[T]he likely moral of the story is the following: If you want to invest in gold, invest in gold — not a paper-linked contract backed by a bankrupt sovereignThis is a fascinating story which I came across on the Financial Times news blog, FT Alphaville. Apparently Germany issued gold-bearer bonds back in the 1920's and 1930 to U.S. investors. A U.S. investor has possession of some of these bonds and a U.S. court of appeals has upheld a ruling that Germany must face the default-claim lawsuit and that the U.S. has jurisdiction. Here's the link to the story: Germany Defaults On Gold Bonds? and here's the original news release from Bloomberg: LINK
More interesting is the fact that these are "gold-bearer" bonds, which means that the bonds are redeemable by the investor in gold. I actually don't want to make more of this situation than should be made of it at this point in time. If you review the facts as presented in the two articles, it looks like Germany should be on the hook for these bonds and may be jockeying for some kind of settlement.
HOWEVER, that being the case, will Germany be willing to settle this lawsuit in gold? And is Germany dragging its feet on this case because it does not want to pay the claim in gold? It has been long-suspected by those who have studied the metals markets for over a decade that Germany's sovereign gold has been largely swapped out and leased, similiar to that of the United States. For a provocative and well-researched article on this subject, please refer to this 2002 must-read article by James Turk: Where's all The Gold?
If you read that piece by Turk and then take another look at the above lawsuit, you might have a different perspective on this whole situation and understand why I wanted to bring it to your attention and the relevance of the opening quote from the FT.