The Golden Truth: Demand For Physical Possession Of Gold Is Driving The Price Of Gold

Monday, October 12, 2009

Demand For Physical Possession Of Gold Is Driving The Price Of Gold

Long-time gold market analyst James Turk was recently on CNBC Europe discussing how and why the scramble by investors and Central Banks for taking possession of physical gold (vs. owning derivative forms of gold like ETFs and leveraged gold investment accounts offered by the likes of Kitco and Monex) is now driving the price higher.

A perfect example of this, Turk points out, is that the demand for ETFs like GLD has gone sideways for several months (measured by GLD's reported inventory of bars) while the price of gold has gone from under $900 to new all-time of $1050. He also mentions the tightness in the physical market. In that regard, I have mentioned that, although the tightness is not apparent at this point in time in the bullion coin market, we have several accountings of delivery problems, including my own, reported by investors on the Comex and the LBMA (London Bullion Market Association), the two largest gold and silver bullion bar markets.

Turk also explains why gold preserves the purchasing power of your wealth against the devaluation of the U.S. dollar and he discusses why an investor can avoid counterparty risk when they own gold outright [without using debt]. I would add that even keeping your cash in a bank exposes you to the counterparty risks of your bank being closed down AND the possible defaulting of the FDIC. The possibility of the latter would have been completely dismissed even a year ago. Anyone who thinks now that it's not a possibility is whisling in the dark.

This video of Turk on CNBC Europe is a little over four minutes and worth every second of watching it:

James Turk On Gold

6 comments:

Hal (GT)Tuesday, 13 October, 2009
Turk definitely has some valid points.

You're point on the risks cash in a bank today is pretty valid too. We really have come to an amazing point economically as a nation. I don't think we are anywhere close to out of the danger zone as some in DC would have us believe.
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Dave in DenverTuesday, 13 October, 2009
Hal, I worked as a trader on junk bond desk in the 1990's. I've seen how corrupt Wall Street is, especially w/regard to hiding derivatives and fraudulent mark to market. It is 100x worse now.

Both Wall Street and DC are much more corrupt than any of us realizes, including those of us who participated in the corruption first-hand.

Take what we know to be the truth, and compound it by several multiples and that's how fraudulent the whole system is.
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EconomicDisconnectTuesday, 13 October, 2009
Dave,
caught this from someplace today, but details possible problems with physical delivery as of late:
http://www.libertygrotto.com/blog/?p=1560

Cannot vouch for the source, but it makes plenty of sense.
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Dave in DenverTuesday, 13 October, 2009
Ya that story is bona fide. Rob Kirby is the source and he reported it in Midas last week (www.lemetropolecafe.com) and I exchanged some emails with him asking about the credibility of his source. He said his source is 100% bona fide and someone who is in a position to know what was going.

There is a rapidly growing understanding of the necessity to have control over one's physical gold and silver and it's affecting the paper frauds out there.

I just spoke to a local bullion trader who told me that his business has really spiked in a big way over the past week and his buyers are wealthy locals who are coming out of the woodwork and who want to buy a lot of bullion privately, with cash, no paper trail and they want physical possession of everything they buy. He also told me one of his big suppliers of bullion coins is running out of inventory.

One of his buyers told him that he thinks the U.S. has at most 6-8 months before it collapses.
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EconomicDisconnectTuesday, 13 October, 2009
Dave,
That is amazing that you have that kind of access!

The story seems solid to me. I love it that people are buying gold with cash (no trail as you said). Things are heating up.
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Dave in DenverTuesday, 13 October, 2009
The dollar is getting smoked right now. 75.63.

So much for the "controlled, orderly" decline. We may be in for a real cliff dive...
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Why Gold?

Gold is the world's oldest currency. You exchange your fiat currency (dollars, euros, yen, yuan) into gold as an insurance policy against catastrophic Central Bank and Government policies which serve to destroy the value of fiat currencies and destroy democracy.

Gold can ONLY be considered an investment to the extent that it remains significantly and historically undervalued in relation to the fiat currencies against which its value is measured. Otherwise it remains the world's oldest currency and is completely free from the counterparty risk associated with currency by Government fiat (i.e. fiat currencies rely on a Government's "full faith and credit.")

Quote Of The Month Courtesy of "Jesse"

Unfortunately for Larry Summers, Ben Bernanke, and their friends at the BIS, they have not yet figured out how to print physical gold, silver, and other essential commodities, and the world is reaching the point where it might simply start ignoring the New York based markets with respect to essential commodities such as basic materials, oil, foodstuffs, and the like, as they become increasingly irrelevant, fraudulent, and Orwellian. And then where will the financial engineers be, except with no more excuses and no place to hide?

Here is the link to his entire commentary, well worth a read:

http://jessescrossroadscafe.blogspot.com/2010/07/gold-daily-chart-shock-and-awe-for.html

Great Quote From Jim Rogers On Govt CPI Reporting

JR: I mean, we have inflation now. If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything. The government lies about it in the US. Some countries lie, many countries don’t: Australia, China, India and Norway. Many countries don’t lie about it and acknowledge that we have inflation. Others lie about it, the UK and the US, but if you go shopping you know prices are up.

Q: Are you saying that the American Consumer Price Index (CPI) published by the US Bureau of Labor Statistics is a lie?

JR: In my opinion, yes, of course it is. Have you looked at it? They’ve changed their accounting several times in the past few decades. When housing was 20% to 25% of the CPI and housing was going up, they didn’t count it, saying rents weren’t going up, and then when home prices started going down, they counted it. It’s the same with many things. It’s staggering some of the tortuous reasoning that the BLS has used over the past 25 or 30 years. When the price of gasoline goes up, they say it’s not really going up because it’s better gasoline, better quality, therefore you’re getting more for your money. I mean, it’s endless, the stuff that they say and for some reason people sit there, although more and more people are catching on, and accept what the government says.

source: www.clusterstock.com

Quote of the Week

"The primary function of a Central Bank is to engage in the massive transfer of wealth from the middle class to the wealthy elite. The Federal Reserve was set up to do this with the blessing and support of Congress." - Dave in Denver

If you refuse to believe the above, please read "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin and then explain to me why the Senate voted down the Vitter Amendment and Congress refuses to pass a law requiring a full audit of the Fed, even though the Fed is using taxpayer-backed money to bailout Wall Street and Europe.