>Gold >>> Easing the fear of inflation

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Should investors be concerned with inflation or deflation?

The question many investors are now asking is this; is the fear of inflation arising from the response of the monetary authorities printing money to address the credit crunch going to be realised?
This fear is based upon a classical Monetarist view based on a definition of inflation; “too much money chasing too few goods”.
However, a recent study by Credit Suisse has questioned the extent to which printing money might be inflationary given the other changes observed in the “shadow money” system. This is the other side of the Monetarist view and postulates that given the slowdown in credit availability, combined with the reduction in aggregate wealth arising from the recent falls in the value of real assets, our preference for holding cash has changed and therefore the monetary authorities are acting appropriately to fend off the risk of significant deflation. The actual rate of inflation is as much a reaction to expectations of the cost of future goods and services as it is to changes in input costs such as raw materials or commodities.
Economists describe this as “expectations augmented inflation” and is reflected in, for example, employees negotiating pay increases to reflect an expection of higher prices in the future. This feeds into the costs of production, higher output costs of goods and services and therefore higher realised inflation. Since our expectations of the future rate of inflation are therefore relevant to the realised rate of inflation, it is clearly beneficial to consider all the possible scenarios.

The original research from Credit Suisse can be found here.

Or listen to a Bloomberg interview

Since the financial crisis hit in late 2008, the US monetary base has more than doubled, from about $800 billion in mid-2008 to about $2 trillion in November 2010.1 When the Federal Reserve announced a second round of quantitative easing (QE2), it raised investor concerns that such actions would stoke inflation.

The chart below shows that the US monetary base has spiked since 2009. While inflation has fluctuated considerably, it has not tracked the changes in the monetary base. Although no one can reliably forecast inflation, we think markets do a pretty good job of sorting through all the macroeconomic data. At present (mid December), the markets do not appear to reflect expectations of runaway inflation in the near future.2

US Monetary Policy since 2000

Source: Federal Reserve Board

Nevertheless, investors may be growing anxious in response to media coverage of the Fed’s continuing expansionary policy. For those who are certain QE2 will be inflationary, perhaps the recent example of Sweden’s monetary base run-up will offer some reassurance.

In the 1990s, Sweden’s central bank, the Riksbank, more than doubled the country’s monetary base during the Nordic banking crisis, but inflation remained moderate during and after the expansionary period. The graph below documents that even as the monetary base jumped from 1994 to late 1996, inflation did not follow suit, and in fact, remained flat before falling in 1996.

Sweden’s monetary base expansion is one of several international examples of quantitative easing over the past two decades. These case studies, which include past expansionary periods in the UK, Switzerland, Japan, Australia, New Zealand, and Iceland, are discussed in a recent Federal Reserve Bank of St. Louis review.3 The researchers concluded that doubling or tripling a country’s monetary base does not lead to high inflation if the public views the increase as temporary and expects the central bank to maintain a low-inflation policy.

Of course, many factors may come into play, and we cannot know whether the US will share the same fortune. But at least we know that quantitative easing has occurred without triggering high inflation.
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1. Monetary base is the total amount of the liquid currencies circulating in the hands of the public, deposits in financial institutions, and the deposits of the commercial banks in the central bank of the respective country.
2. One indicator of expected future inflation is the difference in rates between US Treasury bonds and Treasury Inflation Protected Securities (TIPS), also known as the TIPS spread. As of December 16, the 10-year zero-coupon TIPS spread was 2.35%. Consider, however, that the spread also includes an inflation risk premium, so the spread is not an exact measure of the market’s inflation expectations.
3. Richard G. Anderson, Charles S. Cascon, and Yang Liu, “Doubling Your Monetary Base and Surviving: Some International Experience,” Federal Reserve Bank of St. Louis Review 92, no. 6 (November/December 2010): 481-505.

Managing Inflation Risk: Hedging vs. Total Return Strategies

Many people are asking how they can prepare for potentially higher inflation. This article explores two basic ways to address inflation uncertainty and highlights asset groups that may prove useful.

As you consider strategies, remember the difference between expected and unexpected inflation. Asset prices already reflect the market’s expectations about future inflation, given all available information. Inflation may turn out to be worse than expected, and this risk of unexpected inflation is what some investors may want to manage.

Investors can prepare for unexpected inflation by following one of two basic strategies—hedging the immediate effects of inflation or earning a total return that outpaces inflation over time.

Hedging involves choosing assets whose value tends to rise with inflation. Although holding these assets may reduce the total return of a portfolio, the positive correlation with inflation can help an investor keep up with rising consumer prices, at least over the short term. (Correlation refers to the co-movement of asset returns. When two assets are positively correlated, their returns tend to move together; when negatively correlated, their returns are dissimilar.)

Candidates for hedging include retirees, fixed income investors, and others who would experience a diminished living standard during an inflationary period. These investors are willing to forfeit long-term growth potential for more immediate inflation protection.

In a total return strategy, an investor attempts to outpace inflation by holding assets that are expected to earn higher real (inflation-adjusted) returns. This investor is willing to give up short-term inflation protection for an opportunity to grow real wealth. Younger investors are typically well suited for this strategy because they have many years until retirement and expect their earnings to advance faster than the inflation rate. As they save and invest for the future, they can accept more risk through greater exposure to higher-return assets, such as stocks.

See Larry Swedroe on CBS discussing Inflation and deflation risks

To insulate a portfolio from unexpected inflation risk, both strategies may employ some combination of stocks, short-term fixed income, and Treasury Inflation-Protected Securities (TIPS). Let’s consider each of these:

Stocks
Equity securities have provided a positive inflation-adjusted return over the long term. From 1926 through 2008, the total US stock market, as measured by the CRSP 1-10 Index, outpaced inflation by an average of 6.16% per year.1 To achieve this higher expected real return in stocks, however, an investor had to accept more risk, as measured by greater volatility in returns, and endure periods when stocks did not outpace inflation. As a result, stocks may be less effective for hedging short-term inflation and more suitable for investors who want to beat long-term inflation by earning a higher total return.

Some investors assume that high inflation leads to lower stock market performance, while low inflation fuels higher stock returns. In reality, inflation is just one of many factors driving stock performance. US market history since 1926 shows that nominal annual stock returns are unrelated to inflation.

Fixed Income (Bonds)
Higher inflation can hurt bondholders in two ways—through falling bond market values triggered by rising interest rates, and through erosion in the real value of interest payments and principal at maturity. This inflation exposure tends to impact the prices of long-term bonds more than those of short-term bonds, and investors can mitigate the effects of rising interest rates by holding shorter-term instruments.

Many types of investors may benefit from holding short-term bonds. When interest rates are climbing, a portfolio with shorter-term maturities enables an investor to more frequently roll over principal at a higher interest rate. This can help inflation-sensitive investors keep up with short-term inflation and enable total return investors to reduce portfolio volatility, which can lead to higher compounded returns and growth of real wealth.

Treasury Inflation-Protected Securities (TIPS)
Issued by various governments around the world, TIPS also known as Index Linked Bonds, are fixed income securities whose principal is adjusted to reflect changes in the Consumer Price Index (CPI). When the CPI rises, the principal increases, which results in higher interest payments. At maturity, an investor receives the greater of the inflation-adjusted or original principal. The inflation provision enables TIPS to preserve real purchasing power and hedge against unexpected inflation.

TIPS are generally a good short-term inflation hedge since principal is adjusted for changes in the CPI. They are also a good portfolio diversifier for some long-term investors due to their negative correlation with equities and relatively low correlation with most types of fixed income assets. TIPS were introduced in the USA in 1997, so these correlations are based on a relatively short sample period.

However, keep in mind that TIPS prices also have been affected by changes in real interest rates, so TIPS may not track inflation one-to-one in the short term or over longer periods of time. In fact, TIPS can lose market value if real interest rates increase.

Commodities
Commodity futures, as well as gold and oil, are perceived as effective inflation hedges because their returns are positively correlated with inflation. But many commodities are more volatile than stocks, and their returns do not always rise with inflation because of this significant volatility. So adding these assets to a portfolio may increase real return volatility, which could offset the benefits of hedging.

Investors should also consider the economic argument against holding commodities. Unlike stocks, commodity futures do not generate earnings or create business value. They are essentially a speculative bet in which there is a winner and loser at the end of each trade. Moreover, a broad-based stock portfolio already has significant commodity exposure through ownership of companies involved in energy, mining, agriculture, natural resources, and refined products.

Summary
While the media have featured divergent opinions and theories about the effects of recent government actions on inflation, no one really knows how consumer prices will respond to the complex forces at work in the economy and markets. Investors should carefully review their financial circumstances and investment goals before making changes to their portfolio.

As you assess your exposure to a high-inflation scenario and form a strategy that reflects your financial goals and risk tolerance, consider that:

•    Expected inflation is built into asset prices. In our view, markets efficiently integrate all known information into prices. Thus, current prices already reflect expectations of future inflation. Only unexpected news will affect the inflation outlook.
•    Hedging unexpected inflation has a cost. Investments traditionally regarded as effective short-term inflation hedges have lower historical returns than stocks—and some have much higher volatility.
•    Volatility matters. Evaluating assets solely on their ability to track inflation disregards the effect of volatility on returns and risk. Some assets that are positively correlated with inflation have large return variances, and adding these to a stock and bond portfolio may increase overall volatility.

Even with the prospect for higher inflation, investors who take a total return approach may be better served than those who choose assets based on correlation with the CPI. By choosing assets with higher expected long-term returns and maintaining broad diversification, investors can seek to grow real wealth and preserve the purchasing power of their savings and investments.

Endnotes
1 Real return calculation:  (1+CRSP 1-10 Index return)/(1 + US CPI)-1. The CRSP 1-10 Index is a market capitalization weighted index of all stocks listed on the NYSE, Amex, NASDAQ, and NYSE Arca stock exchanges. CRSP data provided by the Center for Research in Security Prices, University of Chicago.

Disclosures
Inflation is typically defined as the change in the non-seasonally adjusted, all-items Consumer Price Index (CPI) for all urban consumers. CPI data are available from the US Bureau of Labor Statistics.

Stock is the capital raised by a corporation through the issue of shares entitling holders to an ownership interest of the corporation. Treasury securities are negotiable debt issued by the United States Department of the Treasury. They are backed by the government’s full faith and credit and are exempt from state and local taxes.

CRSP is a non-profit center that also functions as a vendor of historical data. CRSP end-of-day historical data covers roughly 26,500 stocks, both active and inactive. OTC bulletin board stocks are not included.

The indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is no guarantee of future results, and there is always the risk that an investor may lose money.

Diversification neither assures a profit nor guarantees against loss in a declining market.

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>Runaway inflation in the near future.

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Inflation or deflation?

by Marc Westlake 

Does Monetary Expansion Stoke Inflation?

Since the financial crisis hit in late 2008, the US monetary base has more than doubled, from about $800 billion in mid-2008 to about $2 trillion in November 2010. When the Federal Reserve announced a second round of quantitative easing (QE2), it raised investor concerns that such actions would stoke inflation.
While inflation has fluctuated considerably, it has not tracked the changes in the monetary base. Although no one can reliably forecast inflation, we think markets do a pretty good job of sorting through all the macroeconomic data. At present, the markets do not appear to reflect expectations of runaway inflation in the near future.
We have recently updated our research on Inflation and this can be found here:
US Monetary Policy since 2000

Source: Federal Reserve Board

>Tax Waived on Gold Investments in Europe

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Value Added Tax Waived on Gold Investments in Europe

(EU source 31998L0080) — Council Directive 98/80/EC of 12 October 1998 supplementing the common system of value added tax and amending Directive 77/388/EEC – Special scheme for investment gold
Official Journal L 281 , 17/10/1998 P. 0031 – 0034
THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community and in particular Article 99 thereof,Having regard to the proposal from the Commission (1),Having regard to the opinion of the European Parliament (2),Having regard to the opinion of the Economic and Social Committee (3),
Whereas, under the sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – common system of value added tax: uniform basis of assessment (4) transactions concerning gold are in principle taxable although, on the basis of the transitional derogation provided for in Article 28(3) in conjunction with point 26 of Annex F to the said Directive, Member States may continue to exempt transactions concerning gold other than gold for industrial use; whereas the application by some Member States of that transitional derogation is the cause of a certain distortion of competition;
Whereas gold does not only serve as an input for production but is also acquired for investment purposes; whereas the application of the normal tax rules constitutes a major obstacle to its use for financial investment purposes and therefore justifies the application of a specific tax scheme for investment gold; whereas such a scheme should also enhance the international competitiveness of the Community gold market;
Whereas supplies of gold for investments purposes are similar in nature to other financial investments often exempted from tax under the current rules of the sixth Directive, and therefore exemption from tax appears to be the most appropriate tax treatment for supplies of investment gold;
Whereas the definition of investment gold should only comprise forms and weights of gold of very high purity as traded in the bullion markets and gold coins the value of which primarily reflects its gold price; whereas, in the case of gold coins, for reasons of transparency, a yearly list of qualifying coins should be drawn up providing security for the operators trading in such coins; whereas the legal security of traders demands that coins included in this list be deemed to fulfil the criteria for exemption of this Directive for the whole year for which the list is valid; whereas such list will be without prejudice to the exemption, on a case-by-case basis, of coins, including newly minted coins which are not included in the list but which meet the criteria laid down in this Directive;
Whereas since a tax exemption does, in principle, not allow for the deduction of input tax while tax on the value of the gold may be charged on previous operations, the deduction of such input tax should be allowed in order to guarantee the advantages of the special scheme and to avoid distortions of competition with regard to imported investment gold;
Whereas the possibility of using gold for both industrial and investment purposes requires the possibility for operators to opt for normal taxation where their activity consists either in the producing of investment gold or transformation of any gold into investment gold, or in the wholesale of such gold when they supply in their normal trade gold for industrial purposes;
Whereas the dual use of gold may offer new opportunities for tax fraud and tax evasion that will require effective control measures to be taken by Member States; whereas a common standard of minimum obligations in accounting and documentation to be held by the operators is therefore desirable although, where this information does already exist pursuant to other Community legislation, a Member State may consider these requirements to be met;
Whereas experience has shown that, with regard to most supplies of gold of more than a certain purity the application of a reverse charge mechanism can help to prevent tax fraud while at the same time alleviating the financing charge for the operation; whereas it is justified to allow Member States to use such mechanism; whereas for importation of gold Article 23 of the Sixth Directive allows, in a similar way, that tax is not paid at the moment of importation provided it is mentioned in the declaration pursuant to Article 22(4) of that Directive;
Whereas transactions carried out on a bullion market regulated by a Member State require further simplifications in their tax treatment because of the huge number and the speed of such operations; whereas Member States are allowed to disapply the special scheme, to suspend tax collection and to dispense with recording requirements;
Whereas since the new tax scheme will replace existing provisions under Article 12(3)(e) and point 26 of Annex F of the Sixth Directive, these provisions should be deleted,
HAS ADOPTED THIS DIRECTIVE:
Article 1
The following Article 26b shall be added to Directive 77/388/EEC:
Article 26b
Special scheme for investment gold
A. Definition
For the purposes of this Directive, and without prejudice to other Community provisions: “investment gold” shall mean:
(i) gold, in the form of a bar or a wafer of weights accepted by the bullion markets, of a purity equal to or greater than 995 thousandths, whether or not represented by securities. Member States may exclude from the scheme small bars or wafers of a weight of 1 g or less;
(ii) gold coins which:
– are of a purity equal to or greater than 900 thousandths,
– are minted after 1800,
– are or have been legal tender in the country of origin, and
– are normally sold at a price which does not exceed the open market value of the gold contained in the coins by more than 80%.
Such coins are not, for the purpose of this Directive, considered to be sold for numismatic interest.
Each Member State shall inform the Commission before 1 July each year, starting in 1999, of the coins meeting these criteria which are traded in that Member State. The Commission shall publish a comprehensive list of these coins in the “C” series of the Official Journal of the European Communities before 1 December each year. Coins included in the published list shall be deemed to fulfil these criteria for the whole year for which the list is published.
B. Special arrangements applicable to investment gold transactions
Member States shall exempt from value added tax the supply, intra-Community acquisition and importation of investment gold, including investment gold represented by certificates for allocated or unallocated gold or traded on gold accounts and including, in particular, gold loans and swaps, involving a right of ownership or claim in respect of investment gold, as well as transactions concerning investment gold involving futures and forward contracts leading to a transfer of right of ownership or claim in respect of investment gold.
Member States shall also exempt services of agents who act in the name and for the account of another when they intervene in the supply of investment gold for their principal.
C. Option to tax
Member States shall allow taxable persons who produce investment gold or transform any gold into investment gold as defined in A a right of option for taxation of supplies of investment gold to another taxable person which would otherwise be exempt under B.
Member States may allow taxable persons, who in their trade normally supply gold for industrial purposes, a right of option for taxation of supplies of investment gold as defined in A(i) to another taxable person, which would otherwise be exempt under B. Member States may restrict the scope of this option.
Where the supplier has exercised a right of option for taxation pursuant to the first or second paragraph, Member States shall allow a right of option for taxation for the agent in respect of the services mentioned in the second paragraph of B.
Member States shall specify the details of the use of these options, and shall inform the Commission of the rules of application for the exercise of these options in that Member State.
D. Right of deduction
1. Taxable persons shall be entitled to deduct
(a) tax due or paid in respect of investment gold supplied to them by a person who has exercised the right of option under C or supplied to them pursuant to the procedure laid down in G;
(b) tax due or paid in respect of supply to them, or intra-Community acquisition or importation by them, of gold other than investment gold which is subsequently transformed by them or on their behalf into investment gold;
(c) tax due or paid in respect of services supplied to them consisting of change of form, weight or purity of gold including investment gold,
if their subsequent supply of this gold is exempt under this Article.
2. Taxable persons who produce investment gold or transform any gold into investment gold, shall be entitled to deduct tax due or paid by them in respect of supplies, or intra-Community acquisition or importation of goods or services linked to the production or transformation of that gold as if their subsequent supply of the gold exempted under this Article were taxable.
E. Special obligations for traders in investment gold
Member States shall, as a minimum, ensure that traders in investment gold keep account of all substantial transactions in investment gold and keep the documentation to allow identification of the customer in such transactions.
Traders shall keep this information for a period of at least five years.
Member States may accept equivalent obligations under measures adopted pursuant to other Community legislation, such as Council Directive 91/308/EEC of 10 June 1991 on prevention of the use of the financial system for the purpose of money laundering (*), to meet the requirements of the first paragraph.
Member States may lay down stricter obligations, in particular on special record keeping or special accounting requirements.
F. Reverse charge procedure
By way of derogation from Article 21(1)(a), as amended by Article 28g, in the case of supplies of gold material or semi-manufactured products of a purity of 325 thousandths or greater, or supplies of investment gold where an option referred to in C of this Article has been exercised, Member States may designate the purchaser as the person liable to pay the tax, according to the procedures and conditions which they shall lay down. When they exercise this option, Member States shall take the measures necessary to ensure that the person designated as liable for the tax due fulfils the obligations to submit a statement and to pay the tax in accordance with Article 22.
G. Procedure for transactions on a regulated gold bullion market
1. A Member State may, subject to consultation provided for under Article 29, disapply the exemption for investment gold provided for by this special scheme in respect of specific transactions, other than intra-Community supplies or exports, concerning investment gold taking place in that Member State:
(a) between taxable persons who are members of a bullion market regulated by the Member State concerned, and
(b) where the transaction is between a member of a bullion market regulated by the Member State concerned and another taxable person who is not a member of that market.
Under these circumstances, these transactions shall be taxable and the following shall apply.
2.(a) For transactions under 1(a), for the purpose of simplification, the Member State shall authorise suspension of the tax to be collected as well as dispense with the recording requirements of value added tax.
(b) For transactions under 1(b), the reverse charge procedure under F shall be applicable. Where a non-member of the bullion market would not, other than for these transactions, be liable for registration for VAT in the relevant Member State, the member shall fulfil the fiscal obligations on behalf of the non-member, according to the provisions of that Member State.
(*) OJ L 166, 28.6.1991, p. 77.
Article 2
Article 12(3)(e) and point 26 of Annex F to Directive 77/388/EEC shall be deleted.
Article 3
1. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive on 1 January 2000. They shall forthwith inform the Commission thereof.
When Member States adopt these measures, they shall contain a reference to this Directive or shall be accompanied by such reference on the occasion of their official publication. The methods of making such reference shall be laid down by the Member States.
2. Member States shall communicate to the Commission the text of the provisions of domestic law which they adopt in the field governed by this Directive.
Article 4
This Directive shall enter into force on the day of its publication in the Official Journal of the European Communities.
Article 5
This Directive is addressed to the Member States.
Done at Luxembourg, 12 October 1998.
For the Council
The PresidentR. EDLINGER
(1) OJ C 302, 19. 11. 1992, p. 9.(2) OJ C 91, 28. 3. 1994, p. 91.(3) OJ C 161, 14. 6. 1993, p. 25.(4) OJ L 145, 13. 5. 1977, p. 1. Directive as last amended by Directive 96/95/EC (OJ L 338, 28. 12. 1996, p. 89).

>Q & A >> What kind of gold should I buy?

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What you buy depends upon your goals. Why are you interested in buying gold?
If your goal is simply to capitalize on price movement, then bullion coins will serve your purposes. If you are interested in long-term asset preservation and you have additional concerns about capital and/or monetary controls — a more complicated scenario — then you might want to include the lower premium variety of pre-1933 European and American coins in the mix. These have been treated by the government since the 1930s as historical, collector items and, as a result, afford the privacy-minded investor with a greater degree of safety than gold bullion.

 To develop a more refined strategy, we recommend spending time with your AMP representative. He or she can help you match the type of gold you buy with your goals. All of our client representatives are seasoned professionals with substantial experience. They can help you zero in quickly on your needs, and make sure you are not going in a direction contrary to your goals and needs.

>Q & A >> When should I buy?

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You cannot approach gold the way you approach equity investments. Timing is not really an issue. The real question is whether or not you feel the need to diversify your present portfolio with gold. If you feel the need, the best time to start is now. With rising competition for the limited gold supply from both nation states — like China, Russia and South Africa – there is the chance that small investors can be crowded out of the market at some point down the road.

>Q & A >> What percentage of my assets should I invest in gold?

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As a general rule of thumb is 10% to 30%; and how high you go within that range depends upon your analysis of the current economic, financial and political situation.
Obviously, the individual with a low level of concern about the current economic situation will tend toward the 10% level. Those with lagging confidence in the way things are going will gravitate to the higher end of the range. In recent months, we have had a number of investors go substantially over the 30% figure based on their own reading of the economy and the various investment alternatives available.
In the current investment environment, with yields still running below the inflation rate and stocks and bonds still suspect, gold remains a healthy and viable alternative. Many, including even the die-hard stock investors, still see gold as the most undervalued primary asset group in the standard portfolio mix. As a result, gold is getting a lot of attention.
Gold is still in the beginning stages of what many financial experts see as a long term bull market.

>Who is the the typical gold investor?

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Traditionally, wealthy, aristocratic European and Asian families have kept a strong percentage of their assets in gold as a protective factor. That same philosophy has caught hold in the United States over the years, particularly in the upper middle class, and there are a number of investors who add gold to their portfolio on an on-going basis as part of a regular gold savings program. This has been good for gold.
Most investors, acquire gold not so much because they feel that the price is going to go up, but because they want to insure their portfolios from destruction related to currency debasement.

>Gold !& Silver Ownership >> Avoid Costly Mistakes

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The biggest trap investors fall into is buying a gold investment that bears little or no relationship to his or her objectives. Take safe-haven investors for example. That group makes up 90% of our clientele, and probably a good 75% of the current physical gold market. Most often the safe-haven investor simply wants to add gold coins to his or her portfolio mix, but too often this same investor ends up instead with a leveraged (financed) gold position or a handful of exotic rare coins (often costing five or six figures). These have little to do with safe-haven investing, and most investors would be well served to avoid them.

>Why AMP Gold Bullion Trading Merchants?

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A professional gold merchant can go a long way in helping the investor shortcut the learning curve. A good gold firm can help you avoid some the problems and pitfalls encountered along the way — provide some direction. It is very important to pick the right firm — one that is highly professional, doesn’t have a political ax to grind and can help you choose the right gold product mix to hedge your portfolio. Unbiased, objective advice from ones gold advisor is key to this process. So are market information and education. Pricing, product selection, fulfillment and on-going support also rely on that relationship. Picking a gold firm will be one of the most important decisions you make on the road to gold ownership.

>Q & A >> What is the best approach for the safe-haven investor?

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If you want to protect yourself against inflation, deflation, stock market weakness and potential currency problems — in other words, if you want to hedge financial uncertainties, there is only one portfolio item that will serve you in all seasons and under most circumstances — gold coins.