GOLD

[Steve Netwriter]

GOLD - BULLION IS SAFER THAN GOLD STOCKS

Is Investing in Gold Stocks Better than Investing in Gold Bullion?

by Krassimir Petrov, PhD

The American University in Bulgaria

February 25, 2008

http://www.financialsense.com/editorials/p.../2008/0225.html

 

I have never found anyone anywhere in the literature to provide a meaningful comprehensive list of all major risks associated with gold stocks. Barisheff mentions quite a few of them in a sentence without elaborating them. I believe that if investors understood those risks better, they will be able to better construct their own portfolios. My thesis is simple – bullion is safe, while stocks are riskier. Let me outline for you a dozen of reasons.

 

....list well worth reading before considering gold stocks.....

 

I claim that gold bullion is safer than gold stocks. However, I do not suggest that investors avoid gold stocks. Neither do I suggest that they are the worse choice. The case for stocks is strong and undeniable. Their higher risk profile offers a higher expected return. However, no one should expect that the higher expected return should materialize in higher actual return, just like the higher expected return on subprime mortgages did not actually materialize in higher returns when compared to prime mortgages.

 

During the 1970s, many gold stocks indeed outperformed the metal 5-10 times or more. With gold stocks, the solution undoubtedly is better stock picking. My investment advice is as follows:

 

ADVICE 1. Investors should keep a bulk of their portfolio in bullion.

 

ADVICE 2. Investors should carefully pick their stock pickers.

[Concrete Jungle]

IMF confirms plans to sell 403 tonnes of gold.

IMF confirms plan to sell 403 tonnes gold

LONDON, Feb 11 (Reuters) - The International Monetary Fund said it does not intend to alter plans to sell just over 400 tonnes of gold to fund changes to its financing base, an IMF spokeswoman said on Wednesday. A recent surge in IMF lending to countries facing balance of payments crises related to the global economic slowdown and financial turmoil has led analysts to question whether the Washington-based institution will proceed with the plan. [iD:nN19466275]

 

But a spokeswoman for the IMF -- the third largest official holder of gold -- said the sale would still go ahead.

 

"There are no plans to change the proposal for a new income model," she said.

 

"The package of IMF governance reforms, including gold sales, was submitted to the U.S. Congress last November, but will need to be reintroduced as a formality," the IMF spokeswoman said. "The timeline will depend on the Congress' schedule."

 

 

 

 

Any of the more learnered posters care to comment on the significance of this proposed gold sale? Will this be the start of a further sell of of UK gold by Gordon Brown?

 

 

 

 

[Steve Netwriter]

Misconceptions about Gold

http://globaleconomicanalysis.blogspot.com...about-gold.html

http://globaleconomicanalysis.blogspot.com...ingly-work.html

 

Jewelry Demand vs. Monetary Demand

 

One can further illustrate gold's unique nature as money with a study of gold prices vs. jewelry demand. If record fabrication demand for gold (jewelry) must be good for the price of gold, then a historic high in jewelry demand should in theory coincide with a high gold price.

 

However, record high jewelry demand in 1999 - 2000 in actual fact coincided with a 20 year bear market low in the gold price - the exact opposite of what traditional commodity supply/demand analysis would suggest.

 

We can therefore conclude that there must be a source of gold demand that is of far greater importance than the jewelry and industrial demand components, and that demand constitutes the true driver of the price of gold in terms of fiat money.

[Steve Netwriter]

IMF confirms plans to sell 403 tonnes of gold.

IMF confirms plan to sell 403 tonnes gold

 

 

 

 

 

Any of the more learnered posters care to comment on the significance of this proposed gold sale? Will this be the start of a further sell of of UK gold by Gordon Brown?

 

 

Yes, it means the gold price will go up. Guaranteed 100%

 

[Pixel8r]

IMF confirms plans to sell 403 tonnes of gold.

IMF confirms plan to sell 403 tonnes gold

 

Any of the more learnered posters care to comment on the significance of this proposed gold sale? Will this be the start of a further sell of of UK gold by Gordon Brown?

 

 

They have been threatening this for ages, that amount would never make it to the market if sold it would probably be picked up by some sovereign wealth fund. It seems whenever gold starts getting high they mention that they are going to sell again.

 

 

[PricedOutNative]

So what currency is it going to accept in return for the gold?

 

Misconceptions about Gold

http://globaleconomicanalysis.blogspot.com...about-gold.html

http://globaleconomicanalysis.blogspot.com...ingly-work.html

 

[Steve Netwriter]

From 2000.

 

Understanding Gold - a Great read, with masses of information

by Paul van Eeden

http://www.usagold.com/gildedopinion/vaneedengold.html

[G0ldfinger]

IMF confirms plans to sell 403 tonnes of gold.

...

Any of the more learnered posters care to comment on the significance of this proposed gold sale? Will this be the start of a further sell of of UK gold by Gordon Brown?

...

Just do the exact opposite of what the UK government and the IMF do, and you will be fine.

[FWIW]

Just do the exact opposite of what the UK government and the IMF do, and you will be fine.

 

Doublespeak - Orwell was right. IMF probably don't even have half that amount of gold. I mean why would they need a barberous relic from our past?

 

Isn't this the greatest time to buy gold in GBP? The sales are here and I am going shopping!

 

 

 

[wren]

A rare picture of the end of a rainbow:

 

But can anybody make out the pot of gold?

 

Article: http://sciencedude.freedomblogging.com/200...-of-the-rainbow

 

[headmelter]

Is there any sign of the bad news slowing up? I would really appreciate a pull back as I'd like to load up.

 

Anyone see a pullback on the horizon. The last time I bought at $900 it dipped over $100 a week later , just as well sterling went scuba diving shortly afterwards.

[azazel]

Is there any sign of the bad news slowing up? I would really appreciate a pull back as I'd like to load up.

 

Anyone see a pullback on the horizon. The last time I bought at $900 it dipped over $100 a week later , just as well sterling went scuba diving shortly afterwards.

 

Who really knows? I think we have a slow creeping up, higher highs & higher lows until April May time, then a pullback for summer dulldrums then a mega move starting in the Autumn through to spring of 2010. Thats based on the article wren posted here. I recently bought about four ounces and 200 grams BV gold at around £20000 a kg and then the price droped to £19250. Dooh! Im getting one of those maples that are 99.999% gold and are of the same design as the 100kg coin.

 

I find this projection from Jordan Roy-Byrne for the next 2 years quite plausible:

 

So, he projects an early March peak, a pull back to about $860, then summer doldrums followed by an autumn take-off. He's targeting $2087 in 2 years' time.

 

Article:

http://www.gold-eagle.com/editorials_08/roy-byrne021209.html

[Pluto]

No one seems to get this and yet it's staring them right in the face - equities is where the money will go next. Stocks are down a massive 45%, inflation is very low and interest rates are very low - as Adam Hamilton from Zeal says, this wasn't a stockmarket crash it was a panic and the two are different as crashes begin with overvaluation. We didn't have an overvalued stockmarket in in 2007/2008 - panics tend to reverse themselves when the dust settles.

 

So what happened at the end of 1974 when stocks had crashed by around 45% and gold was at a new all time high?. They traded places for the next 18 months - gold fell by 43% and the Dow went up by around 73% in that period up to August 1976.

 

The panic is justified. Dividends and future earnings are being slashed left right and center. The stocks that were correctly priced are now way way overvalued based on future earnings. Don't try and catch a falling knife.

 

Stocks have a long way to go to the downside.

[lowrentyieldmakessense(honest!)]

The panic is justified. Dividends and future earnings are being slashed left right and center. The stocks that were correctly priced are now way way overvalued based on future earnings. Don't try and catch a falling knife.

 

Stocks have a long way to go to the downside.

YEP

 

plus

 

aint no sustainable earnings coming until this is either written off or inflated away

 

 

 

 

 

not to say there wont be a bear market bouce in stocks though

 

barclays bank bust before the year is out

[Pluto]

YEP

 

plus

 

aint no sustainable earnings coming until this is either written off or inflated away

 

 

 

 

 

not to say there wont be a bear market bouce in stocks though

 

barclays bank bust before the year is out

 

That chart is obscene and immoral, and is why we're in for more misery that will see grown men crying like babies.

[FWIW]

YEP

 

plus

 

aint no sustainable earnings coming until this is either written off or inflated away

 

 

 

 

 

not to say there wont be a bear market bouce in stocks though

 

barclays bank bust before the year is out

 

 

We have a thread on that if you would like to discuss your thoughts on Barclays?

 

 

[Compounded]

IMF confirms plans to sell 403 tonnes of gold.

IMF confirms plan to sell 403 tonnes gold

 

 

 

 

 

Any of the more learnered posters care to comment on the significance of this proposed gold sale? Will this be the start of a further sell of of UK gold by Gordon Brown?

 

 

They have threatened this over and over again, it's a positive sign a sign that the cartel are running out of ammo.

 

[warpig]

I've always been confused by pictures like this. Light is refracted at the angle of incidence (42 degrees) and so technically you should always apear to be at the centre of a rainbow, as you chase the end it appears to move away from you.

 

A rare picture of the end of a rainbow:

 

But can anybody make out the pot of gold?

 

Article: http://sciencedude.freedomblogging.com/200...-of-the-rainbow

[Catflap]

The panic is justified. Dividends and future earnings are being slashed left right and center. The stocks that were correctly priced are now way way overvalued based on future earnings. Don't try and catch a falling knife.

 

Stocks have a long way to go to the downside.

 

It depends on what stocks your talking about - having gold, silver and platinum miners in my portfolio (about 20% in total) has hedged the risk and overall I'm up. I would rather put money into undervalued stocks near a bottom at this point than into gold which is nearing a mid-cycle top - I think gold is now overvalued compared to silver and oil and will begin it's long correction once it reaches a new record high.

 

It's possible that stocks will fall further but I'm happy to trade this market - at some point it's going to turn up because no matter how bad the news has been everyday, we still havn't got below the November lows which is actually a good sign. 47% down on the Dow is more than the 45% we had in 1938 which was a far worse period for stocks than now - Japan was already at war with China in 1937.

 

A contrarian would say that because all the news is so bad that we are at a bottom - especially when many still fear the market will fall even further. Just remember that gold can perform equally as badly as the stockmarket and over the same agonising length of time.

 

Dow fell 45% from January 1973 to December 1974

 

Gold fell 43% from December 1974 to August 1976

[Pluto]

They have threatened this over and over again, it's a positive sign a sign that the cartel are running out of ammo.

 

I would not be too concerned about the IMF. I am more worried, as I've always been, about ETFs.

 

Most of the banks failed during the Great depression because of rumors circulating that gold would be confiscated. The government at the time did not deny any of the rumors. These bastard gold ETFs could cause the price of Gold to collapse. All it would take is a credible rumor of gold confiscation and the ETFs unloading would crater the POG, just like in the great depression when the rumor of Gold confiscation destroyed the banks. Bernanke eluded to "rumors" being able to collapse the POG in one of his speeches.

 

This is the biggest fear gold bugs should have. The possession of gold is more important than ownership - they are not the same thing.

[lowrentyieldmakessense(honest!)]

I would not be too concerned about the IMF. I am more worried, as I've always been, about ETFs.

 

Most of the banks failed during the Great depression because of rumors circulating that gold would be confiscated. The government at the time did not deny any of the rumors. These bastard gold ETFs could cause the price of Gold to collapse. All it would take is a credible rumor of gold confiscation and the ETFs unloading would crater the POG, just like in the great depression when the rumor of Gold confiscation destroyed the banks. Bernanke eluded to "rumors" being able to collapse the POG in one of his speeches.

 

This is the biggest fear gold bugs should have. The possession of gold is more important than ownership - they are not the same thing.

 

youre not the only one

 

http://www.jsmineset.com/

 

 

 

Dear Editor Dan,

 

Here is an important piece of research for you.

 

Find out for me (ASAP) the reported amount of gold every Gold ETF has on the planet as of their last reporting period.

 

I smell a massive fraud that could easily collapse on a rising price of gold by the failure of the sellers to deliver anything.

 

The Madoff equation is saying that none of this gold is paper gold on a clearinghouse exchange. It can’t based on its size be real bullion, leaving only toxic paper (OTC derivative) gold.

 

I believe I know exactly how it is being done and by whom.

 

It is totally legal but so are OTC derivatives.

 

Jim

 

Jim,

 

I am working on it now. More on what I find out soon…

 

Regards,

Editor Dan

 

 

 

Jim,

 

In your posting, entitled "Where Do All The Gold ETFs Get Their Bullion From?", you wrote the following:

 

"Don’t you think it is about time GLD and all the other popular international gold ETFs told its owners exactly what kind of gold they claim to own? …

 

"This begs one major question: From where did all the gold claimed to be owned by all the gold ETFs come from?"

 

I agree with what you wrote regarding the GLD ETF in the United States.

 

However, the "ETFS Physical Gold" Exchange Traded Commodity (ETC) Fund in the United Kingdom (UK) actually appears to provide some of this information on the ETF Securities web pages at http://www.etfsecurities.com/en/securities...al_exposure.asp and http://www.etfsecurities.com/msl/etfs_physical_gold.asp

 

I suggest that you click on the underlined URL link entitled "Click here to view the list of allocated metal bars held by the Custodian" on either of these two web pages, which will download an Excel spreadsheet at http://www.etfsecurities.com/msl/bar_list.xls. I do not know if this list of allocated metal bars is accurate or not, but this list is publicly available for anyone to download and study or criticize.

 

If you download this bar list, you will discover that it also contains a list of all of the physical Platinum bars held by the "ETFS Physical Platinum" ETC Fund at http://www.etfsecurities.com/msl/etfs_physical_platinum.asp, a list of all of the physical Palladium bars held by the "ETFS Physical Palladium" ETC Fund at http://www.etfsecurities.com/msl/etfs_physical_palladium.asp, and a list of all of the physical Silver bars held by the "ETFS Physical Silver" ETC Fund at http://www.etfsecurities.com/msl/etfs_physical_silver.asp.

 

All of these ETC Funds managed by ETF Securities claim to be "Shariah compliant"! I do not know what it means for these Funds to be "Shariah compliant". However, if this means that the underlying precious metals must actually exist, and each physical bar held be publicly accounted for, then I’m all for having ETF and ETC Funds that are "Shariah compliant".

 

The US GLD Fund does not claim to be "Shariah compliant", and does not make available any kind of similar list of all of its alleged Gold bar holdings.

 

There is one other point to consider: In October, 2008, "ETF Securities Limited, the innovator and pioneer of Exchange Traded Commodities (ETC), has formally completed the acquisition of the world’s first gold ETCs - Gold Bullion Securities listed on the London Stock Exchange (LSE: GBS) and the Australian Securities Exchange (ASX: GOLD)."

 

See the ETF Securities press release at http://www.etfsecurities.com/en/news/etfs_news_081023.asp for further information.

 

The "Gold Bullion Securities" Exchange Traded Commodity (ETC) Fund is shown on the ETF Securities web pages at http://www.etfsecurities.com/en/securities...al_exposure.asp and http://www.etfsecurities.com/msl/etfs_gold_bullion.asp. However, this Fund does not claim to be "Shariah compliant", but it does now make available a separate public list of its of its Gold bars. The latter web page for the "Gold Bullion Securities" ETC Fund also contains the same above referred to URL link entitled "Click here to view the list of allocated metal bars held by the Custodian", but this link takes you to a separate PDF document at http://www.goldbullionsecurities.com/pdf/gbs_bars_list.pdf. I do not know if ETF Securities intends to make its "Gold Bullion Securities" ETC Fund "Shariah compliant" sometime in the future. However, making the above list of its Gold bars publicly available might be a preliminary step in this direction.

 

The bottom line is that the GLD ETF Gold Fund in the US appears to be very different from its above two counterpart Gold Funds in the UK, the latter of which do make publicly available purported listings of all of their physical Gold bar holdings.

 

CIGA Richard

 

Dear Richard,

 

In today’s Madoff world who cares if the gold, claimed to be held in a vault, is claimed to be divinely compliant?

 

Thank you for all the reference material.

 

Respectfully yours,

Jim

 

Hi Jim,

 

Where Do All The Gold ETFs Get Their Bullion From?

 

You are wise to raise these questions.

 

Analysis complied by work done by James Turk

Source: www.goldmoney.com

 

Taken from the prospectus:

 

"The Custodian is not liable for the acts or omissions of its subcustodians".

 

In other words, if the subcustodian does not have the gold, ETF:

 

"Shareholders cannot be assured that the Trustee will be able to recover damages from subcustodians…for any losses relating to the safekeeping of gold by such subcustodian". This means that "Because neither the Trustee nor the Custodian oversees or monitors the activities of subcustodians who may hold the Trust’s gold, failure by the subcustodians to exercise due care in the safekeeping of the Trust’s gold could result in a loss to the Trust."

 

These prospectus disclosures raise the question of does the gold owned by ETFs really exist? Why is the objective of the fund to provide investors with the opportunity to own gold rather than simply track the price?

 

“The Trust’s independent auditors may…visit the Custodian’s premises in connection with their audit of the financial statements of the Trust."

 

In what appears to be a glaring omission, the prospectus fails to disclose the important risk that the independent auditors will not visit the vaults of the subcustodians and sub-subcustodians, and more to the point, that the BoE does not allow auditors into its vault, even though the prospectus allows for the possibility that all of the fund’s gold may be stored in the BoE.

 

Taken from 10-Q Filings:

 

The asset reported on ***’s balance sheet says: "investment in Gold". It does not say just: "Gold." By declaring ***’s asset to be an "investment", it is an easier hurdle to meet for auditing purposes. Investments in gold can be nearly anything gold related, and for example, include gold certificates and other promises to pay gold. All *** has to do to satisfy the auditors therefore is to show them a bank statement of the Bank of England for example, or any other subcustodian (i.e., a piece of paper) that says gold is stored with them.

 

CIGA Eric

 

[Pluto]

It depends on what stocks your talking about - having gold, silver and platinum miners in my portfolio (about 20% in total) has hedged the risk and overall I'm up. I would rather put money into undervalued stocks near a bottom at this point than into gold which is nearing a mid-cycle top - I think gold is now overvalued compared to silver and oil and will begin it's long correction once it reaches a new record high.

 

It's possible that stocks will fall further but I'm happy to trade this market - at some point it's going to turn up because no matter how bad the news has been everyday, we still havn't got below the November lows which is actually a good sign. 47% down on the Dow is more than the 45% we had in 1938 which was a far worse period for stocks than now - Japan was already at war with China in 1937.

 

A contrarian would say that because all the news is so bad that we are at a bottom - especially when many still fear the market will fall even further. Just remember that gold can perform equally as badly as the stockmarket and over the same agonising length of time.

 

Dow fell 45% from January 1973 to December 1974

 

Gold fell 43% from December 1974 to August 1976

 

We are nowhere near the bottom in stocks. The Nikkei 225 went from 48,000 to 7,800 and is still dropping. Stocks dropped 90% during the last depression. Sure you can trade this market and make some lolly, but you have to be nimble as the market could collapse at any time. During the tech collapse many were spouting the same claptrap as you only to be completely wiped out.

[marmite]

I would not be too concerned about the IMF. I am more worried, as I've always been, about ETFs.

 

Most of the banks failed during the Great depression because of rumors circulating that gold would be confiscated. The government at the time did not deny any of the rumors. These bastard gold ETFs could cause the price of Gold to collapse. All it would take is a credible rumor of gold confiscation and the ETFs unloading would crater the POG, just like in the great depression when the rumor of Gold confiscation destroyed the banks. Bernanke eluded to "rumors" being able to collapse the POG in one of his speeches.

 

This is the biggest fear gold bugs should have. The possession of gold is more important than ownership - they are not the same thing.

 

Could they fool the people for a second time ?? I cant see people parting with physical under any threat, when history shows that it will be revalued upwards in the future, But yes the ETF sell off would be brutal

[Pluto]

youre not the only one

 

http://www.jsmineset.com/

 

ETFs are another abortion born by wall street. They are tomorrows CDOs, MBSs and SIVs, and yesterdays MFs.

[Pluto]

Could they fool the people for a second time ?? I cant see people parting with physical under any threat, when history shows that it will be revalued upwards in the future, But yes the ETF sell off would be brutal

 

You have no control over ETFs other than to buy with Fiat and sell for Fiat. The benefits of having bullion is null and void by having gold in ETFs.

 

The threat of confiscation by a credible source will crater the price of gold, as the first to panic will be those who do not have possession. This is same reason the banks collapsed during the great depression.

 

The bigger these bastard ETFs get the harder the POG could fall.

 

The oil futures collapsing from 150 to 35 gives you an indication of what could happen when many run for the exits at once.

 

This, in my humble opinion, is the ace up their sleeve. Volcker warned the government to have control over the gold market - just in case - and this is wall streets solution, herd everyone into these schemes and control the coin bullion market by inducing shortages thereby increasing spreads. Volcker's only option was to increase IRs to 20% to force gold onto the market, he did not have ETFs back then to manipulate.