Posted by
DaHKGKid
16 yrs ago
Hello All, there are a few different vehicles for buying gold. How do we purchase physical REAL GOLD, I mean owning from the stockpiles around the world. This does not mean taking delivery of it!
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dbg
16 yrs ago
Depends how much gold you want to buy. Most of the banks in HK sell gold coins in various sizes. Could be a good place to start?
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This question has been popping up several times lately. You can do a search for gold. Hang Seng HQ sells coins and 5-tael bars, and so do some Bank of China branches:
http://www.bochk.com/web/market/trading_rates/precious_metal_trading_prices.xml?section=market&level_2=trading_rates&fldr_id=279
You may want to buy a safe as well. And a mean guard dog. Or a very big garden and a spade.
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Thanks, my Louisville Slugger gets it done. But what I would expect to buy is real gold not futures or a commodities blend with precious metals but have it purchased as real gold stored in a safe reserve outside of HK.
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If I read you correctly, you want to keep gold as a store of value in a safe place away from HK where you could go in case of financial implosion.
The problem with say safe deposit boxes is that you cannot access them if and when the bank is closed or shut down. E.g. due to bankruptcy or by government order. In 1933 all gold in the US was confiscated by presidential decree. Safe deposit boxes could only be opened under supervision of IRS officers!
Still you may consider buying any of the famous coins (if they are not sold out), such as Kruger Rand, American Gold Eagles and Australian Nuggets. Or go for the 99.0% pure gold bars certified by the Chinese gold society. Obviously you would have to carry them out of HK yourself.
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dadda, that is what I'm looking for. thanks.
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Ed
16 yrs ago
You can buy taels of gold from Hang Seng Bank and Bank of China.
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HSBC paper gold is just that: paper. It is guaranteed by HSBC, for what it is worth. GLD (equity ticker) Exchange Traded Fund (ETF) has actual gold stored against every outstanding share. Obviously the risk associated with this is the suspension of trading.
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yes, but would rather has a suspension take place then worthless paper. Have you been able to purchase GLD via HK?
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Ed
16 yrs ago
I believe that if you are wanting to purchase gold not so much as an investment but because you fear a financial catastrophe, you should purchase and take possession of actual gold. Again you can do that at Hang Seng and BOC.
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I agree with Ed's point of view. Streettracks Gold Trust (GLD) is listed in NY and is the most liquid gold ETF. ETFS Gold (BULL) is listed in London. Gold Bullion Securities (GOLD) is listed in Australia. Gold-Price-Linked ETF (1328) is listed in Osaka. ZKB Gold ETF is listed in Switzerland. I am sure you can trade most of these through the online brokerage companies or through one of the local HK banks. AFAIK there is no gold ETF listed in HK.
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And just after I pressed "Reply" I found the Streettracks Gold Trust listing and ticker in HK: 2840. Turnover is very low though.
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There is no safe and certain way of holding Gold as all options carry their own inherent risks. I own the paper gold version via HSBC which is based on stored gold price held in London.
If you want to own physical gold and have it held for you in a 'safe' place then other than some of the options listed above you could choose the Perth Mint in Australia.
There is a current price dislocation between the paper or spot price shown on the Comex (i.e. your Bloomberg ticker price) and the premium you need to pay to acquire Physical gold. Premium will be higher or lower depending on the volume of physical gold you wish to acquire.
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The time will come when the greenback is going to fall off quickly likely 2nd quarter 2009 when they start really printing paper for more bailouts. In the meantime, demand destruction will have commodities continue to slide but there will be that turning point back to gold. The only issue is gold being valued in USD. All you can hope for is GOLD gains outweighing USD index losses.
If the complete you know what hits the fan and USD looses big time, you can see anything pegged to USD to get hit and eventually depeg from the USD.
Any thoughts gents?
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Gold is priced in USD not valued in or pegged to USD and gold can be priced in any currency.
As Gold is a store of value it essentially negates the effects of inflation over the medium to long term. In the short to medium term it can therefore be volatile as the commodity is traded it will have ups and downs. So for example if Crude Oil was backed by gold currency in USD it would cost 3$ per barrel of Oil instead of US$60 per barrell of oil.
If the US Dollar loses a lot of value then the Gold price in USD will skyrocket. As hyper-inflation will dramatically erode the purchasing power of the USD it will cost many many MORE dollars to buy the same quantity of gold. So Gold goes from US$750 to US$5000 for example.
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Gold is not exclusively valued in USD. What makes you say that? You can value it in any currency you like. Neither is it exclusively traded in USD. For example it trades in Yen in Japan. Just like any currency, it can be traded against USD, EUR, GBP, JPY, CHF or any other currency of choice. As a matter of fact BOC or Hang Seng will only accept payment in HKD.
The correlation between USD and gold is negative. Interestingly gold price volatility is quite low when denominated in AUD. Money is fungeable and as such I would not worry about the price of commodities to be "pegged" to any currency. It is correlation you should worry about, but as markets have repeatedly shown, historic correlations can be thrown out of the window in times of crisis.
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okay guys, thanks for clearing that up. So for example a purchase of gold via HSBC in HKD via HK is made. This is eventually sold and priced in USD so I again ask, if sold I can ask for the transfer into any currency?
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And the Gold Index while priced in USD runs independent to the value of the USD.
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That's the beauty of gold, it is a fairly liquid, universally accepted, fluid currency. So indeed, your Kruger Rand can be bought in HKD in HK and sold VAT-free in the UK for GBP! Gold traders will charge a small fee, but so do money changers.
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Which Gold Index are you talking about? The only "Gold Index" I know is priced in Indian Rupee. The London Metal Exchange quotes gold (spot) price fixings twice a day in USD, EUR and GBP.
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Gold (CMX)
($US per Troy oz.)
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The Comex future is just one pricing reference, but it is indeed commonly used by the media. It is the most liquid gold future in the world. Since it is traded in Chicago (soon in New York) it is priced in USD.
If you draw the Dollar Index and the gold price (in USD) in one chart, you will see that when the dollar goes up, the price of gold goes down and v.v.
The last couple of months the Australian dollar has dropped about 35% against the USD, the British pound has dropped about 25% against the USD, gold has dropped about 30% against the USD, the euro has dropped about 20% against the USD from their highs earlier this year. Looks to me that gold is more "linked" to AUD, GBP and EUR than USD!
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Very good points and analysis onemorething. I have never retreated to gold before just currencies when stocks are under performing. I am looking for gold as you are to follow the future dollar demise and go back up, along with Silver and agriculture commodities.
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Tuesday, November 18, 2008
GOLD demand so high US mint CANNOT keep up
THERE'S a worldwide run on gold coins.
Even as the price of the precious metal itself comes under pressure along with commodities like oil and copper, people around the world are demanding so many of the valuable coins that government mints are having difficulty filling orders.
A spokesperson for the US Mint tells me that gold coins in this country, for the past month, "are being allocated because of an increased demand."
And the price that the government charges coin dealers has recently been increased by as much as 10 percent for a 10-ounce coin.
Robert Mish, a coin dealer in Menlo Park, Calif., says customers who want to purchase 200 gold coins often have to wait up to two weeks. Six months ago, he said, a purchase that size could have been filled immediately.
Someone who recently tried to purchase 100 one-ounce American Eagle gold coins in the New York City-area was turned away, even though he'd uneventfully made purchases before through the same dealer.
And even when gold coins are available, dealers report that customers are paying a bigger premium than they would have just a few months ago.
Previously, American Eagle coins were going for 5 percent over the market price of gold on the Commodity Exchange (Comex). Now the premium can be anywhere from 10 percent to 15 percent, even though the US Mint raised its price to dealers by just 3 percent for an ounce coin.
In one sense, the attraction for gold coins isn't surprising. Since ancient times, gold has been considered the safest investment to hold in times of uncertainty.
With fears of future inflation rising and concern about the value of paper currency and government-debt increasing with each new recovery plan announced in Washington and in foreign capitals, the desire to hold gold grows.
That part makes perfect sense. But there's another more puzzling aspect to the recent gold rush.
Even as the demand for gold coins such as the Canadian Maple Leaf or the Krugerrand of South Africa has grown, the market price of the precious metal itself is off its highs.
In early October, the price of an ounce of gold on the spot market was about $930 an ounce. With the commodities bubble bursting in recent months, gold declined into the upper $600 range. Spot gold closed yesterday at $739.90, down $2.60.
Bill Murphy, chairman of the Gold Anti-Trust Action Committee, says the price of spot gold is even more perplexing given the demand for coins and the fact that central banks in Europe have stopped selling gold into the open market.
"Gold should be moving up," Murphy says. "How could there be such a dichotomy between the historic high premium for coins all over the world and the low Comex price?"
His answer? "Today the public is buying gold like crazy, but the US government and the banks that hold bullion are intentionally keeping the price down."
Ah, but that column will have to wait for another day.
"..."Today the public is buying gold like crazy, but the US government and the banks that hold bullion are intentionally keeping the price down." .."
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I mentioned this on the 'Coping with the Crisis' thread a week or so ago. There is the posibility of the Comex 'naked' short position unwinding as people take delivery of their physical gold in December. The US Government have sold more Gold short than they actually have available with the intent to make the USD appear stronger than it actually is.
Therefore there is the possibility of the huge price squeeze as the November contracts mature and IF this happens it will take place between tomorrow and the early part of December.
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Ed
16 yrs ago
I understand that Iran last week converted USD75B of their 120B in foreign reserves last month to gold...
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there is a huge demand for gold from all corners of the world but the spot price continues to be low.
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I don't expect a default on Comex yet. It certainly will be interesting to see how many holders will opt for physical delivery (as opposed to cash settlement). I am not convinced that gold is being manipulated, although I will not rule it out. Even if it were, it cannot be kept down forever. Don't forget we are in a deflationary environment in which all asset prices are deflating. On a relative basis gold has already outperformed commodities and many assets by a significant margin.
I have heard stories about Iran and Saudi-Arabia buying billions of dollars of gold for their reserves, but I have not seen any reliable sources or evidence of such purchases. Allegedly China is contemplating diversifying into gold as well. I do believe that some countries will switch back to some sort of gold standard as early as next year, and it will be a very interesting development if that happens.
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why wouldn't you expect it yet? gold spot is US$750 and Gold Physical is US$850 - US$1,000 depending on quantity purchased. That is certainly strange?
As you mentioned there is only a certain period of time they can keep this up.
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Not everybody is allowed to take physical delivery on the Comex futures. Legally you are, but there is an implicit understanding that only end-users are allowed to take delivery. An investment fund (i.e. not an end-user) once demand physical delivery (in the 80s I think it was) and got criminally convicted for market manipulation because of the short-squeeze it created! Mining companies are often at the selling end of the futures market. If the mining companies did not have enough stock to deliver, you would expect them to have bought back their contracts, pushing prices up... we have not seen that.
I have yet to see real evidence of physical gold trading at a premium in the wholesale market. So far nobody has produced such evidence, all I have heard and read is just anecdotal evidence. Perhaps you can convince me! :-)
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I can confirm that Hang Seng still sells American Eagle and Kruger Rand gold coins. So much for the 2-tier market theory (paper vs physical).
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Hardy
16 yrs ago
I guess it is clear that it makes sense to hold at least some gold as a hedge against inflation, bank runs whatever..
It is better to buy "real" physical gold than "paper" (e.g. hsbc online) gold, as in case of a bank run or other problems the bank has no obligation to give you actual gold for your "paper" holdings. i.e. you are then...screwed.
I have bought gold (you can get little tael gold bars, us gold dollar goins, krugerrands.. from the hang seng bang HQ in sheung wan. go down to the basement and line up at the forex / gold counter. note: you can only exchange a max of 100,000 hkd per day.
then you will need a safety deposit box from your bank to keep the gold at...
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Thanks for the informative posts.
I would like to buy physical gold and take delivery. What do you suggest to buy - Tael Gold coins, American Eagle, Maple Leaf, Kruggerands? I am looking for the least premium over the gold price - whichever is the best investment. Meaning I am not looking to trade unblemished coins in the future to collectors but want to invest in physical gold.
Where in HK is the best place to buy? Hang Seng, Chow Tai Fook...?
And lastly, is HK the best place to buy gold or is it the same price in Europe, US or other Asian countries?
Thanks in advance!
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Ed
16 yrs ago
Hang Seng Bank and Bank of China will sell you taels of gold
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Has anyone purchased any of this physical gold?
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both options, either physical or paper, have their own inherent risks. As you mention the risk of paper is the 'guarantee' failing and the risk of physical is theft.
you would buy physical gold because you believe that gold is real money and you don't believe in the viability of fiat money storing wealth.
also remember the spot price of gold is based on derivative trading and if this market were to fail then your gold would still be held at HSBC but the spot price could go to zero. in this circumstance the price of physical gold would skyrocket.
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Hi dadda,
I have a HSBC gold account already. For diversification sake and for safety in case of whatever happens, I would like to hold some physical gold. I saw your post that you ran the calculations so would really appreciate your insight.
I know that Hang Seng Bank and Bank of China sells taels of gold but my question is what is best to buy as far as having the least premium over gold prices - Tael Gold coins, American Eagle, Maple Leaf, Kruggerands?
Where in HK is the best place to buy? Hang Seng, BOC, Chow Tai Fook...?
Any advantage to buying in HK over other countries (I heard that if buy in Switzerland, for example, you have to pay VAT buying/selling)
Thanks!
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Depending on how much you want to buy, you can purchase gold as well at those companies that are dedicated to supplying gold bars for jewelry or other manufacturing. The major players in Hong Kong are Heraeus, Metalor, Chow Sang Sang (their gold division, not retail stores), Scotia Mocatta, and Kaloti. With these companies you are basically paying the median price between the bid and ask spot price and they normally sell kilo bars (@ 32.15 troy oz in one kilo). They may sell smaller bars, not sure. When you purchase gold, you want to purchase the highest purity possible. Nobody can make pure 24k gold. The best you can purchase is 23.9999kt (4 nines). Some places might sell 23.999 (3 nines)or 23.995 bars, so just be careful about that. In HK there is no tax so you do not pay any VAT where you might pay in other countries, although I don't know of many countries that charge sales tax on gold. At least in USA and Canada there is no sales tax on gold purchases.
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Dadda,
Thats a slightly misleading post.
It is misleading to suggest that holding gold via HSBC is the 'safest investment you could make'. the Gold price is VERY volatile (it was up 11% just last week) and you could end up losing a lot if you make an investment in gold regardless of the fact that the gold is held by HSBC.
Also HSBC would normally have to release your gold (but not necessarily) if you held physical gold but investing in their Wayfoong statement gold is basically an investment in the paper stuff. So they would be under NO obligation to release physical to you based on this.
Finally HSBC going down would not be the end of the world. Some people would lose their jobs other people would lose their savings but that's all.
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Citigroup says gold could rise above $2,000 next year as world unravels
Gold is poised for a dramatic surge and could blast through $2,000 an ounce by the end of next year as central banks flood the world's monetary system with liquidity, according to an internal client note from the US bank Citigroup.
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/3526645/Citigroup-says-gold-could-rise-above-2000-next-year-as-world-unravels.html
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The end of the world (paper money anyway) IS coming.
Paper gold will be equally worthless as banks default.
We have been buying real gold and silver for two years now.
Lately, we are having a hard time buying it. There is little available. AT ANY PRICE>
SO how can the spot price be XX if you can't buy it for XX. You pay a big premium if you find someone who has ANY gold to sell. Buy what you can, hid it somewhere (nNOT a bank).
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Ed
16 yrs ago
I think that the point linking the demise of HSBC with the end of the world implies that if HSBC, which is one of the strongest banks in the world at the moment, were to for some reason have problems, that would mean that we would be experiencing massive global economic problems that would be affecting every institution which would no doubt be perceived as some as world ending...
Regarding gold, you can take physical possession of gold from BOC and Hang Seng banks in Hong Kong - I do not think you can buy gold over the counter at HSBC... You can keep gold in a safe deposit box and my understanding is that there are no conditions under which you would not be able to access your box.
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Topol
16 yrs ago
Not sure if it has been mentioned before in this thread because I have'nt read all the posts. In the past I have bought gold from Johnson Matthey Tel: 852 2738 0121. You need to call them before 3:30pm (which is when HK price fixes) and give your order. They will call you back and tell you the settlement amount. You transfer the money into their HSBC account and the next day they bring the gold to your office. In the past I have bought 1kg 'bricks' so you need somewhere to store them - unless you are a rapper then you can wear it round your neck.
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There is a lot of confusion and misunderstanding here.
HSBC passbook or online gold is paper gold. HSBC will never ever deliver you gold against that contract even though they may actually hold gold against your contract: https://www1.ebanking.hsbc.com.hk/1/PA_1_1_S5/content/hongkong/pdf/banking/wf_statement_gold.pdf
Spot gold is actually the price for gold for delivery in two days. Spot gold therefore is physical gold.
HSBC is NOT the safest bank in the world measured by credit rating. A lot of banks have serious solvency issues as we have observed recently... why would HSBC be any different from the rest? HSBC has invested in subprime mortgage, they have massive mortgage exposure and house prices are falling globally... don't fool yourself! Neither would it be the end of the world if HSBC would go bankrupt.
As I have written before in this forum, gold coins are tax free in most countries. The wholesale price is the same globally. Kruger Rands trade at spot prices. The other coins trade at 3% premium (which is the wholesale price). The tael bars trade at below spot prices reflecting their lower purity of 99%.
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Thanks for the great info.
onemorething - So are Kruggerands the best form in which to buy physical gold (don't want 1 kilo bars)? Any why do other coins trade at a 3% premium but not Kruggerands? I tried comparing these different types of coins but searching on the internet does not give complete information.
And where in HK do you buy them at the best price?
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The "other gold coins" also keep their 3% premium when you sell them again, so it does not make a big difference which one you buy. Wholesale prices are set by the respective mints.
American eagles will be more accepted in the US, and Australian nuggets in OZ... but all are highly recognised and widely accepted coins. I have a slight personal preference for 24 karat gold coins, so that excludes the 22 karat eagle and kruger rand.
Amongst other banks Hang Seng and BOC sell gold.
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I note that US has american buffalo which is 24 karat gold. Has anyone bought them? It is difficult to buy Canadian Maple. I am wondering if anyone has bought Chinese Panda which is 24 karat. AS compared to Australian Nuggets, what would be a better investment? I have called BOC and Hang seng and have not managed to get any Maples. Any advice or views is appreciated.
Thanks.
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Never seen American Buffalo (99.99%) or Chinese Panda (99.9%) coins in HK. I wouldn't be very concerned about which coin I buy: (pure) gold is gold.
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Hi,
Can somebody be kind enough to give me links to websites stating that banks/govt/ entities are buying lots of gold? I am having a difficult time convincing my husband to buy gold. He keeps on saying that deflation causes gold prices to go down. And I keep on telling him it has nothing got to do with inflation/deflation but a turn towards the gold standard.
Thanks.
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Deflation causes ALL assets prices to fall, however, your husband should not be too worried about deflation as this is just short term noise. The main event is inflation which is currently taking place and the consequential huge inceases in consumer prices down the road.
On to your point about the gold standard; there is every chance that this could happen and with the combination of this event occurring and inflation taking place; fiat currency is proven to fail and therefore a return to the gold standard is a likely outcome. The gold price would shoot up.
However Ben Bernanke and the Crony's in the fed would never give advance warning of this as the dollar would collapse quickly.
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Again, I do believe a gold standard future may happen but only worst case scenario. Demand destruction is causing commodities to slide including gold so you may want to buy down to the bottom over the next quarter I think. If a Stonger Dollar continues during a flight to safety then it would appear Gold could come down below $700/oz but if it stays where it is for 2009 gold should trade between $700-$800 and then move up nicely when inflation occurs. Personally, I'm holding cash in USD looking to exit to Gold 20% Silver 20% and foreign non USD linked currencies when the USD begins to weaken.
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qpzmgh- how temporary is deflation? Or how soon do you see inflation coming up? Do you see property prices coming up then or is this inflation just for essential goods, commodities? Even though many of the governments have pledged for trillions in expenditures, I dont see it as enough to stimulate the economy.
DaHKGKid- can you let me know when would be a good time to buy? I read in your other posts that you see Q109 as the start of the USD going down. Maybe after Obama takes office then? I'm thinking that his solution would be to spend, spend and spend, which means borrow, borrow and borrow. I really doubt that China would be so stupid to keep on buying, buying and buying US treasuries, but then it could be a political thing.
The problem I have with this crisis is that there is so much political meddling which skews the economy more and more. I wonder if the day will come when the economy will be allowed to heal itself. Or maybe there will be another political solution, another big war which with today's technology and population would cause tremendous damage. If so gold will definitely be up.
BTW, does anybody see a correlation between the DOW and gold prices? With this window dressing (stock market), gold might just get pushed up.
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Not sure how temporary deflation period will be.
It could be 3 months or it could be 12 months it all depends on when the dollar begins to lose it current strength.
BUT as soon as the dollar rally ends, and it looks like were just about there, then the effects of all this inflation will begin to kick in and that means higher gold price, higher oil prices, higher commodity prices and higher general cost of living.
Inflation may also appear in the property sector but not for some time. In HK we have a problem as we are pegged to the USD. This will cause us some issues down the road for sure.
At the same time the US mostly, and, to some extent, UK and Europe will move into a long and DEEP recession/depression. Remember all the credit that fueled economic growth over years has gone. Spending will be curtailed so company earnings are going to be dramatically affected. You will see this in Q4 earnings reports and Q1 2009 as well.
Job losses will quicken at an incredible rate and this will have knock-on consequences throughout the wider economies.
Just a note on the Gold price and to update on an earlier thread i posted about a price squeeze. We saw the price of Gold move from 740 to 840 over the final week and a bit of November.
I have figures now for the amount of gold contracts that requested delivery as their November contracts expired and this came to a total of 20% of gold held at the comex. Bear in mind that the normal amount for delivery is 1-2%.
So the same could happen end of December as contracts expire and delivery requested and some of the analysis i have heard is that the request this time could be in the region of 40%.
This could spike the gold price to US$1,000 (just 3% from its all time high).
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I want to offer a different view on deflation. Deflation might stay here for two to three years at least. Eventually the money printing actions of the central banks will find their way into the real economy and cause inflation. Until then deflation will cause destruction to the economy. Many companies will be forced into bankruptcy and the survivors will be forced to scale down. I fear that the deflationary force cannot be stopped by money printing. Only an economic implosion will bring deflation to a halt, but that means that we have an instant shock inflation wiping out all life savings. Gold would do relatively well in such an event. Actually bond and credit markets are pricing in a prolonged period of violent deflation and economic stagnation with a high probability of a total implosion. Equity markets do not support this scenario.
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Does anybody know why the price of platinum is almost the same as gold?
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Mathematical coincidence IMHO. Just like the HK$ crossed parity with the CN¥ two years ago.
Gold is considered a monetary metal, whereas platinum is an industrial metal. Strictly platinum is more precious than gold, and for that reason alone you may see platinum staying close to gold for a while, but there is very little fundamental reason for them to track each other.
Btw, gold hit an alltime high against the British pound last week!
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Since Gold hit an all time high. Is it still advisable to buy Gold at this point.
Please advise
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I think Gold will rise as the USD will decline slightly before year end. I a now reserved to the thinking that demand destruction and deflation will continue bringing at least in the short term deflation in commodities including Gold and Silver, and in the new year flight to safety risks in the USD will continue to keep this currency fairly stable. Note that all countries will have to start printing money so to pick a currency against the USD is becoming harder and harder. Longer term I believe the USD will loose its value say end of Q109 and risk will be flight to GOLD. I would take the next few months to watch the price on gold potentially come back down for a period, in the new year as the USD climbs back, buy in at any level lower than $750/oz down to a bottom and then all the way up to about 20% of your portfolio.
Only my combined thoughts after being stuck in the last 6 months accessing our global situation. I am still looking for safe haven currency outside of the USD.
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hipsmiffy> I don't do advice, but FYI gold in US dollars is still 20% below its alltime high.
DaHKGKid> Got yourself a new crystal ball? Just kidding. ;-) What are you making from the fact that gold is in backwardation? What is that telling you?
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Well, to respond it is too late to purchase real gold as the demand is much greater then the supply SO, all you can do is hope the currencies anywhere aren't a write off completely and to hedge yourself in paper GOLD and SILVER. Yes Silver is in a stage of backwardation as well but again my thought given to anyone who has missed the real gold play looks for some further strength in USD and most demand destruction in the new year to all commodities and at least grab it at the bottom. If the last thing we have left to hold wealth is real gold, the whole world is screwed!
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IHE
16 yrs ago
Easiest & safest way to buy/own gold bullion: BullionVault.com or GoldMoney.com. BullionVault is good as it offers the option of keeping your gold in Switzerland or UK (or US) and can operate in three currencies (USD, GBP, EUR). I've been using them for awhile and have been impressed by the service and online interface.
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Re backwardation. If gold was in such short supply then the spot price should be a lot higher... supply and demand right! Actually we should be reading about it on the front page of the WSJ or the FT: "Shortage of Gold Bars", but we don't! Furthermore the dollar spot price is currently below its all-time high, so it simply cannot be shortage of supply.
I think the answer does not lie in gold... it is actually quite scary if it is what I think it is.
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So onemorething, you said the answer does not like in gold, so where does it lie?
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A few possibilities:
paper gold collapse
counterparty risk
fiat money implosion
gold yield
If it is the third, we are all in very big trouble. I haven't had time to study it in greater detail, so I have not made up my mind yet.
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Gold prices gone up alot these few days! I missed the chance to buy at reasonable price few weeks ago. There's not much supply of Real Gold with Bank of China and Hang Seng Bank.
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you've not missed anything the price is just getting going. As i said some days ago watch for a spike to US$1,000 between 24th Dec to 4th Jan.
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All is relative! Gold is quite stable between €600-620 the last couple of weeks. It set a new alltime high of £570 last week. Personally I do not see what would be the driver for gold at $1000 within the next two weeks.
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hipsmiffy, the fact that gold has gone up a lot recently is nothing to get excited about, because USD has gone down a lot recently, and gold is denominated in USD. So if you work it out in RMB or Euro terms, gold has either gone down or stayed the same.
alpha235, I would agree with your husband, and recently offloaded 100 ounces of physical gold at Hang Seng. The gold standard will only exist if the world recognises it as the standard, but with the bank deposit guarantees kicking in, such recognition should take some time and maybe not in the next few months. Gold is also correlated with other commodities like oil, so it may drop down a bit more until $600+. Just like property, market timing and margin of safety is important.
DaHKGKid, Citigroup can say anything they want. They have been wrong many times before.
Ed, BOC does not sell gold to non-BOC bank account holders, and they will only sell a maximum of 1 ounce per day to a BOC bank account holder. In addition, I understand that HK banks no longer measure HK gold in taels, but in maces.
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Has anyone's view on Gold Changed in the last few weeks. We see some increases based on USD coming off its highs only. Who's ready to play gold? Who believes $2000/ in 2009 or better 10,000 by 2012. Again if the USD falls sharply the measure of gold will only appreciate if the it's price exceeds the drop in USD.
If USD drops 10% then gold must at least appreciate by 10% to break even?
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What do you mean by "if USD drops 10%"? It is not possible: 1 dollar will always be 1 dollar! (Here's the data if you don't believe me: http://finance.yahoo.com/q?s=USDUSD=X)
I suspect the market does not fully realise the power of deflation yet. When we start to see price deflation around us, I expect some more gold softness, although the long term prospects are up, based on the money creation it is taking place now.
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I would be inclined to agree, although the Dollar Index is based on a very limited basket, of which the euro is the biggest component (57.6%). Although you have to understand that the correlation between gold and the dollar index is not -1 (i.e. dollar index down 10%, gold up 10%).
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I would think of gold and silver as being extremely attractive safe havens right now to hedge the future onset of inflation / hyperinflation looming, because the rate at which the Fed is printing dollars for bailouts at present. Silver may initially be a more attractive investment than gold, until the gold silver ratio narrows. Silver is predicted to reach $28.00 an ounce. Whilst silver has fallen hard from its highs of last year, it can only move up. Of course the US may ban gold trading and purchase as they have done before. BOC sell silver in 10oz units, but any leads on where to buy physical silver?
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You are right and you are wrong IMHO. The Fed cannot print fast enough to keep up with the credit deflation/destruction we are going through. Inflation is nowhere near, let alone hyperinflation.
I am happy to sell all my silver for $15 to anyone who is predicting it will go to $28. Hell... I will sell it for $14 even! ;-)
Sorry, I just had to poke fun at these people with crystal balls. Yes, fundamentals may be in favour of silver (and gold), but putting a price and a time on it is blind foolishness. And don't be fooled, it can move down a lot lower! Very few people had predicted oil would fall to below $35 last year, but it happened nonetheless.
The problem with silver is that you almost need a wheelbarrow to move $10,000 from one place to another (28kg)! Let alone if you want to invest $100,000! Not to mention, where will you store it?
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Demand Destruction, Deflation, Risk Aversion and Safe Havens are the name of the game right now. I believe all commodities still have a way to go down and while I am worried about the USD loosing steam there still seems to be some belief that repatriation of USD back to the US is going to occur for the first half of 2009 keeping the dollar high, potentially pushing GOLD back down to $700-$850 ranges.
When a bottom in the realestate market is found there can begin a recovery of some sort but with all the money being printed and the debt incurred inflation must return along with high interest rates and lower dollar.
My gut says GOLD is a buy in Q1 & Q2 since the above must occur but the IF those owning US treasuries (China & India), about $3T between them feel the bubble is going to burst then they will sell them off and the USD will devalue quickly and GOLD will go crazy first hitting the $1000 level, then $1200 and potentially $2000 by end of 2009.
Just my opinion but Chindia could do this in a year or a month but my guess is the latter giving their pending financial challenges further realized by negative news in the US that keeps coming. DOW at 6000 anyone!!!!
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To get gold coins in hong kong, you will have to try your luck by going to the hang seng bank and Wing Lung bank in Des Voix Rd, Central. For the hang seng bank, go down the escalators to B1 and line up at the money exchange/gold bullion counters and ask what gold stock they have. You will have to go on daily basis and try. They charge a very low premium of 5% above the gold spot price fro 1oz. (dealers in Aus/US, charge 7-12%)When I was there on 5th Feb, 2009, they had 5-6 x 1 oz Australian Nuggets and dozens of 1/4 oz maples from the Canada
With the main branch of Wing Lung bank in des voix rd ( just 300m away from Hang Seng ), walk up the stairs to the Money Exchange and ask for gold bullion. Cash only! No credit cards.
These are the best two banks. Bank of China, main branch may have some as well. Most of the other banks are waste of time and HSBC and others sell only Paper Gold, which is false gold as it is based on promise of delivery.
The main rule of physical gold buying is ALWAYS TAKE POSSESSION of your gold. Do not buy into Gold Trusts or Gold Certificates. You are buying just 'Paper'. It wise to buy a good quality small fire-rated safe of $US 600+ to store your gold at home. Avoid the chinese made safes as thief can pry your cheap safe in 2 minutes! (see youtube.com). You can also store it in the safe deposit boxes but it has risk of becoming subject to Government freezing of access or bankruptcy of the banks and limited opening hours, which is a risk in the current environment. The HK banks will also offer "Taels" bars which are popular in HK, but not overseas. I would stick to the Gold Coins that are issued by the Perth Mint ( good source, goto their website sale and ring them for orders as they ship overseas, subject to bank transfer of $, big tip!) which are known as "nuggets" or "Kangaroos" as they are .9999 gold and come in protective plastic housing. The second choice would be Canadian Maple leafs as they are also 24 kt, but do not come in protective housing and are subject to scratching due to being pure gold. The next choice would be Kruggerand, which are 22kt, weigh 36gr per "1ounce" due to the inclusion of copper & nickel to make the coin more durable, that is why they have a red-copper look. Be careful when exporting the Kruggerands, as many countries such as Australia/UK will charge you VAT or GST tax at customs, because the Kruggerand is defined as "improved value added raw material". However, 24kt or pure gold is not and is a "raw material". US Eagles are 22kt and are also good. Avoid old gold coins from rome, France, UK, except for Austrian gold. Some dealers offer old Amercian St Gauden 22kt coins from 1907-1928, these are numastics coins and are for professional collectors with a lot of experience and knowledge. You just plain simple modern issued coins & gold "biscuits" from Australia, Canada, S.Africa and US.
Your next choice of Gold Buying would be Swiss "Biscuits" or flat credit card bars issued by PAMPS , Valcambi and Credit Suisse. These have less premium than coins, very popular on the re-sale market. Avoid the gold coins for sale at Chow Fook jewellery stores. They carry a 12% premium! Yes they are pure gold, but they are cast in China and are not recognised by most international dealer. Stick to the Government mint issues from Western Governments. Many say "gold is gold". Yes, granted, but you will achieve a better premium when you re-sell well-known brands as they are perceived a trustworthy by buyers. Avoid generic gold bars as well.
If you want to re-sell your gold (only if desperately necessary! keep your gold as the $HK is pegged to the $US and will take a battering in July-Sept due to inflationery pressures in the US), sell it on E-bay, less Ebay seller commission, you will get 10-15% gross premiums, whereas dealers will give 1-2% less spot.
It is always a good time buy gold if you have the cash. Do not wait for it drop 5% or10%, you could be very sorry as it is forecasted to climb $1000+ in 2009, while the $US/$HK will be heading south once investors wake up with fantasy of US Bonds and start selling them, thereby putting pressure on the $US. Buy gold with your spare cash when you can. Go with 1 oz as the price is easily determined by just going to 24hgold.com or kitco.com. 1/4 oz and 1/2 oz carry extra premium. Avoid the 1/10 and 1/20th oz, wasting your time as you are paying premiums of up to 40% above the spot price!Avoid buying proof/commerative coins from dealers, paying a big premium as well. Leave that to the collectors and novices. Make sure that the coin/bar states in the weight in ounces or grams, not Tolas or Taels. Most Westerners do not understand Middle East/Asian gold measurements.
Buy gold now while it is too late! Leave silver alone unless you plan on staying in HK for a while, because silver is bulky and you will need 70 times as much silver to equal 1 oz (31.1gr) of gold. In fact you will need nearly 2 kg of silver for 1 oz. Imagine trying to take $US20,000 silver out at the airport? That is 40kg! while gold would be around 22 x 1 oz (681 grams, $US900oz ) which you just put in your pockets and jump on a plane! Get the picture? Or even still $US100,000 is 3.45kg, you can put that in your carry on luggage. Please check with your local customs that it is o.k to import without declaration.
Physical gold, especially gold coins from US, Canada and Australia, are very hard to get at the moment, so when you find 1oz coin, buy it asap! Come back in a few hours it will be gone! I went to over 20 dealers and most were sold out! It is the same around the world. Imagine if there was a panic and everyone wanted gold? P.s I am a professional international gold coin trader. Share the Knowledge and karma will reward you!
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Deflation is dragging gold down and monetary inflation is pushing gold up. Uncertainty about the future, and the debasement of fiat money is definitely behind gold's recent rally. Some see gold as a worthless metal, others see it as a super-currency. You decide who is right!
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There are people in New Orleans selling gold teeth $50 each! I am as uncertain as onemorething as it could go either way. I believe the move will begin in June/July this year OR when the FED finds out the only way to improve their position is to raise interest rates. I would hold 20% GOLD, rest in assets such as CASH and other NEEDED assets.
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One variable affecting gold price is consumer demand from low/middle classes - I'm thinking in particular of India, whose lower/middle classes are very underbanked and so used to store savings in gold, as well as for socio-cultural reasons.
This consumer demand has tanked 90% in Q4-08. This is one reason why gold hasn't touched $1000, even though many funds have increased their holdings after dumping it in sept.
The point - made months ago - about Roosevelt taking over all Fed and PRIVATE gold holdings in 1933: He did that because he wanted to suspend the gold standard. There isn't the same impetus today.
If you are truly afraid - and there are quite a few scare-mongers around - then buy a vegetable plot (I'm serious). Barring a nuclear wipeout, at least you won't starve. I'd recommend 2 chickens for eggs as well, but in HK, there's always the danger of bird flu. You can sell excess bak choi to the people holding gold bars.
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You do not need to confiscate gold to suspend a gold standard... please enlighten us! In my view gold was confiscated to debase and immediately stabilise the dollar, because as FDR knew very well: gold == money.
That is why some analysts recommend buying physical gold or Swiss-held ZKB gold ETF (ticker: ZGLD on Swiss Ex). The latter is fully deliverable upon demand within 10 days and cannot be confiscated by the US government. The US could increase their gold reserves by 12% by simply confiscating the SPDR gold ETF (ticker: GLD). Caveat Emptor!
[EDIT: typos]
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If I remember my boring economic history lessons correctly, FDR wanted to suspend convertibility in 1933, i.e. he didn't want annoying people to go to banks and ask to return dollars for gold. He also had bank holidays to prevent runs.
The silver lining is that so far we have not had serious widespread bank runs (fingers crossed, I haven't jinxed things by pointing it out, but can't be as bad as shaking out the worst-fate chopstick at the temple...)
The Depression was persistent because it had 3 financial crises, each worse than the other. I'm not sure what we have is the first - or second - wave, but during the GD there were massive runs and people holding gold and refusing to spend. FDR wanted to prevent further gold hoarding by confiscating it - not recommended. My surprise is that Americans seemed rather pliant at that time. I'd riot if the gov took my gold.
Veneria: no, nothing to prevent that - I wasn't assuming a law and order breakdown, but that if peace held, I'd prefer the choice of veggies/eggs to physical gold.
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Ed
16 yrs ago
I of course have no idea how GD1 played out in the media but I suspect that there is sophistication at work today that prevents a panic.
There was a palpable difference in coverage from the initial few days when biz news guys were in shock and predicting end of days - I am certain that an edict came from above about self-fulfilling prophecies because this talk quickly stopped.
And for every super negative story there are 2 hopeful stories - to maintain journalist credibility this is a must. See SCMP Property today - main page with two positive stories - open it up and you get a mash of armageddon stuff...
People of course like to hope for the best and if you give them a string to grasp they will take it.
So I think the media is playing a very big role in cooperating to make sure that the masses dont capitulate completely.
This is a good thing because it allows the government to try to bring things down to a soft landing rather than pound things into the pavement - however if the soft landing doesnt work do we pound into the pavement anyway - just a bit later...
Are those who predict the worst scare mongers? I dont believe that the former chairman of Goldman is trying to scare anyone when he says he can see no way out of this and predicts it may be worse than GD1.
What agenda could he possibly be pushing with such comments?
On the other hand when you hear a trader say we have bottomed out (how many times have we heard that...) or that we will be in recovery in second half 09 you have to think about their agenda - no trading no job... what do you think they are going to say when asked about the recovery?
There is a lot of confusing and conflicting information about this depression (yes, the head of the IMF called it that yesterday - but you wont find that on the front page of the NY Times...) so I think what you have to do is listen to it - consider who the person is who is disseminating the info and any biases they may have... and come to your own conclusion as to who is right - and how that impacts your financial decisions.
Unfortunately though even if you reach a conclusion there is still no consensus on the end game because nobody can know - nor is their consensus on how you would preserve wealth....
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We do have to fear fear itself at this point - the key driver behind capitalism is consumption, and current consumption level depends on worries about the future. And fear feeds upon itself.
Now that many have binged and have swung to the other extreme of anorexia, alot of activity has stalled. It is not a bad idea to use this crisis to reexamine whether we are consuming needs, wants or just useless things. It is just that in that reconsideration, people who were producing useless trinkets can't feed their families or send children to school now.
It isn't their fault and this adjustment process will be painful. But standing by will make it unnecessarily painful - and those who want a complete crash to clear the decks need to think about this. 20-50m will lose their jobs this year, and only a few are in banking. The rest are in businesses that can't continue without either working capital from freaking-out banks, or demand, or both. I think the urgency of leaders arises from partly humanitarian grounds, cynical though I am about govs.
No one knows the technical definition of a depression, so Strauss-Kahn is unwise to say this. The GD was a retrospective label used by economic historians to describe the 50% fall in GNP in 1929-33 in the US. The US has been in recession for a year or so, but fall in GNP has been 1-2% so far. Unless GNP falls by 48% over the next 3 years - not impossible, but unlikely, and more likely if we don't do anything or let the whole thing collapse - than we can start to call this GD2.
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Ed
16 yrs ago
Hang Send Bank has coins and taels - you can go to the HQ in Central - take the escalator downstairs and there are counters that will sell you up to HKD100,000 immediately if you dont have an account - not sure on the limit if you do have an account
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Ed
16 yrs ago
The Gold Rush: Don't Get Burned
With the yellow metal near $1,000 per ounce, investors are clamoring for coins and bullion. But buying gold in its physical form can be tricky
If you had any doubt that the prime motivation for investors has shifted from greed to fear, look at the price of gold. The spot price for the yellow metal reached $992.43 an ounce on Feb. 20, its highest level since hitting $1,002.70 on Mar. 17, 2008, the day that Bear Stearns collapsed. The spot price has climbed more than 39% from a near-term low of $712.30 on Nov. 12, 2008.
Demand for physical gold has exploded as the deepening financial crisis and ongoing slide in stock prices has pushed nervous investors into safe-haven investments. But new investors need to be careful about who they buy from, since inexperienced people seeking to take advantage of opportunities in the market are opening coin dealerships without being aware of the financial risks or legal compliance issues involved.
How to Choose a Dealer
"These days, with everything going on with the [Bernard] Madoff scandal and now the [Allen] Stanford scandal, you have to know exactly who you're dealing with," says David Beahm, vice-president at Blanchard & Co., a leading retail dealer of gold coins and other precious-metals products based in New Orleans. The best way to ensure the quality of what you're buying is to do your due diligence when choosing a dealer, he says. The Better Business Bureau is a good place to start, at least to be able to see whether a certain dealer's clients are satisfied or not. And the Internet makes due diligence that much easier. For instance, you can check whether a dealer belongs to the Professional Numismatists Guild (PNG), a nationwide association based in Fallbrook, Calif., on the PNG Web site.
Be wary of incoming cold calls from dealers unless it's someone with whom you have a long-standing relationship, advises Diane Piret, industry affairs director at the Industry Council for Tangible Assets (ICTA), the national trade association for rare coin and precious-metals dealers. Investors are better off seeking out dealers on their own. It's a good idea to look for companies whose dealers are members of the PNG, which requires dealers to have five years of experience as numismatists, have a net financial worth of at least $250,000, and be elected to the guild by a majority of the present members. PNG members must abide by guild rules, which include an arbitration process to resolve any dispute over product quality between buyers and sellers.
It's treacherous to enter the bullion market with no understanding of how tight the margins are and how rapidly investors can lose their shirts, given the volatility in gold prices, says Piret. Although she has received five or six inquiries recently from people asking which laws they need to comply with in order to establish a dealership, she doubts many of them have subsequently opened a business. "A dealer who buys and sells over $50,000 with all [his] customers of bullion-related products…needs to be compliant with section 352 of the Patriot Act and have a compliance officer," she says. "Cash reporting laws and money laundering laws are very serious."
Keep Close to the Spot Price
New investors in the yellow metal also need to keep an eye on the spot price of gold to ensure they're not being charged too high a premium for gold coins. It's common these days for dealers to sell gold coins at 8% or 9% above the spot price, and that's not necessarily bad, given the supply constraints for the retail product due to higher demand, says Dave Meger, managing director of metals services at Alaron Trading in Chicago. His firm has had to turn away orders occasionally in recent months when it hasn't received fresh product from the U.S. Mint.
During the fourth quarter of 2008, U.S. consumer demand for gold coins and bars jumped to nearly five times the amount from a year earlier, to 34.8 metric tons, according to the World Gold Council. Between Sept. 15 and early December, Blanchard sold more gold than it had in the prior three years, despite the Mint's 45-day suspension of sales of one-ounce American gold eagle coins after the collapse of Lehman Brothers. Blanchard had to sell "whatever product we could get our hands on"—Canadian maples or South African krugerrands—until supply of American eagles resumed, says Beahm. "At that particular time, nobody really cared what they had as long as they had gold."
To keep the premium they pay over the spot price to a minimum, Meger at Alaron recommends investors buy from one of the four authorized distributors that buy directly from the U.S. Mint. The Mint charges premiums of 3% on one-ounce gold coins, 5% on half-ounce coins, and 7% on quarter-ounce coins when it sells to authorized purchasers, which in turn mark up prices to dealers and individual investors. While Alaron can't buy directly from the Mint, it benefits from having a partnership with a firm that is an authorized purchaser.
Hedging Gold Purchases
Meger also suggests buying from a dealer who is linked to a brokerage firm with a reputable name in the commodities industry and who sells only exchange-approved brands, hallmarked bars, and reputable mint coins.
"We can offer clients the ability to hedge their purchases with options or futures contracts," he says. A buy-and-hold investor who expects to see gold prices pull back in the short term isn't likely to go to the trouble of taking gold out of the warehouse to sell it, but might think it advantageous to hedge his position by selling a futures contract. "It's nice to be able to deal with a brokerage firm that offers you that ability," he says.
Only a few of the 30 or so refiners whose brands are listed on the New York Mercantile Exchange's Web site sell gold bars in retail sizes of one, five, and 10 ounces. Until about a month ago, those smaller retail forms of gold were in short supply, but now that refiners realize they can get significantly higher premiums for them, they are starting to shift resources from jewelry and other industrial fabrication to increase production of the smaller retail forms, says Meger.
When ordering coins from a dealer, it's best to send your money in as quickly as possible, since dealers will only lock in prices once they've received "good funds" in the form of a bank wire transfer or cash. "The price could change from the time you contact us until the funds are good," says Beahm.
Alternatives to Bullion
From a cost perspective, there are far more efficient ways to buy gold than coins or bars, where uncertainty about the size of markups is compounded by shipping costs, says Leonard Kaplan, president of Prospector Asset Management in Evanston, Ill. "The alternatives are so much better and so much safer. You can either buy futures or ETFs. Then you're dealing with regulated industries, known quantities, not Joe Schmo coin dealer who's been around for two weeks," he says.
Gold investors have to pay shipping and storage costs on top of the hefty premiums they're already paying above the spot price. "Is it worth $6,000 to $8,000 on 100 ounces of gold to have it in your hand, and to lose liquidity, and to pay storage? I don't think so," Kaplan says.
Some strategists suggest waiting for a pullback in gold prices, to around $950, before buying more. But $992 may prove to be cheap a few months from now if things break the gold bulls' way. Beahm at Blanchard believes spot gold is poised to reach at least $1,500 by the end of this year, in view of all the liquidity the government is putting into the economy, which will eventually boost inflation.
Right now, the fundamentals look good for gold. But remember that the yellow metal has tripped up smart investors in years past, and will likely do so in the current boom.
http://www.businessweek.com/investor/content/feb2009/pi20090220_462946_page_2.htm
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Western buyers and Indian sellers... that is what makes a market!
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The Swiss franc historically has been a disciplined safe haven currency, but with their economy reliant on the financial sector, one has to wonder how safe Switzerland really is! UBS and Credit Suisse are heavily exposed to bad assets. It is a myth that the Swiss franc is fully covered by gold. It probably has the highest gold coverage ratio of all currencies in the developed world, if that counts for anything.
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I am in the Franc as a hedge along with USD and upto recently Yen. There has been some issues as onemorething describes above. Most recently is the US asking UBS for offshore information from US clients which has lowered the Franc value.
I am long franc as recent YEN has lost value as the country hits the skids, and USD is next but not sure when. The Forex plays are scary but rewarding as some move 200+ pips per day.
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Anyone been buying gold lately? Took a dip and picked up some yesterday. Now looking at Silver!
Any thoughts. Have a read below.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=arweARZI9J.Y
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There is a rumour going around that a central bank in Asia is partially switching out of USD in major other currencies.
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The USD is falling off its highs of yesterday. I thought this was only because of jobs report. Are you saying the above it happening now in volume as well?
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Hard to tell. Currencies have been volatile lately. The jobs report yesterday was no surprise, if anything it beat expectations. In my observation the USD is showing signs of fatigue, but there is still a strong case for continued dollar strength in the months ahead. It is all about the money flows. Who is selling and who is buying?!
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Thanks guys for some very useful tips. Goldhunter you are what your name says! I'll be doing what you suggest soon. Of course I know that by the time I have the gold safely stashed at home, the world economy will recover and the price of gold will collapse... I'll go ahead anyway. I'm not too afraid of the second great depression: I'm more afraid of the third world war that will follow it: and then only gold and meat are currency. Since I don't have a farm, I'll stash up some gold.
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Shorting Gold: 8 More Signs Gold is Overdue for a Correction
Mar 9th, 2009 | By Louis Basenese | Category: Gold Market
Let me start off with a morsel of clarification. I don’t hate gold. I own it, or more accurately, an interest in gold via gold mining shares.
And I believe a small allocation (5% to 7%) has a useful place in a well-diversified portfolio. Over the long haul, studies confirm it helps increase returns while minimizing risk. A benefit we can all agree is desirable.
But over the short-to-intermediate term - the next six to nine months - I think gold is a terrible investment. After breaching the $1,000 per ounce mark again, as I suggested would happen to my subscribers on February 2, it is overdue for a retracement back to roughly $700 per ounce.
Those of you who expected it to drop the day after I suggested shorting gold need to understand that “short term” doesn’t mean “this week.” Just because it moved higher doesn’t negate the point of the recommendation.
Long story short, I view shorting gold as a way for me to hedge my long-term holdings. For traders, it’s a profit opportunity to consider. And whether we see eye to on this is irrelevant. Ultimately, the market will be the great arbiter of our differences.
For kicks though, let’s address a few of those minor points of disagreement…
Shorting Gold is Not Really Contrarian
A small army of you suggested I was being an “arbitrary” contrarian when I suggested that it was time to start shorting gold. That no evidence, just a warm and fuzzy feeling, existed to back up my call.
Are you kidding?
Sure your “Cousin Vinnie” as chronic poster Todd opined, the trash collector or the newspaper boy might not be investing in gold. But the rest of the lemmings certainly are…
* Investments in coins and bars increased 811% in the fourth quarter, according to the World Gold Council.
* Headlines abound in the mainstream press like this one from The Financial Times - “Gold primed to be ‘mania asset.’”
* Wannabe gold bugs are paying - willfully I might add - 20% premiums for coins and small bars. Forget buying gold, we should all become coin dealers!
* Investors - like teenage girls at New Kids on the Block concerts in the late 1980s - can’t reach out and touch the SPDR Gold ETF (GLD) enough. It’s now the second-largest ETF in the United States with a market cap of roughly $33 billion. With more than 1,000 metric tonnes of gold, speculators now control more gold than many industrialized nations. If that doesn’t scream “out of whack” I don’t know what does. Many of you respond by saying the investors here are institutions, so the inflows are not indicative of a top. You’re wrong. Individuals, according to Morningstar, accounted for an estimated 60% to 70% of the investments in the last four years.
* The world’s largest gold refinery is pumping gold coin blanks at a rate not seen in 23 years, according to Bloomberg.
* Reuters reports investment consultants are now advising pension funds and high-net worth clients to invest 5% to 7% percent allocation toward gold and gold stocks. After being an investment consultant to such clients, I can confirm such allocations are new. And will be followed, if they haven’t been already.
* If you’re a newsletter junkie, like myself, no doubt you also noticed the sudden explosion in “gold experts” that have some overlooked, stealth play on gold you need to consider. It’s poised for 500% gains (or more), they say! All you have to do is read a 16-page teaser and sign-up for some newsletter. Marketers tap into what’s hot, typically as a trend is cresting. Don’t expect this time to be any different.
* From today’s Wall Street Journal, futures investors are taking delivery of gold at more than double recent levels (4.5% versus 2%). Paranoia anyone?
If the above isn’t sufficient evidence to be a contrarian, I don’t know what qualifies then.
Why should I listen to you, Lou?
Others of you simply wanted to know, why you should listen to me - a Wall Street flunky, “idiot” or a “young analyst who thinks he’s got the magic touch and will never be wrong.”
Forget that the last reader - and yes it’s the chronic poster and my new “buddy” Todd - is completely clueless and didn’t catch my transparent about-face on the dollar here. Or my confession that I flubbed the rebound in financials.
I’m human. I will be wrong. I’m man enough to admit it. But I don’t think shorting gold will be one of those times.
And if I don’t have enough credentials to make such a claim, in your opinion, fine by me. Listen to someone more “qualified.” Plenty of them exist that are also starting to question the merits of investing in gold, or at least acknowledge the mania…
…Newsletter god, Dennis Gartman says, “It’s a little worrisome that so many people are piling in [to gold].” He expects a pullback, too. Just not as far as me.
…Peter Munk, founder of Barrick Gold, says he’s never seen such strong interest in physical gold ownership.
…”This will all end badly, just like all other bubbles,” predicts Leonard Kaplan, President of Prospector Asset Management, a commodities futures brokerage in Evanston, Ill.
…”Historically, when stocks begin to underperform gold, that’s a sign that gold is running out of steam,” according to Ray Hanson, a technical analyst at RBC.
My Biggest Concern
What really scares me is that some people take gold investing to an extreme. They actually believe in a government-orchestrated conspiracy to suppress prices, as some of you revealed in your comments.
It’s pointless to engage in lengthy debates with conspiracy theorists. Logic means little. But let’s suspend disbelief for a millisecond and say you’re right, that the price of gold is being fixed.
Why in the world would you throw hard-earned money after the slim prospects of actually exposing and overturning the fix? Talk about a low probability of success.
But I digress. What’s most troubling is many investors, including some in my industry, say gold is a forever position and they are committed to “a lifetime pattern of purchasing” and will never sell. Some of you even revealed 50% of your portfolio is invested in gold.
Here’s the thing. I know that Christopher Columbus says, “Whoever possesses it [gold] is lord of all he wants. By means of gold one can even get souls into Paradise.” But if financial Armageddon unfolds, which many gold bulls predict and in some sickly way wish for, gold will be priceless and worthless at the same time.
How so?
If world governments collapse, social order goes to heck, (NYSE:MCD) McDonald’s won’t magically be set-up to “make change” for your gold bars. ATMs won’t spit out Krugerrands.
What’s more, even if the price of gold tops, say $5,000 per ounce under such circumstances, what can you do about it? Cashing in on the gains means accepting the thing gold bugs completely despise, paper currency, in return. So indeed, it will be priceless, useless and worthless all at the same time.
Bottom line, the world isn’t set up to handle gold as a currency. Not now. Not ever. It’s merely an asset. And like all other assets, it’s susceptible to bubbles.
If you’re in the speculative mood, I recommend shorting gold in the coming months. Especially since, as the saying goes, “gold goes up on an escalator and comes down in an elevator.”
At the very least, examine your reasons for owning gold. If you believe the end of capitalism is nigh and financial ruin is imminent, just remember you need gold to be liquid, acceptable and portable for your investment to be really worth anything.
All three are big question marks, convincing me John Maynard Keynes was more right than most want to admit. Outside of a small allocation for diversification purposes, gold is indeed a barbarous relic.
I’m off to the message board to prepare for the onslaught of “fan mail”
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As an investment perhaps it is. But as insurance against monetary armageddon... who cares what the price is? I am not waiting to insure my car until 10 minutes before I have an accident, am I!
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no this has been are argument against gold bugs. End of the day if its worth $5000/ounce the USD is worth 0.15 cents and if paper money is worse off, worthless, gold coins will be easy to trade to the highest bidder for goods.
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Anyone purchased some real gold lately and taken possession? What's the sediment out there? Same or worse?
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I believe Standard Bank has a very good physical gold facility. They are supposed to be one of the biggest gold dealers in Asia-Pacific. They offer storage.
http://www.standardbank.co.za/SBIC/Frontdoor_02_02/0,2454,12816627_23908005_0,00.html#hong
NB!! Be careful, gold coins seldom have any more value than mass of the gold. Don't get conned into believing that the coin itself has value. Kruger Rands are one of the few globally recognised coins. Be sure to check on whether you need to declare them (and other gold) if moving across borders.
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About two months ago I went to both the Hang Seng bank and the Wing Lung bank in Central. Wing Lung had nothing at all. And quite frankly they seemed quite clueless, as though they had never sold gold before. But perhaps that was the language barrier. Hang Seng had Australian nuggets. I got a few. They are small, beautiful things.
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Go to Hang Seng Bank's HQ building. If they don't have it, they can probably buy it in for you. If you do anything on-line, there is a high risk of fraud - unless it's with a mainstream bank.
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Also, if you buy via the UK, you'lll have to pay 20% VAT.
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