Gold Brokerage Account vs Gold Bullion

When holding physical bullion, your profit would only be made from appreciation in the price of gold since your initial buy in. Gold is often used as hedge against inflation and devaluing fiat currencies.

There are significant advantages to a leveraged gold brokerage account over just buying and holding physical bullion, which enable you to generate monthly cashflow returns in gold.

Leverage

This means that for every dollar you risk, the broker will allow you to trade with a multiple of that amount; up to 100 times in the case of gold (100:1). If you invest just US$10,000, the brokerage will effectively lend you up to $1,000,000 to trade with!

This leverage operates in very much the same way as bank loans on property, except of course you are dealing in gold, not property. And you can’t go into negative equity with a broker, whereas that can easily happen with a bank loan secured on your property.

Lets compare two scenarios, where you start with US$10,000 cash to invest:

Scenario 1

You buy bullion at US$900/oz, but the price of gold quickly drops to US$850/oz putting you behind on your initial outlay. The price later rises to US$990/oz and you sell your bullion. You realize a 10% gain in dollar terms (less costs). At the time you sell, your dollar holdings have increased, but you can still only buy back the same amount gold you just sold. All you have really achieved is a hedge against the devalued dollars.

Scenario 2

You open a brokerage account to buy bullion at US$900/oz. The price of gold quickly drops to US$850/oz, but you use the brokers money to buy another US$10,000 worth of bullion. The price later rises to US$990/oz and you sell the gold you first bought at US$900/oz. You realize a 10% gain in dollar terms (less costs) and you still have another US$10,000 worth of gold that you paid only US$850/oz for. That lot is also worth US$990/oz now, a US$140 per ounce gain (16% plus gain).

The Advantage of the Leveraged Gold Brokerage Account

In either scenario you’d have bagged US$1000 profit, but with scenario 2 you would also own another 11.76 oz’s of gold; worth US$11,647 at today’s US$990/oz price. You might choose to liquidate this position, increasing your cash balance by a further US$1,647 to US$12,647 in total (less costs).

The Gold Rush system is all about teaching you to exploit scenario 2 as easily as possible.