with the exception of Alice
Paul whose effigy opposite of Chester A. Arthur was
mandated by law.”
But so far the number of classic designs used on U.S.
coins remains relatively small. For example only four of
the First Spouse coins out of more than 50 designs that
will be issued in the series use classic obverse designs.
In addition, silver and gold eagles exist in many versions
and have been minted for almost three decades, but
that is only two classic designs that appear on one side
(the obverse) of both coins.
So since just about everyone agrees the classics are
great at least in moderation, a few questions present
themselves: How much is too much? Is the Mint already
making sufficient use of the classic designs, or should it
do more in this regard?
In my view the answer is to do both: issue some more
coins with classic designs, and I think the upcoming
hundredth anniversaries of the release of the Standing
Liberty quarter in 2017, and of the Peace Dollar in 2021
could be honored by issuing coins that use those beloved
designs.
Collectors are the end user, so to speak, so why not issue
what the majority of collectors want? And at the same time,
also issue coins with solid modern designs that make better
use of the talented artists and sculptors at the Mint and
in the Mint’s Artistic Infusion program. Few people would
disagree that our modern coin designs have tended to lag
behind what most of the rest of the world is doing, but I
know we have both the artistic talent and the technology to
do better. Just compare our recent modern design coins
with the designs that appear on modern world coins, which
regularly receive the lion’s share of awards for best designs.
Finally, there is another aspect to this issue, which is the
idea of modern depictions of Liberty and related Americana
themes, and that is precisely what the CCAC suggested with
its proposal for a series of circulating Liberty-themed coins
that is now a bill pending in Congress. Ed Reiter, editor
of Coinage magazine, wrote an editorial in his magazine’s
October issue that criticizes the proposal and argues it is
unlikely to generate the kind of revenue the commission and
“While a lot of people love the classic
designs there comes a time to move
forward and come up with something
different and fresh.”

Story Name | S e c t i O N N a M eLunar Horse Coins | N u M i S M at i c S
its congressional supporters believe it is. He is also concerned
that it would result in too many coins being issued, and in
the creation of yet another product (the Liberty half dollars for
collectors) that separates a collector from the money in his or her
wallet.
He may turn out to be right about the revenue issue, if the bill
becomes law, although I believe the program would be more
popular than he does. And the legislation calling for this program
specifies only one new circulating coin a year, a dime or a quarter
in alternating years, not both as Mr. Reiter wrote, and with a
rebounding economy there is greater need for more circulating
coinage. In addition, no one would force anyone to buy collectible
half dollars they do not want, and I am sure many people would
enjoy collecting Liberty half dollars.
The key point for this discussion is that there is scope for all kinds
of designs, provided they are compelling in the view of most
collectors. There should not and cannot be a choice between
either classic or modern. To argue only one kind of design should
appear on our coinage, which spans circulating, bullion,
numismatic, and commemorative coins, would be folly. Both
kinds of designs should be used as well as designs that
straddle the two, such as the 2012 Star-Spangled Banner
silver dollar, a collector favorite because it evokes the classic
coins of the past yet does so in a modern way.
“. . . there is scope for all kinds of designs,
provided they are compelling in the view of most
collectors. There should not and cannot be a
choice between either classic or modern. “

S
ilver had a turbulent year in 2013. Will 2014 bring the relief
of smoother skies, or will the bulls end up reaching for the
airsick bag?
About this time every year, metals traders pause to reflect on the
year that’s been and ponder what may lie ahead. Of particular
interest is what may lie ahead for the price of silver. While the
myriad of factors that affect the price of metal makes it nearly
impossible to forecast the price of silver, it is worth examining the
underlying macro-trends that largely steer the precious metals
markets in one direction or another.
January of 2013 began with the 10-year treasury yield at less
than 2%, silver trading a little above $30/ounce, and the S&P 500
hovering around 1400. Over the course of the last twelve months,
we have seen yields jump to near 3% and equities rise as much
as 30%, all on the back of slowly-improving macro-data and
a declining unemployment rate. Silver, for its part, has been
dragged all the way down to $20/ounce, and even traded in
the mid-18s for a time.
With the likelihood of another cataclysmic economic crisis
dwindling, market participants have started looking ahead to
the withdrawal of the monetary stimulus that has supported
so much of the financial market these last five years. The
third iteration of quantitative easing alone will end up being
between $1.5-$2 trillion. That’s just part of a $4 trillion
overall balance sheet. To illustrate the magnitude of this
number, one trillion is equivalent to one million millions (or
one thousand billions). We have spent roughly four of those
buying financial assets on government balance sheets.
2014 Silver
PreviewBy Brad Yates, Elemetal Capital

2014 Silver Preview | H AR D A S S ET S
While this money is not printed like traditional, circulated
currency, the yield-reducing effect of these purchases cannot
be understated. As global yields contracted, investors seeking
returns on assets were forced into less stable sectors that
otherwise may have been avoided as too risky.
In August of this year, outgoing Federal Reserve Chairman Ben
Bernanke hinted that the Fed’s monthly asset purchases could
contract from $85 billion to $65 billion. As expected, the market
took the news badly--so badly in fact that the Federal Open
Market Committee (FOMC) opted to delay the dreaded tapering.
In light of this, the same question is on everyone’s mind: when can
we expect tapering to kick in, and how much?
The general (and certainly fallible) consensus is that the Federal
Reserve will reduce their monthly purchases to between $65-
$80 billion per month from the current $85 billion; the formal
announcement is expected in mid-December or late January. In
the long term, this reduction in monthly purchasing is minimal.
However, in the short term, purchases are going to decrease and
the market’s already-feeble recovery is going to get less support
from the monetary crutches it has depended on for several years.
The next question is will the market be able to stand on its own
two legs?
To give the market any hope of continued recovery, there
are only two options: either the Fed adopts a policy of
reducing its accommodation only as continuing economic
data dictates (at what may be an imperceptibly slow pace),
or it adopts a slightly more hawkish rate of tapering, leading
initially to a lessening of global growth rates. Sensational or
outlying scenarios of rampant inflation or deflation can be
safely ignored.
If the Fed has indicated anything to the
investing public, it is that the Fed will take the
conservative route whenever possible. And
with Janet Yellen assuming the lead in January
2014, this tendency is unlikely to change. With
that in mind, the more likely option for market
recovery seems to be the first: a gradual
reduction in monetary stimulus resulting in a
steady (though marginally lower) growth rate.
The recovery process may not be painless, but
this unconventional tactic may, in the long run,
prove to actually work.
Considering all this, what should our outlook be
on silver in the coming year?
Industrial demand may see a slight rebound,
but technological advances in solar cells, mobile
devices, and electronics on the whole is likely
to lead to a lower aggregate demand curve,
though an improving global growth rate will
prevent any drops from being too significant.
Any major drop in growth, out of China in
particular, may create demand-side risk to the
down side.
Silver is likely to experience a significant
drag from the close association with gold
and the seemingly inherent reduction in
accommodative monetary policy.

H a r D a S S e t S | 2014 Silver Preview
From a fundamental supply-and-demand perspective, if silver is
likely to remain in surplus, then any excess supply will need to be
absorbed by the investment sector. Coin and bar demand typically
accounts for only 10-15% of the aggregate demand, so the rest
will have to come from the ETF segment.
Despite the negative price action in silver this year, investors have
increasingly made electronic exposure a part of their portfolios. Net
total holdings in silver ETFs are roughly equal to one year’s mining
production, so a swing to net selling (as gold ETFs saw this year)
could mean a large difference on the margin. Another important
reality of the global silver supply is that a large portion of the supply
has effectively no marginal production cost; it is estimated that
up to 50% of new global mining supply every year comes as a
byproduct of another primary metal such as copper or gold.
For this reason, silver can actually trade below its net cash cost of
$15-$18/ounce on a long-term basis. Even with no active demand,
new silver supply could continue to be created every year. This
is not likely to have a major effect in the context of a single year,
but it is a key factor in differentiating it from other commodities
like energy or agriculture that tend to revert to their net production
costs.
When it comes down to it, silver is likely to experience a significant
drag in 2014 from its close association with gold and the seemingly
imminent reduction in accommodative monetary policy. Rising real
interest rates will cut investor demand for non-yielding
assets and the industrial supply-demand fundamentals
are not as bullish as in years past.
The real potential for any upside in silver will come from
any misstep from the path of steady economic growth
over the next year, or a major turn in interest rates or
equities. Investors will continue to see silver as a safe
haven investment; therefore silver, like gold, should
continue to play a part in any well-diversified financial
portfolio. Its correlation benefits are well established and
the potential for substantial gains in the event of financial
crisis are significant. If 2014 goes as smoothly for the
broad economy as the Federal Reserve hopes, metals on
the whole will face some headwinds, but any stumbles
along the path of economic growth will ensure that silver
shines brightly.
If silver from a fundamental supply and
demand perspective, then, is likely to
remain in surplus, then any excess
supply will need to be sopped up by the
investment sector.
Even if no new silver were actually needed,
it could continue to have new supply come
online every year.

H a r D a S S e t S | Bail-ins and Deposit Confiscation
O
ne of the most important risks facing investors, savers,
corporate depositors and indeed all depositors today is bank
and financial institution bail-ins.
This is why we have completed a research document on this not
fully understood or appreciated risk entitle ‘From Bail-Outs to Bail-
Ins: Risks and Ramifications’.
Preparations have been or are being put in place by the US Federal
Deposit Insurance Corporation (FDIC), international monetary and
financial authorities, including the FDIC, for bail-ins of both banks
but also other financial institutions. The majority of the public are
unaware of these developments, the risks and the ramifications.
In December 2012 the Bank of England and the FDIC produced a
joint paper on “Resolving Globally Active, Systemically Important,
Financial Institutions”.
This important and little reported upon document explained the need
for a single national resolution authority and claimed that the bail-in
regime is a reaction to the financial crisis that began in 2007 and the
lessons learned from bail-outs.
The US resolution strategy is based on powers stemming from the
Dodd-Frank Wall Street Reform Act of 2010 which would “assign
losses to shareholders and unsecured creditors”, while the UK
approach draws its powers from the UK Banking Act of 2009
and would involve what is “a bail-in (write-down or conversion) of
creditors”.
Bail-Ins and Deposit
Confiscation Makes
International Gold
Ownership Essential By Mark O”’’’Byrne

Bail-ins and Deposit Confiscation | H AR D A S S ET S
In March 2013, the EU and IMF spearheaded the restructuring of
the troubled Cypriot banking sector. Although the terminology of
bank ‘bail-ins’ first entered public consciousness during the Cypriot
financial crisis of March 2013, the idea of bail-ins as a central bank
rescue mechanism has been openly discussed for a number of years
amongst international central bank policymakers.
Cyprus became the defining event since it revealed the preparations
and planning of international banking regulators and governments at
the highest levels for the coming ‘Bail-In Regime’.
The market’s expectation was that Cyprus would be similar to
previous Eurozone rescue packages applied to economies such as
Greece, Ireland and Spain, where banks had their losses ‘bailed-out’
by governments, with the bail-out cost and risk transferred to the
sovereign nation and funded by the taxpayer.
However, the backlash from taxpayers and certain political parties
and a vicious circle of sovereign bank-induced debt was leading to
recessions and the possibility of an economic depression. This may
have contributed to the international monetary authorities, central
banks and governments altering the approach to burden sharing,
pushing the losses onto bank depositors.
The important shift from bail-out to bail-in had not been signalled in a
very public way. The market’s expectation was therefore confounded
when Eurozone finance ministers imposed bail-ins on Cyprus. This
forced bondholders to convert into shareholders, and critically,
imposed an element of bank deposit confiscation and the forced
conversion of these deposits into bank equity.
Never before in the public’s perception had bank deposits been
countenanced as potential financing sources for the rescue of
insolvent banks. The public was shocked by the freezing and
confiscation of deposits and the use of them in a desperate attempt
to prevent banks from failing.
While bail-in generally refers to a bank restructuring where
shareholders and various unsecured creditors such as bondholders
are forced to share the rescue costs, after Cyprus, the term ‘bail-
in’ became synonymous with possible deposit confiscation, where
uninsured depositors were seen as unsecured creditors of the bank
and liable to share bank restructuring costs.
The coming bail-ins regimes will pose real challenges and risks to
investors and of course depositors - both household and corporate.
Return of capital, rather than return on capital will assume far greater
importance.
Evaluating counterparty risk and only using the safest banks,
investment providers and financial institutions will become essential in
order to protect and grow capital and wealth.
It is important that one owns physical gold and not paper or
electronic gold which could be subject to bail-ins.
Owning a form of paper gold and derivative gold such as an
exchange traded fund (ETF) in which one is an unsecured creditor of
a large number of custodians, who are banks which potentially could
be bailed in, defeats the purpose of owning gold.
Physical gold, held in secure storage conferring outright legal
ownership through bailment remains the safest way to own gold.
Many gold investment vehicles result in the buyers having very
significant, unappreciated exposure and very high counterparty risk.
Retail investors, retail savers, high net worth individuals, family
offices, pension funds, charities, companies, corporations, corporate
treasurers, financial advisors, accountants and
anyone who manages money on behalf of clients
need to consider the risks and ramifications of
bail-ins.
Many in the financial services sector have paid
lip service to diversification in recent years.
This has led to many investors experiencing
sub par returns and returns below the market
rate of return. Those who have achieved real
diversification involving owning international
equities, high credit bonds, property, cash
and gold have been protected from the recent
volatility.
If there is a failure to observe the fundamental
tenet of investing in the coming years – real
diversification – we may be subject to further
financial pain.
Conservative wealth management, asset
diversification and wealth preservation are of
paramount importance today.

H a r D a S S e t S | Bail-ins and Deposit Confiscation
Gold will again have a fundamentally important role to play in order to
protect, preserve and grow wealth in the coming bail-in era.
Leading economists and financial commentators in Ireland give their
perspective regarding the risks of bail-ins. If you manage money in any
way, your own or others, it will be prudent to heed their warnings.
Dr. Constantin Gurdgiev, Chairman of Ireland Russia Business
Association
“The recent abatement of the euro area crisis and the reduction in
overall global financial uncertainty have led to a decline in the demand
for gold as a safe haven instrument and speculative asset.
Contrary to the short-term signals in the spot markets, gold and
other precious metals role in delivering long-term risk management
opportunities and tail risks hedging is becoming more important as
the immediate volatility and short-term risks recede.”
Cormac Lucey, Chartered accountant, Financial Analyst & Lecturer at
the Irish Management Institute (IMI)
Depositors should seriously consider two questions when putting
money into a bank:
(i) is there is a serious possibility of the bank failing?
(ii) if the bank fails, is there then a serious possibility that the
government would be unable to honour deposit guarantees in full?
If there is a significant possibility, even small, of capital loss, depositors
should ask themselves the same question that corporate treasurers
regularly ask themselves: am I being adequately compensated by the
deposit rate for the risk I am now exposing my money to?”
Jim Power, Chief Economist at Friends
First Group
Any individual or any corporate treasurer
would be taking an unacceptable risk
in making a decision to leave deposits
in excess of €100,000 in any single
bank, unless one is convinced that the
institution is 100% sound. The events
of the past 5 years should have taught
us that such a conviction would be
dangerous.
For investors, bank diversification
is essential, but more broadly, asset
diversification has to be the priority for
anybody with any wealth. We still live in
very dangerous and uncertain times and
investors should do whatever it takes to
manage risk and ensure that all of their
eggs are not in a single basket that may be
badly holed.”
What Are Bail-Ins?
A bail-in is when regulators or governments
have statutory powers to restructure the liabilities of a distressed
financial institution and impose losses on both bondholders &
depositors.
Simply stated, a bank bail-in is an attempt to resolve and
restructure a bank as a going concern, by creating additional
bank capital (recapitalisation) via forced conversion of the bank’s
creditors’ claims (potentially bonds and deposits) into newly created
share capital (common shares of the bank).
To understand what the bail-in concept of a troubled bank is, it is
important to understand what a bank balance sheet is, and what
the balance sheet consists of. Simply put, a bank’s balance sheet
consists of sources of financing and uses of this financing. At a high
level, the sources are shareholders’ equity (shares) and the bank’s
liabilities, which consist of lending to the bank by bondholders
(bonds) and lending to the bank by depositors (deposits).
For large institutions, there are two main approaches to a bail-in,
the first being ‘single point of entry resolution’ where the bail-in
occurs in the holding company at the top of the group, and the
second being ‘multiple point of entry resolution’ where, given that a
banking group may be operating across lots of regions.
Who Is Driving The Bail-In Regime?
It is revealing to examine the genesis and evolution of the centrally
planned bail-in regime as discussed by central banks and
international policymakers, since it highlights that the planning and
preparation for a global bank “Bail-In Regime” has been on-going
internationally at a high level for a number of years now, primarily
under the auspices of the Financial Stability Board (FSB).
The Financial Stability Board emerged from the Financial Stability
Forum (FSF), which was a group of finance ministries, central

Bail-ins and Deposit Confiscation | H a r D a S S e t S
bankers and international financial bodies, founded in 1999 after
discussions among Finance Ministers and Central Bank Governors of
the G7 countries. The FSF facilitated discussion and co-operation on
supervision and surveillance of financial institutions, transactions and
events. The FSF was managed by a small secretariat housed at the
Bank for International Settlements in Basel, Switzerland.
The Key Attributes Of A Bail-In Regime
The Key Attributes include a number of noteworthy pronouncements
on an effective resolution regime such as:
• Allocating losses to fi rm owners (shareholders) and unsecured
and uninsured creditors in a manner that respects the hierarchy of
claims.
• Not relying on public solvency support and not creating an
expectation that such support will be available.
• Where covered by schemes and arrangements, protecting
depositors that are covered by such schemes and arrangements,
and ensuring the rapid return of segregated client assets.
The inclusion of Financial Market Infrastructures means that large
parts of the global financial system is susceptible to bail-in and could
potentially be bailed-in.
The scope of this planned bail-in regime for participating countries
is not just limited to large domestic banks. In addition to these
“systemically significant or critical” financial institutions, the scope
also applies to two further categories of institutions, a) Global SIFIs,
in other words, cross-border banks which happen to be incorporated
domestically in a country that is implementing the bail-in regime, and b)
”Financial Market Infrastructures (FMIs)”, such as clearing houses.
The inclusion of Financial Market Infrastructures in potential bail-ins is in
itself a major departure.
Where Are Bail-Ins Likely To
Take Place
Bail-ins are likely to happen at banks
that are close to failure in countries
that have adopted the FSB bail-
in conventions and or do not have
financial resources to bail-out their
banks. Thus, deposits in failing banks
in G20 nations may be subject to bail-
ins.
The total debt to GDP ratios,
household, corporate, financial and
sovereign debt, in Japan, the UK and
the U.S. are all at very high levels. All
three countries have banks whose
outlook is far from positive.
Many analysts warn that many Wall
Street and City of London banks are
bigger now than they were prior to the
collapse of Lehman.
The Eurozone debt crisis has abated in
recent months but many analysts and
economists are concerned that it is only
a matter of time before the debt crisis
returns with Greece, Spain, Portugal, Italy and Ireland all remaining
vulnerable.
European banks have been recapitalised but should the sovereign
debt crisis return or a new global systemic crisis happen, à la
Lehman Brothers, individual banks may again face capital shortages.
Greece, Cyprus, Spain, Italy, Portugal and Ireland all remain
vulnerable. However, other countries in the EU also have risks,
including the UK, the Netherlands, Switzerland, Denmark & France.
A recent paper by Eric Dor of the IESEG School of Management
in France, warned how most European governments remain very
exposed to their banks, especially France.
The paper computes the total recapitalisation needs of the banking
sector of each European country in case of a new systemic financial
crisis. It looks at ratios that would represent the increase of public
debt, in percentage of GDP, that would result from a recapitalisation
of the big national banks by each country.
France which would incur the highest cost in percentage of GDP, if
the big banks in France had to be recapitalised with public monies.
After France, Cyprus, the Netherlands Greece, the United Kingdom
and Switzerland are the most vulnerable.
When Could Bail-Ins Take Place?
The readiness for the bailin regime depends on how quickly each
participating jurisdiction implements supporting legislation. Given
the recent updates (see below) from a number of regulators and

S e c t i O N N a M e | Story Name
central banks, it appears that they are well positioned to have
the necessary legal framework in place to support resolution
authorities by about 2015, if not before.
EU leaders plan to agree on the ‘Single Resolution Mechanism’ by the
end of 2013, for adoption by the European Parliament in 2014, and
implementation in January 2015.
The UK and U.S. appear to already have the supporting powers and
legislation in place for bail-ins, based on powers granted in the UK
Banking Act of 2009 and the Dodd Frank Act of 2010, respectively.
The exact timing of any bank rescue involving a bail-in obviously
would then depend on the need for the bank to be rescued.
Emergency resolutions and legislation would be likely in many
countries in the event of another Lehman Brothers collapse and
another global credit and financial crisis.
How Likely Are Bail-Ins?
There are differing opinions as to the severity of the on-going financial
crisis, and whether it has turned a corner. There are two very broad
‘schools of thought’.
The first school believes that the U.S. Federal Reserve, along with
partner central banks internationally, has successfully stabilised the
global financial system through low interest rates and quantitative
easing, while the EU has managed to help recapitalise banks and
avoid bank insolvencies in the European Union and and the breakup
of the European Monetary Union (EMU).
The second school is more skeptical of this view and believes that
many banks globally remain vulnerable to insolvency because they
are being kept on life-support due to extremely accommodating
central bank measures including near zero percent interest
rates and quantitative easing. Banks are also being supported
through the use of almost fictional, though internationally
endorsed, accounting treatment for their asset books, such
as mark-to-model valuations for their over-the-counter (OTC)
derivatives exposures and by failing to have realistic valuations on
problematic property loan portfolios.
Many sovereigns nations remain vulnerable to sovereign debt
crises. The Eurozone debt crisis and other sovereign debt
crises have been solved for the moment through various forms
of ultra loose monetary policies, quantitative easing or debt
monetisation.
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Up, Down, or Sideways?
T
he last twelve years have been a fascinating time for the
gold market. Having emerged from a decade long stint
in the doldrums, gold prices began to gather steam in
first years of the new millennia. The run which really began to
take off in 2004 was like nothing we’ve seen in the past. Even
the inflationary spike in gold prices back in the early 80s was
comparatively short-lived. As the bull market continually posted
double-digit gains year after year, precious metals began to
find their way back into the mainstream and the forefront of
investors’ minds. Whereas in the 1990s, gold was somewhat
relegated to the doom-and-gloom survivalist minority, the
2000s saw it blossom into a cornerstone of many Main Street
portfolios.
The story on Wall Street was not much different. As the precious
metals market knocked down previous highs like bowling pins,
new Exchange-Traded Products (ETPs) emerged to meet the
growing interest from both private and professional investors.
Investments into these ETPs were massive and sucked
enormous quantities of precious metal inventory off the
market quicker than mining operations could pull more metal
out of the ground. Occurring simultaneously were significant
changes to the central banking investment strategy in which
these massive institutions also became eager buyers of the
yellow metal, an investment appetite they had not held in a
long time.
The effect of these changes was the price-positive
environment which gold enjoyed in the early 2000s and
was later amplified by the financial crisis of the latter part
of the decade. As American stock investors scrambled to
stop the bleeding, governments around the world began to
employ “extreme measures” to divert a repeat of the Great
Depression.
AT THE
CROSSROADS
Gold in 2014
H AR D A S S ET S | Gold in 2014
By Mike Getlin

The new U.S. fiscal and monetary policies which emerged from
the crisis created a perfect storm for gold. Like pouring gasoline
on a raging fire, quantitative easing drove massive speculative
demand into the gold market from 2009 through 2011. The solid
multi-year uptrend turned into a bull market on steroids.
Like a modern-day Icarus flying too close to the sun, the price
of gold attained in 2011 was too high to sustain and have since
come falling back down to earth. Prices sputtered in 2012,
fumbling between about $1550 and $1800. However, 2013
brought the real shift as concerns of an end to the Fed’s stimulus
programs prompted massive selling across the entire commodities
sector in anticipation of a stronger dollar post-QE.
To date however, the tapering has not come. For all the talk about
tightening, the Federal government has done nothing to reign
in its monetary policy. We all know investors buy the rumor, not
the news. They abandoned gold in 2013 on the rumor that QE
would be stopped. The news however, never came about. By
many accounts, gold may have shed as much as $400 per
ounce of “QE premium” on the assumption that the Fed’s
dangerous game might soon come to an end. So what does
this mean for gold prices moving forward? Can we draw
any conclusions about this market which has been utterly
directionless for months? Though 2014 may be the hardest
year in recent history for gold forecasting, there are some
significant points on which we can achieve some clarity.
Seeing enough small factors clearly might help us piece
together the big picture in a meaningful way.
Gold now finds itself at a crossroads. Which way will it go?
Will it continue its legendary bull run and finally achieve the
coveted $2000 per ounce mark or will it slip back down into
its pre-2001 slumber. Neither is likely to happen in 2014.
What will likely emerge is some more clarity as to the role
gold will play over the coming years.
Gold in 2014 | H AR D A S S ET S

Supply
As with any commodity, gold’s long-term price trends are
determined by supply and demand fundamentals. Though frenzied
investment demand may push the market around in the short
term, those changes usually succumb to the supply and demand
fundamentals when the time table is stretched.
Gold supply is really quite easy to understand, especially
compared to that of many other commodities. Nowadays, gold
supply really only comes from two places: mining and recycling.
If we rewind to 2000, it’s a very different story. Back then,
approximately 14% of the gold supply came from recycled scrap,
47% came from mine supply, and the remaining 39% came
from central bank sales. Over the last decade, central bank
sales essentially have stopped. At the same time, recycling has
increased drastically as rising prices made the prospect of selling
scrap gold that much more attractive. Mine supply did increase,
but not significantly. Most analysts believe total mine supply to
be less than 10% higher now than it was in 2000. Since then, the
price is up more than fourfold.
As we sit today, global mine supply makes up about 65% of
the gold that comes to market, while the balance of about 35%
comes from recycling. Looking forward to 2014, we can make
some logical assumptions about each of these supply factors.
Rising gold prices have been the driving force behind the
increases we’ve seen in recycled supply. The time, effort, and
expense of recycling gold does not change with the gold price.
However, the reward for doing so does. As the price has risen
over the last decade, returns on recycling operations have
skyrocketed. Want proof? Go back and watch Superbowl
XLIII from 2009. You’ll see a Cash4Gold commercial that
was rumored to cost the scrap recycling company a cool
$3 million. Like many other recyclers, their business reaped
massive benefits as folks were eager to cash in on rising gold
prices.
In 2012, Cash4Gold filed for bankruptcy. Its assets were
purchased for $440,000—just a fraction of what it had paid
for just one thirty-second TV commercial. Needless to say, the
winds have shifted significantly in the scrap-recycling world.
As 2013 saw gold prices fall significantly, it’s fair to assume
that the recycling supply in 2014 will remain subdued as
compared to previous years. That said, recycling supply can
ramp up quickly if prices turn higher again. So far as the role it
will play in 2014, all we can conclude is that the scrap supply
will be price-dependent.
Mine supply on the other hand, will not. Whereas it takes
weeks or even days to establish a retail scrap company,
it takes years or even decades to bring new mines online.
The process of gold exploration is cumbersome, slow, and
massively expensive. As such, the falling price of gold in 2013
has ravaged global exploration projects.
To expound fully on the mining industry woes of late would
make for a book of comparable size to War and Peace.

www.ahametals.com American Hard Assets | 43 www.ahametals.com American Hard Assets | 43

Suffice it to say that after years of pouring money into new
operations and exploratory projects, the mining industry has been
hammered by the decline of the price of gold. These investments
were made in anticipation of the price of gold holding at $1600/
ounce or higher. But with prices at $1200 - $1400/ounce in 2014,
the return on those investments will be catastrophic.
The net effect has been a rush to cut costs, cancel projects,
close mines, and abandon exploration. Even if gold prices recover
quickly in 2014, it will take years for the mining operations to
recover and begin bringing significant increased supply to the
market once again. One more concern for miners is the cost
of financing. Like all businesses, mining operations are heavily
dependent on financing costs, and at the moment, they can
borrow quite cheaply. However, as interest rates begin to rise,
the cost involved in production may overtake the value of the
recovered metal, leaving the mining sector in a precarious
position.
All in all, it is unlikely that there will be any significant increases in
global gold supply in 2014. With a subdued recycling climate and
blood in the streets for miners, there is only one place significant
supply increases may originate: central banks. That said, those
institutions don’t exactly turn their investment strategies on a
dime. It’s hard to imagine the same people who are sacrificing
the value of their own currencies deciding to sell the best asset
they have when it comes to hedging currency declines. There’s
not a lot of noise about a potential shift to net selling from central
banks. Our bet is that gold supply in 2014 will remain relatively
constant, with a trend to the downside over the coming years.
Demand
Gold’s price in 2014 will be decided primarily by demand.
Currently, the demand picture is made up of four general sources:
industrial, official sector, jewelry and investment. As of
2011, demand from industrial applications accounted
for about 10%, official sector (central banks primarily)
accounted for another 10%, jewelry accounted for about
35%, and the remaining 45% came from investors. Central
bank and industrial demand remains constant and makes
up the smallest piece of the pie. It’s the jewelry and
investment sectors that will drive prices in 2014. Gold in
2013 was plagued by a collapse in both.
India is the world’s largest gold importer and makes up the
most crucial portion of global jewelry demand. As rising
account deficits were pressuring the rupee and putting
India at risk of a credit downgrade, the Indian government
began aggressive attempts to curb gold imports in mid-
2013. Through new tariffs and restrictions, Indian gold
imports plummeted as much as 70%.
Though it enraged the public (and initiated a healthy black
market), the strategy was somewhat successful. Though
demand from China has risen to fill some of the gap, the
lack of Indian exports has been a major blow to the gold
price. On the other hand, one thing has become very clear:
the Indian public’s lust for gold cannot be suppressed
forever. The cultural significance of gold in India dates back
thousands of years and will continue for thousands more.
Also, there is not much to indicate that their gold imports
will fall further. From the bottom, there’s really nowhere to
go but up. Whether or not those imports increase in 2014
stands to be seen. That said, the Indian demand factor has
the potential to be very positive for gold in 2014 and poses
little downside risk.
Investment demand is where the rubber really meets the
road. It’s fickle, it’s unpredictable, it’s wound up in an
infinitely complex web of outside markets, and it’s the key
to gold’s direction in 2014.
Between 2007 and 2011, jewelry demand fell by about
18%. Yet, overall gold demand skyrocketed as prices
surged to above $1900 per ounce. That is what investment

Gold in 2014 | H AR D A S S ET S
demand can do. However, in 2013, gold dropped like a rock.
That also is what investment demand can do. Before the
financial collapse, investment demand was driven by two main
concerns: crisis and inflation. Since then, it’s been driven by
one: monetary policy. When it comes to gold these days, the
Fed giveth and the Fed taketh away.
Gold was at about $1000 per ounce in early 2008, before
the first round of quantitative easing. Shortly after QE2
stopped, gold topped $1800 per ounce. With falling jewelry
demand over this time period, investment buying (due
primarily to currency debasement fears in the brave new
world of quantitative easing) drove gold up more than $800
per ounce. That “QE premium” began to come out of the
market by early 2012, and has now been all but erased. This
is clearly evidenced by massive outflows from ETPs. For
professional investors, gold has fallen about as far out of favor
as imaginable. Even the dependable players like Soros and
Paulson have cut their holdings significantly.
The other (and perhaps most important) factor affecting gold
demand as of late is the stock market. I have always said,
the only real enemy of gold is other options. Gold is really
the “default” store of value. When you realize that gold is just
about the only asset that has never been worthless, it reasons
that one would want to use it as the main storage place for
wealth. This is not necessarily the case, however, when better
options arise. Gold does not pay dividends, it does not enjoy
stock buybacks or IPOs, and it is an effective (though often
crude) hedge against inflation.
When you look at periods in which gold prices have been
subdued, they all have one thing in common: strong
investment performance in other sectors. As of late, the
stock market has been running like mad. Due mostly to the
Fed’s intervention which has destroyed the market’s ability
to accurately assess risk (which incidentally is exactly what
the Fed hoped to accomplish), the stock market has posted
outstanding gains as of late. I will venture that those gains are
not only outstanding, but unsupportable and probably short-
lived.
Stock prices have more than doubled since 2008. During the
same time period, economic growth has been essentially non-
existent. Consumer demand has putted along, innovation and
product development has been tepid at best, and the only real
explanation for an 8000 point run in the DOW is the effect of
quantitative easing.
Unlike gold however, stocks have not yet shed any of their QE
premium. This poses a significant risk to the value of stocks
going forward. As gold does not exist in a vacuum, we have
to examine it in terms of its relative appeal when compared
to other asset classes. At the moment, gold has probably
suffered most if not all of the losses it will sustain if QE does
end. Stocks have not. If the Fed continues to move the goal
posts back with justifications to keep the stimulus flowing, it
reasons that gold will recover some of the QE premium it has
lost and will move higher. Stocks may not.
There is one more concern that must be noted. A lot has
been said as of late about a potential bubble in the securities
market. It’s not a stretch when you consider that bubbles
are by definition found in markets that have lost the ability
to accurately compare risk and reward. Quantitative easing
has artificially removed risk from stock markets as near zero
interest rates have made stocks the only game in town. It’s
quite similar to the pre-2005 housing market. Remember when
home prices were just going to go up forever? Do you think
stocks now are going to keep going forever?
If the stock bubble argument proves true, we could see
securities prices continue to rise with reckless abandon
for some time. In this environment, it’s hard to imagine a
significant move back into gold on the part of investors.
Of course the other shoe must eventually drop. When the
bubble pops, investors will panic and begin searching for firm

H a r D a S S e t S | Gold in 2014
footing—the kind of stability that gold has provided since the
end of the Stone Age.
So What’s Next?
Looking forward in the new year we can make some general
assumptions about gold. It’s likely that supply will not be
a significant factor for prices in that it will probably remain
relatively constant.
As prices have come down significantly, it reasons that interest
in jewelry will probably increase moving forward. Whether or
not Indian import restrictions are lifted may determine whether
much of that interest turns into real demand. The jewelry factor
has the potential to be a significant positive for gold, especially
if pent-up demand from a lack of Indian imports is somehow
released through a relaxation in tariffs and restrictions. Whether
that will materialize stands to be seen. All in all however, this
consideration is neutral to positive for prices.
So far as investment demand is concerned, we must again
weigh downside risk against upside potential. Gold showed
a desire to stay above $1225 for much of 2013 even under
significant sell pressure and without clear direction or strong
investment demand. People kept buying it off the lows for
most of the year simply because they thought it was too cheap
to pass up. This speaks volumes to the downside risk. If the
$1200 bargain buying trend holds through the opening months
of 2014, we can assume that downside risk is quite limited.
This is not to say that frenzied short selling couldn’t drive prices
lower, but rather that the long-term value floor is somewhere in
that $1200 range.
Concerning the upside potential, there are many factors to
consider. If the outside market environment remains the same
as it was in the latter part of 2013, we will likely see a similar
trading range for gold. If on the other hand, any number of
occurrences disrupts the high stock, strong dollar, no-inflation
environment, we could see gold make very meaningful gains.
Despite the fact that many analysts won’t agree on this point,
an end to quantitative easing will prove to be very price positive
for gold in the long term. Tapering may hurt gold a bit, but it
will hurt everything else much more. As capital is moved out of
stocks and other bubbly assets, some of it will make its way
back into gold.
All in all, we never really addressed the imbalances that created
the financial crisis of 2008. We just papered over its effects.
The Fed’s “emergency measures” have become the new norm.
That’s because we treated the symptoms of the crisis, but have
done nothing to address the underlying illness. That illness will
surface over time and in increasingly unpredictable ways. Right
now, it’s mostly subdued. Gold’s struggles as of late reflect that
reality. However, the same logic holds that when these massive
systemic imbalances resurface, gold could quickly rebuild its
wings and soar once again toward the sun. In my mind, it’s not
a matter of if this will happen but when.
The real question is not if gold prices will rise in 2014. It’s
whether gold is more likely than other asset classes to provide
low downside risk and high upside potential. Looking at all
these factors together, I believe the answer is a resounding
“YES!”

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