My advice on owning and storing gold: buy the physical gold and store it yourself. The form of the gold, be it Krugerrands, American Gold Eagles or gold bars, is not as important as taking physical possession.

CMIGS does not hold or store gold for its clients—we ship it to them—and we strongly warn against trusting a third party to look after one’s gold. Gold is too important to trust to someone else’s care.

However, Americans who put gold or silver in their IRAs have to use precious metals warehouses. For those investors who buy gold (and silver) outside IRAs, we recommend that they secure the metal themselves.

As to whether the gold or silver should be stored in a bank safe deposit box or secured away from a bank is a decision that each gold owner must make. Investors who own their homes have many more storage options than investors who live in apartments. Frankly, we caution against keeping gold in apartments; we think that bank safe deposit boxes are the preferred storage places for apartment dwellers.

A final note on storing gold or silver at home, whether a house or an apartment: never, ever store gold or silver in a bedroom. That’s the first place that a common burglar goes, looking for cash, guns and jewelry.

What about owning “other forms of gold,” such as ETFs, futures contracts and gold mining shares? With ETFs (Exchange Traded Funds) you do not own gold. You own shares in a company that owns gold. You get the price action dollar for dollar with prices of gold, but you do not own gold.

With futures contracts, by going “long” them, you have the “right” to take delivery of the gold represented by the contract when it matures. With futures contracts, you get dollar for dollar price action plus you gain the advantage of leverage, meaning that you have to put up far less money than if you were buying gold for physical delivery, such as from CMI Gold & Silver Inc.

As with ETFs, when you buy futures contracts you do not “own” gold. You have the right to take delivery of the gold represented by the contract when it matures and you pay the full value of the contract. As for the leverage that comes with futures contracts, it also works against you if gold goes down before it goes up. Futures contracts are not suitable for gold investors and should be left to commodity speculators.

Mining shares also provide greater leverage than the outright ownership of gold because stock shares trade “times earnings.” Further, if you select a mining company that makes moves that increases earnings, you usually see the price of the stock rise. But, with stocks, you in no way “own” gold, you own “proxy gold,” which should increase in value if you select a gold mining company that makes good business decisions.

In reiterate, it my position that persons wanting to hedge against inflation and protect against financial uncertainties should buy gold, be it gold bullion coins or gold bars, take delivery of it and secure it themselves. Leaving someone else to look after your gold is risky.

Still, I recognize that some persons’ circumstances are such that buying and storing offshore, i.e., out of the United States, makes sense. In the past, I’ve had no good recommendations for investors wanting to buy offshore other than to seek out a Swiss bank. Now, though, I do.

BullionVault is a highly-professional precious metals firm owned by Galmarley Limited, a UK-registered company located in West London. BullionVault offers its clients choices of storage in London, Zurich and New York. Obviously, if you choose New York, you are not going offshore, but with BullionVault you have the option of storing precious metals either in London or Zurich.

Perhaps the fundamental fear behind every gold investment is that the paper money being gotten rid of could become worthless. In theory (probably in actuality), that fear rests with any currency not redeemable in gold or silver, which means all the world’s currencies. No world currency, not even the fabled Swiss franc can be redeemed for gold or silver at the Swiss National Bank, which is Switzerland’s central bank, the equivalent of the U.S. Federal Reserve Bank.

The destruction of paper money usually comes about after the abandonment of the gold standard and the institution of fiat money, which is money by governmental decree. The dollar is money by decree, “all debts, public and private.” However, in many cases, one fiat currency is introduced to replace another fiat currency. Brazil is famous for doing that.

Before moving on to the problems faced by the Zimbabwean gold miners, I should note that since the Bretton Woods Agreement of 1944, no country has been on the gold standard. The Bretton Woods Agreement established a gold exchange standard, under which the world’s currencies were redeemable in dollars, which were redeemable in gold. Although under the Agreement, currencies’ values were fixed relative to gold, central banks that were presented their nations’ currencies for redemption actually gave the redeemer dollars.

Zimbabwe is an economic cesspool, with government regulations of nearly every facet of economic activity. One control in Zimbabwe is that all mined gold is to be sold to the Zimbabwean central bank, the Reserve Bank of Zimbabwe (RBZ).

According to one source, gold miners are meant to be paid 35% of their production at the highly overvalued local currency and the remainder in US dollars. The RBZ pays partially in U.S. dollars because the gold mining companies need to buy equipment in foreign markets to keep operating. There is no market for Zimbabwean dollars outside Zimbabwe. Outside Zimbabwe, Zim dollars are paper.

While the official policy is for the RBZ to pay partially in U.S. dollars, the RBZ now has no U.S. dollars, or any other foreign currencies, and the gold mining companies are receiving only Zim dollars. Because Zim dollars cannot be spent outside Zimbabwe, the mining companies are unable to replace worn out equipment.

As a result, “Zimbabwe’s once proud and big gold sector could be set for a further decline,” says Tawanda Karombo, posting an article from Harare, the capital of Zimbabwe. Zimbabwe produced seven tons of gold last year compared to 11 tons in 2006, their lowest level in 90 years.

Although Zimbabwe’s gold production has never rivaled that of neighbor South Africa, for nearly a hundred years it has been a solid gold producer. Now, Zimbabwe’s gold production looks set to grind to a halt, which will be positive for gold investing.

The last few posts were about silver because that’s the way the news fell. Now, we have a plethora of articles about gold, some worth reading and one worth listening to if you prefer not to read.

ANZ Australian Economics Weekly says gold prices may “firm this week.” With gold having hit $930 Wednesday morning, I bet ANZ now wishes they had predicted rising gold prices this week. Analysts love to be right about predicting short-term price moves. Accurate predictions sell subscriptions.

Although ANZ advised that gold could firm this week because of surging oil prices, the analysis warned that concerns about oil prices were “re-setting” global inflation concerns, “which should trigger a catch-up rally in gold (compared to oil).” I guess that’s what we’re seeing with gold up $65 from this time last week.

Nevertheless, ANZ cautioned, “We expect gold prices to drift lower over the coming months, with increasing signs that the fall in the USD is near the trough.” Seasonally, the summer is the low period for gold and silver prices, so there remains the possibility that “gold prices may drift lower over the coming months.” Still, past summers have not had the dollar in so much trouble and real fears that the Bush administration may bomb Iran’s nuclear research facilities.

Mineweb.com reviewed ANZ’s analysis, for those who want to read it.

Meanwhile, Kevin McArthur, President and CEO of Goldcorp, a major gold mining company, said Tuesday that he is certain that investors will again see four-digit gold prices this year with the potential to “go well into the four digits.” Four-digit means above $1,000, and I guess that “well into the four digits” means something like $3,000 or $4,000 gold. McArthur didn’t give a time frame, but I don’t think he was predicting $3,000 or $4,000 gold this year.

I think that $3,000 - $4,000 gold is a real possibility, out there four to five years. A widened war in the Middle East, and it may not take four or five years.

Mineweb.com ran an article on McArthur’s comments, but the article is mostly about “greens” dominating the conference where McArthur made his predictions.

The third article, which you can listen to instead of read if you prefer, is titled Is the dollar doomed? and is more about the dollar than about gold. Because you can’t talk about a sinking dollar without talking about gold (if you’re giving an honest appraisal of the situation), the article really is quite good. Except where the speaker says, “Well, we don’t actually need a government run gold standard anymore.” Here, he covers himself by saying that there are places where individuals interested in investing in gold can go.

When a government is not on the gold standard, the door is wide open for inflation, exactly what we’ve had in the United States since 1971 when President Richard Nixon closed the gold window.

Meanwhile, resourceinvestor.com slapped gold around a little with an article titled Gold Demand Drops to Five-Year Low in Q1. The article, based on a GFMS study for the World Gold Council, noted reduced demand for gold, with the blame laid at the feet of higher gold prices. In India, for decades the biggest buyer of gold, demand shrank.

Here’ how resourceinvestor.com summed it up:

Gold demand in India, the world’s largest physical bullion consumer, was most severely affected by the movement in the gold price, falling 50% to 102.1 tonnes in Q1. Jewellery and investment demand, at 71.1 tonnes and 31.0 tonnes respectively, were half the levels of the correspondent quarter last year.

In almost an after thought, the resourceinvestor.com article noted:

In marked contrast to India, demand in China grew by 15% to 101.7 tonnes, with both jewellery and investment demand increasing during the first quarter as continued economic strength allowed consumers to increase their purchases regardless of the rising price. Jewellery demand rose 9% to 86.6 tonnes and investment demand surged 63% to 15.1 tonnes.

Somewhere a news outlet should broadcast that China is about to replace India as the biggest buyer of gold. Further, with China’s increasing prosperity and its people freer to buy gold, China’s impact on the gold market should be huge in the years ahead. Wonder why only the perpetual bulls seem to know what’s going on in China when it comes to gold?

Resourceinvestor.com has posted an excellent report on the proposed gold sales by the IMF.

Before anyone panics at the idea of the IMF selling gold, I would like to point out that in the 1970s both the IMF and the US Treasury sold gold while it marched to $850. Further, European central banks have been selling gold for years, and gold prices are at record highs.

Additionally, the recommendation for the sales calls for limited sales, maybe up to 400 tons and “sold in a way that didn’t disrupt the market, much like gold sold consistent with the European Central Bank Gold Agreement (EGA), which limits sales to 500 tonnes per year.”

ResourceInvestor notes that past proposals have been blocked by the US Congress, which has, because of weighted voting power, a virtual veto on any IMF gold sales. However, come January 2009, I suspect Congress will have a much more liberal makeup than it now has, and it may not block IMF gold sales, especially with promises of limited sales that are done in a nondisruptive manner.

We may have to put up with IMF gold sales in future years, but the possibility does not dampen my enthusiasm for gold (and sliver). None of the likely presidential winners has any plans to address the massive bleeding of dollars by the US Treasury.

McCain is a war candidate and has said he will continue the occupation of Iraq. McCain has never addressed the financial cost of doing so. Clinton and Obama, while saying they will end the war in Iraq, offer such potpourris of social programs that the dollar will strain under them.

With the likelihood of one of these three becoming president and major shift to the left in Congress (already 21 Republican members of the House have said they will not run for reelection.), I cannot find anything positive for the dollar on the political scene. Although IMF gold sales may turn into reality sometime in the future, I don’t worry about them at all. Investing in gold and silver makes a lot of sense for these times.

Worldwide concern about the dollar is the primary reason gold has surged to new highs this year. However, the dollar is not the only factor driving the price of gold. A shortage of electric power in South Africa, the world’s largest producer of newly mined gold, is putting downward pressure on the supply.

In South Africa, 95% of the electricity is generated by Eskom, a public utility that now cannot supply enough to meet the country’s needs. The gold mines (and the platinum mines), although South Africa’s economic lifelines because they generate the country’s export revenues, are suffering along with the South African people. Last week Eskom cut power to the mines, which resulted in an industry-wide shut down.

Eskom is between the devil and the deep blue sea.

If Eskom allocates enough electricity to the mines so that they can operate, other consumers will do without, those consumers being not only South African homes but also small businesses. That is a political nightmare for a public utility and the politicians running the country.

However, if Eskom denies the mines the needed power, jobs and export revenues will be lost, further compounding South Africa’s social problems. South Africa has one of the highest crime rates in the world.

If the mines get 50% of the power they need, they can keep the mines open but with no production. The other 50% is needed to mine. If the mines get 90% of what they need, production can be cut not 10% but 20%.

In the last few days, after much lobbying by the mining industry and its supporters, Eskom has been supplying 90% of the power the mines need, which has enabled Anglo Platinum to assert that they will be able to operate at “sustained levels” within two weeks if they continue to get the promised 90%.

Gold Fields has been in constant dialogue with Eskom since having its power needs cut to 80% and has been promised, according to a mineweb.com article, that they will receive the minimum 90% needed to produce.

But a major concern for the mines is the reliability. Can Eskom continue to supply the 90% that the mines say is the minimum needed to operate?

Further, the miners—the guys doing the work—are at great risk if the power is cut unannounced. So far, that has not happened, but it remains a possibility. The power utility previously committed to give the mines at least four hours warning before power supply was shut down or reduced.

Mining in South Africa has always been a great challenge because of the depths of the mines. An unreliable power source makes mining in South African even more challenging.

I visited South Africa in 1979 and made a two-mile vertical drop in a cage attached to a cable (Technically, it was an elevator, but not the type most Americans are used.) into the bowels of the earth where the miners worked. The temperature at the bottom would have been something like 140°F had it not been for the massive—and I mean massive—air conditioning units.

Additionally, there were the electric trains that hauled ore from miles of horizontal shafts. The use of electricity was enormous. Plain and simple: South African mines cannot operate without electricity.

The root of the problems in South Africa lies in the country’s shift toward socialism, but that is a topic for another blog post.

Meanwhile, a one would expect, South African gold shares have not done well since the problem arose. Some analysts say South Africa’s power problems cannot be solved for years. I suspect they will not be solved at all and that in time South Africa will resemble Zimbabwe, which can only be described as a cesspool.

The circumstances in South African are positive for the price of gold, but sad on a human scale. South Africa is a beautiful country with vast resources, but the country is now in the grips of socialism, which, in the ends, spreads misery among the people.