The Golden Truth: Physical Bullion vs. Paper: Get Your Paper Bullion Converted to Physical ASAP

Thursday, May 6, 2010

Physical Bullion vs. Paper: Get Your Paper Bullion Converted to Physical ASAP

Below is an email that went out from a Canadian bullion dealer:

"Sold almost a half tonne of silver on Friday. Bought 3,000 maple leafs in two orders over the last couple of days to replenish shop inventory...I am doing my best to add to my personal holdings but so much is coming in I can't really afford to buy it all. I don't have any personal bullion but I try to keep all the silver dollars offered to the shop. We have full page newspaper ads as well as radio ads running so a great deal of material is coming in.

On Friday I sold over 150 gold maple leafs as well as the silver I mentioned. I am seeing more affluent buyers who are cashing out certificates and converting to physical. The banks are getting weird about bullion here in Canada. They are refusing to buy bullion unless it is fully documented. I get the feeling they are trying to imply your specie would be worthless if you loose the documentation so stick with certificates which are registered. One client tried to convert certificates from Scotia Bank into bullion but the bank said the type of certificate did not allow for that. He sold it and found the premiums to buy physical there to be prohibitive so came to me. It's very easy to do well when your competitors are the banks

I am also selling lots of silver over the last few weeks. With the current lower prices I am seeing many people add to positions which is very unusual. In the past many sold corrections."

GATA has always warned for over a decade that eventually the physical bullion market would blow up the fraudulent paper market. If you have ANY paper/certificate/leveraged account "investments in gold/silver - GET OUT OF IT NOW AND BUY THE REAL THING. This includes GLD, IAU, SLV, Kitco, Monex, BMG or any Wall Street bank cerificate products. Even Perth Mint certificates. And especially if you have ANY exposure to Bank Nova Scotia/Scotia Mocatta, HSBC, JP Morgan or Barclays as a custodian.

"Alea iacta est - Let the die be cast" - Julius Caesar upon crossing the River Rubicon with army. Today was just a taste of what is to come with the markets.

18 comments:

GoldFreakThursday, 06 May, 2010
Today's action will send more people to the golden safe haven.

Euro crash, market crash..and gold looking better than ever
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RothbardThursday, 06 May, 2010
"They are refusing to buy bullion unless it is fully documented"

Do you mean bullion certificates or physical bullion? If the latter, that would seem contradictory, as they would like as much bullion as possible, especially given how much gold Scotia removed from the COMEX last week. Am I missing something?

Also, why do you say BMG is/could be in trouble? I thought they were allocated and segregated gold holdings? Is it b/c their gold is held with Scotia Mocatta?

What are your thoughts on Central Fund of Canada(CEF) and the Silver Bullion Trust(SBT.UN) ? Aren't these run by the same folks? Fully allocated and segregated too, I believe.

Thanks
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Dave in DenverThursday, 06 May, 2010
It depends on the products from BMG, and I wouldn't trust any of it because they use Scotia. I'm not saying BMG is in trouble, I'm saying their producsts are not to be trusted. If you go to their website and read thru the prospectus for their funds, you'll see how their custodian agreement w/Scotia is written. I was going to do a post on it and compare it to the PHYS prospectus but don't have the time right now. My view is that BMG was reckless with its custodial agreements and Scotia is not to be trusted. I have been informed of more than one first-hand account of people having trouble getting their bullion out of Scotia.

CEF/GTU/SBT are the only paper bullion products I would trust.

What the coin dealer is saying is that banks will buy not bullion from anyone unless it comes with appropriate paperwork which documents the serial number and assay. I'm assuming it refers to bullion bars, not coins.
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AnonymousThursday, 06 May, 2010
It's really telling that the best performing "gold stock" today was PHYS. LOL!
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Dave in DenverThursday, 06 May, 2010
WOW. You're right. The premium on PHYS blew out from 11.5% yesterday to 17.5% today.
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MikeThursday, 06 May, 2010
the only bank that i know buys physical is scotia and they have always asked for the documentation for years now that i remember when selling. here is the link

http://www.scotiamocatta.com/products/pdf/PM_Sale_Transaction_Reqs_via_Branch_Network.pdf

i am pretty sure this goes for all types of bullion, coins or bars.

1. receipt original
2. canadian social insurance number
3. more identification

there are so many PM shops now that i dont even know why you would go to a bank, you can sell and buy everything for cash easily especially if you live in toronto. buy $15 over spot in person. one reason people buy bullion is for hiding wealth, not to leave a paper trail behind. then just buy mining shares if thats the case.

scotia is the biggest rip off to buy bullion from, at least $150 over spot, check out all there fee's for buying on there site.

http://www.scotiamocatta.com/eStore/FAQ.htm#payments

a big supplier i know told me the last time i was there that 1oz coins/wafers are very tight and he sells a lot of 1oz scotia wafers.

canada last january also made it mandatory for places that sell over 10k in a transaction to report it.
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EconomicDisconnectThursday, 06 May, 2010
Flight to the safety of th US dollar, home of the exportation of the financial crisis as well as computer trading "errors" (yeah right) that can drop a market 10% in a few minutes. No this was not an Onion headline! The wheels are getting very loose.
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Dave in DenverThursday, 06 May, 2010
gyc: ROFLMAO - you mean you don't believe the "pushed the wrong letter" story?

Mike: good color. Thx. The best way to buy/sell bullion is craigslist - it's done with all cash and privately.
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Bron SucheckiThursday, 06 May, 2010
Perth Mint hasn't seen a big pick up but demand is generally strong. If people want to take delivery of Certificate that is OK, but we consider ourselves safter than other storage facilities so clients don't have to worry.
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RothbardThursday, 06 May, 2010
Fat fingers

When is the last time you enetered a dollar or share amount on a trade and spelled out the quantity? The 1950's?

Was this individual writing out a cheque? Or was it a sell ticket and he spelled 'milllion' incorrectly?
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Live RichlyThursday, 06 May, 2010
I love how the dealer says "I don't have any personal bullion." Talk about not believing in your own product! When I was a bullion dealer I definitely ate my own cooking.
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Dave in DenverThursday, 06 May, 2010
Here's what he said: "I am doing my best to add to my personal holdings but so much is coming in I can't really afford to buy it all. I don't have any personal bullion but I try to keep all the silver dollars offered to the shop."

I think in the first paragraph he is referring to people who are selling bullion to his shop. It sounds like he doesn't have personal gold but he accumulates silver dollars (maple leafs, eagles).

A lot of coin dealers are just like any other "broker." As long as there's buy/sell movement, and a lot of it, they don't care what the product is.

I posted that commentary because I find the parts in bold and underlined to be of significance and reinforces my views on what's happening with buyers switching to physical and eschewing paper.
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Live RichlyThursday, 06 May, 2010
Hmm, I interpreted "silver dollars" to mean ones with numismatic value like Morgans, but no bullion coins like Maples. Maybe I misunderstood.
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Dave in DenverThursday, 06 May, 2010
That could be too. Like I said, the commentary of interest to me was the stuff in bold/underline
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AnonymousFriday, 07 May, 2010
I trade Spot Gold (XAUUSD) through a Forex broker that uses both Barclays Commercial and HSBC as its custodians for client funds..am I exposed?
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Dave in DenverFriday, 07 May, 2010
Nah. Paper assets they can just print more of. It's the physical bullion where the huge exposure is.

Make sure you have a core position of physical gold and silver the you keep "under yer mattress."
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Bron SucheckiFriday, 07 May, 2010
I would about 99% certain the gold leg of your forex trading is "held" by HSBC as unallocated gold. OK to trade/speculate on gold via forex broker, but not for buy and hold.
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AnonymousSaturday, 03 July, 2010
Gold sovereigns seem to have performed pretty well.
You can buy any old sovereign post 1817 as an investment, so long as it's legit, which will be ~ 8 grams of 22K gold.
Or you can buy collectors' proof coins with COAs.
Since sovereigns are still legal tender, transactions and profits are tax free too :)
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Add comment

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.