I guess you too have concerns about financial melt down?

It’s amazing how so many things are coming together all at once such as the American presidential debate, credit crunch, stock market prices plunging, the USD collapsing, house price collapse, global warming etc.

I decided to start educating myself about what is going on out side the world of internet marketing that could be of use to know in regards to creating wealth.

Today I was checking out Sarah Palin, WTF! I heard there is something like a 30% chance that she could at some stage be president of the United States.

Truly shocking after seeing the YouTube videos of how she responds to questions such as “what newspapers do you read”. I don’t read newspapers, but so what, I would say I read news on the web. But she tries to dodge the question.

I am impressed with the way Obama presents himself and would love to be so good at communication. McCain is a great communicator too but a bit less trustworthy I think with too much “Joe the plumber” kind of theatrics and stabs at Obama.

Moving on …

I decided to look at ways to invest in tangible material that is worth something rather than paper money like the green back. For example Gold and Silver.

The prices of these have took a hammering too, but they are still rare and valuable metals. So, if you buy the physical metal, you will always own something of value. Another example would be land.

So it seems like a sensible idea to invest a proportion of our savings in precious metals such as gold and silver. In the past, I looked at doing this but it seemed like I had to buy stocks in companies that mined metal, or I had to buy say coins.

The paper money is involved in contracts that only last a few months such as the options market or spread betting. I don’t like these markets since the price can fluctuate in an instant as you make your transaction and you are basically screwed by the big boys.

If you ever watch live stock prices, you can see the prices changing by the second with occasional large blips, so it is easy to be taken advantage of in these situations of day trading.

What I learned is that not many people are aware that there is a physical market for precious metals where you can actually buy real Gold and Silver that is held in vaults under your name.

The paper version is not physical product, it may not even be paper, but data on a computer!

To buy the real stuff, you can go through a broker such as goldmoney.com They actually own gold and silver that you can buy and sell very easily online. This is what I plan to do.

You can also, buy metal from some banks over the counter such as in Zurich, Switzerland, where you could save the brokerage fee of a few percent. Then you have to securely store it.

In the UK, it is a very bad idea IMO to buy and store the metal yourself since the government imposes a 17.5% VAT charge on the purchase price. But GoldMoney operates from the tax haven of Jersey, plus you don’t take physical delivery of Gold or Silver that you buy, so you don’t pay this tax.

I think that one reason the Gold price has gone down is because investors turn to cash in bad times since they think they removed all the risk from their investments. But the value of paper cash is worthless since it is only paper that was printed.

The value of this paper cash must be backed by physically valuable stuff such as Gold reserves and loans that must be repaid to prevent war etc. It is like an IOU. On the UK pound it used to say “I promise to pay the bearer on demand the value of 1 pound” in exchange for this bit of green paper.

Think of pirates and ancient kings, they loved to hoard Gold and Silver since it can always be traded. Paper money can become worthless, easily. I went for a holiday in Turkey and came back with a 250,000 note of Turkish Lira. Now that is worthless.

So, I think it is a good idea to own at least some Gold and Silver as long as you are debt free. The first priority should be clearing your credit card bills and then mortgage I think. No financial advice intended!

OK, we are ready to invest in Gold and Silver, how do we know when to buy? Now, the prices have plummeted but there is always a turning point where prices start to rise again. So we need to detect when that point is.

What I learned was that the precious metals are like a family and move roughly together in price but there is one that is a stronger indicator of the trend. I heard it called the big sister. Her name is Platinum

Below, I have shown the comparison between the recent price charts for Platinum, Silver and Gold.

The vertical blue lines mark a couple of major change points to the trends of the prices. In this case, following a bull market (rising prices), it seems like Platinum was the first indicator of the top being reached and volatility setting in.

So if you were holding Gold and Silver, you could have noticed the sudden change to the rising price of Platinum and used this as an indication that the top had been reached and sold your Gold/Silver.

After this, all these precious metals enter a phase of unpredictability.

Then as the Gold and Silver prices peak up, the Platinum price does not, but it started drooping down in a steady decline.

This decline continues with the Gold and Silver fluctuating with the Gold going a bit wild. However, the Platinum price continues to steadily drop.

So could a steady rise in the Platinum price be a signal to buy back into Gold and Silver?

These price charts were derived from kitco.com The prices are known as “spot” prices, which is the market price at the time on the chart.

Percentage-wise, the prices can move by large amounts per year compared to say bank savings rates, but the value can go up and down. So you have to decide how much money you are prepared to risk if you invest in this kind of thing.