Investing In Precious Metals

civilchallenger

If you are going to invest in commodities, strongly consider having physical ownership of the bullion. Many people are buying gold through ETFs and that may not be a good plan.

At a CFTC meeting last week, director of GATA, Adrian Douglas, said
“If we look at the physical market,the LBMA, it trades 20 million ozs of gold per day on a net basis which is 22 billion dollars. That’s 5.4 Trillion dollars per year. That is half the size of the US economy. If you take the gross amount it is about one and a half times the US economy; that is not trading 100% backed metal; it’s trading on a fractional reserve basis. And you can tell that from the LBMA’s website because they trade in “unallocated” accounts. And if you look at their definition of an “unallocated account” they say that you are an “unsecured creditor”. Well, if it’s “unallocated” and you buy one hundred tonnes of gold even if you don’t have the serial numbers you should still have one hundred tonnes of gold, so how can you be an unsecured creditor?”

Former Goldman Sachs investment analyst and founder of CPM Group added:
“…the previous fellow [Adrian Douglas] was talking about hedges of paper on paper and that is exactly right. Precious metals are financial assets like currencies, T-Bills and T-bonds they trade in the multiples of a hundred times the underlying physical.”
“…its most recent report on silver used the term that we use “the physical market”. We use that term as did the CFTC in that report to talk about the OTC market in other words forwards, OTC options, physical metal and everything else. People say, and you heard it today, there is not that much physical metal out there, and there isn’t. But in the “physical market” as the market uses that term, there is much more metal than that…there is a hundred times what there is.”

In other words, the London Bullion Market Association and COMEX do not have the gold they say they do and it is up to you to ensure that gold or silver is really something you own.


Reprinted from my blog with permission.

shaun_from_Africa

My opinion has always been along those lines. (I'm not saying that holding "paper gold" is wrong, simply that it's not my choice).

I know that buying and storing physical gold and silver has its problems and associated expenses, but a gold certificate is really no different to a cheque in that that the relevant company has stated that they "owe" you the bullion and are simply holding it for you.
If banks and even countries can go bankrupt owing billions of £s, the same could happen to any company.
I've always wondered what would happen if everyone who owns paper gold suddenly contacted the holding company and stated that they wished to collect their allocated stock.

I'm more than happy to pay my £31 a year to have a box stored in the vault of my local Nat west bank, and £35 to pay for insurance for it.
If they ever went bankrupt, the box and it's contents would still belong to me, and even though it may take a while, I would eventually get it back.

JamesU

shaun_from_Africa wrote: »

I'm more than happy to pay my £31 a year to have a box stored in the vault of my local Nat west bank, and £35 to pay for insurance for it.

Is the insurance offered by Natwest, or did you take it out independently?

JamesU