Physical gold versus "paper" gold

As always, the following is not intended as a recommendation to buy, sell, or hold anything, nor as a recommendation of any investment strategy, and constitutes only my own opinions and speculations. You know the drill.

I've been predicting on this board for some time that eventually people will realize that pieces of paper saying they own or will own gold (such as ETFs, gold futures contracts, certificates of deposit, etc.) are NOT THE SAME as having PHYSICAL GOLD in your hands. Bars, coins, etc.

I believe that eventually it will come to light that "paper gold" contracts and recipts have been created in excess of actual gold reserves, at least by some major player(s). This makes perfect sense...it is, after all, how fractional reserve banking got started in the first place! And everyone should have learned by now just how "trustworthy" the financial players who push paper are. "Suuuuure, Mrs. Jones. We've got your gold right here in this little box. Here's a piece of paper proving it. Now run along."

The following is a long and recent piece on gold and contains numerous links and pieces of information:

www.marketskeptics.com...

Among them, the following struck me as significant:

Investors emptying COMEX warehouses

...investors are discovering that there is trouble at Comex warehouses:

1) Delays and complications in the delivery process have become increasingly commonplace. It is taking weeks and possibly even months, and sometimes dozen of inquiries, for investors to get the gold they already own out of the warehouse.

2) More restrictions are being applied to overseas buyers requesting delivery.

3) Some brokerages will not help with the delivery process or refuse to help even after the commissions are paid.

4) The cost in just about everything "Comex" is increasing

5) Investors withdrawing their 100oz. bars from the Comex depositories are being given bars with incorrect serial numbers or weight.

With the difficulties and irregularities in the COMEX delivery process, many, including gold brokers like JB Slear, have doubts as to whether there is gold in inventory to match existing warehouse receipts.

Number 5 is particularly noteworthy, IMHO.

Now, let me be clear...I am not accusing anyone at COMEX or anywhere else of any wrongdoing. For all I know, they are just backed up and harried by extra demand, or for any other number of reasons. I'm just tossing this information out there on the table, for your consideration.

I've heard about this earlier this summer about Comex and their delivery problems and such. It's exactly as everyone has thought, Comex doesn't have the gold to make good on all of the paper slips for the gold they said was there. Some have said that we may see the implosion of Comex.

Here's another lovely bit of info: fake "gold bars" that are really tungsten covered with a thin outer layer of gold are increasingly being noted.

On Thursday, it was disclosed by Rob Kirby that in an "Asian depository" , gold bricks were found to have been filled with Tungsten....

Tungsten is unique and one of its chief characteristics is that it has the same density of gold. Gold is very dense and so is tungsten. Tungsten is also very cheap.

One of the oldest scams is making a brick of tungsten and covering the brick with gold, sealing all the edges and covering the whole surface with real gold.
...

If I were to buy gold from London and ship to say the bank of Nova Scotia, Scotia Macotta, the agent for the bank and for me would guarantee to me the purity and the weight.

For this I pay insurance, shipping fees and storage fees. If the gold comes from their own inventory, they would not assay. If it comes from another vault, then one or two bricks would be assayed.

The assay requires a hole to be drilled to make sure that gold is uniform. The core and the brick is then heated and reweighed and stamped and that new brick would have Good Delivery Status.

It would be a nightmare to assay every brick that comes to a bank.

It now seems that the Chinese asked for an assay on some of their bricks and lo and behold, some were filled with Tungsten. You can imagine the nightmare that this presents itself.

More at source:
theburningplatform.com...

There's a lot of fishy business going on in the gold world, as after all, gold is the only real and universally accepted currency in existence.

I too will not be surprised to see those responsible for the fun and games at Comex to end up in a dithering heap soon! Same with the Gold Fix'ers in London - if the tungsten bar rumors prove to be real, man this is going to be interesting to see how it pans out.

Not owning physical gold is foolish. Just make sure you buy it directly from a reputable mint - taking delivery at Comex now though there is a clause saying that they are allowed to redeem in ETF shares/cash to the similar value of the physical. Really not good.

Buy gold and silver....

Gold will rise to $5000+
Buy real gold, not shares in gold.

Silver will also rise....

The EU and the Saudi's are discussing plans to have the US to pay for their oil bills in either another currency other than the US dollar as it's worthless bit of paper, or gold.


Also dont store your gold in the usa.

The past may come to haunt you again....
www.the-privateer.com...
The Gold Confiscation Of April 5, 1933
An Act to provide relief in the existing national emergency in banking, and for other purposes~',

in which amendatory Act Congress declared that a serious emergency exists,

I, Franklin D. Roosevelt, President of the United States of America, do declare that said national emergency still continues to exist and pursuant to said section to do hereby prohibit the hoarding gold coin, gold bullion, and gold certificates within the continental United States by individuals, partnerships, associations and corporations and hereby prescribe the following regulations for carrying out the purposes of the order:

_____-

He devalued the cost of gold and made it worthless and then in acted this bill. He then confiscated everyone's gold (with very few exceptions)...Then once he had control of the gold again he devalued the dollar and just simply increased the price again....wham America out of depression.
Of course that is in very basic form....

The melt down hasn't finished...there is worse to come the protective bubble of gov spending is going to burst, and apart from that the pure debt of the US is far to much to ever be repaid....ever! At a conservative estimate if you paid off the debt right now with no more borrowings at a $1 a second and started 150years ago...it would take another 150,000years to have it paid off.

There are ways out of the hole...but ways that wont win you votes.
Hold on it is about to get ugly for the next few years

[edit on 5-11-2009 by 297GT]

This may be a really BIG hit on financial markets, seems there are a lot of tungsten filled gold bars around:

www.marketoracle.co.uk...

Paper gold is way better than physical gold.

Would you guys grow up? There is not going to be some super-crash where everything becomes worthless except gold you crazily horded in order to barter with in a mad-max style, post-apocalyptic waste land. You're being paranoid.

If you really want to preserve your wealth, it's best to trade in paper, or buy shares in a gold mining company. If the world caves in on us, and the world ends financially, gold bars wont be worth nearly as much as food/water. So maybe you should be buying that instead.

Groupies--

Since it is still possible (by some statute still on the books..) for the US Federal govt to confiscate any gold coins minted AFTER April 5th 1933, it is highly recommended that any collectors of gold coins buy ONLY gold coins minted BEFORE April 5th 1933--I would be safe and bring the date back to BEFORE 1912---just to be sure..

www.gold101.com...

www.usagold.com...


Also, when purchasing gold-coins, apparently many Americans are told by certain gold dealers that it is 'a federal law' that the customer fill out an IRS form and give it to the dealer which includes a listing of the customer social security number i.e. to register with the US Federal govt / IRS any gold bullion (gold bars etc.) they purchase : if asked, refuse to fill out the fom and ask to buy pre-1933 solid gold coins instead---or walk out slamming the door behind you !

Originally posted by Kaytagg
Paper gold is way better than physical gold.

Would you guys grow up? There is not going to be some super-crash where everything becomes worthless except gold you crazily horded in order to barter with in a mad-max style, post-apocalyptic waste land. You're being paranoid.

If you really want to preserve your wealth, it's best to trade in paper, or buy shares in a gold mining company. If the world caves in on us, and the world ends financially, gold bars wont be worth nearly as much as food/water. So maybe you should be buying that instead.

There are many middle grounds between the housing bubble fantasy playground of the last decade and mad-max style meltdown.

I for one predict a future where there will still be plenty of paper but physical gold will get you much more currency than selling shares in some gold company or trying to get out of an ETF.

Originally posted by silent thunder

Originally posted by Kaytagg
Paper gold is way better than physical gold.

Would you guys grow up? There is not going to be some super-crash where everything becomes worthless except gold you crazily horded in order to barter with in a mad-max style, post-apocalyptic waste land. You're being paranoid.

If you really want to preserve your wealth, it's best to trade in paper, or buy shares in a gold mining company. If the world caves in on us, and the world ends financially, gold bars wont be worth nearly as much as food/water. So maybe you should be buying that instead.

There are many middle grounds between the housing bubble fantasy playground of the last decade and mad-max style meltdown.

I for one predict a future where there will still be plenty of paper but physical gold will get you much more currency than selling shares in some gold company or trying to get out of an ETF.

That's crazy, though. The market for gold is absolutely huge, and it's the same market that gets gold delivered into your hands in the first place. To say that that infrastructure wont hold up, and gold mines will be worthless, futures contracts will be worthless, etc, IS a mad-max world.

That simply wont happen.

If it does, though, gold mining companies will still be worth something -- and if they're not, it's because law has broken down, and guns become the most valuable commodity.

Originally posted by Kaytagg

Originally posted by silent thunder

Originally posted by Kaytagg
Paper gold is way better than physical gold.

Would you guys grow up? There is not going to be some super-crash where everything becomes worthless except gold you crazily horded in order to barter with in a mad-max style, post-apocalyptic waste land. You're being paranoid.

If you really want to preserve your wealth, it's best to trade in paper, or buy shares in a gold mining company. If the world caves in on us, and the world ends financially, gold bars wont be worth nearly as much as food/water. So maybe you should be buying that instead.

There are many middle grounds between the housing bubble fantasy playground of the last decade and mad-max style meltdown.

I for one predict a future where there will still be plenty of paper but physical gold will get you much more currency than selling shares in some gold company or trying to get out of an ETF.

That's crazy, though. The market for gold is absolutely huge, and it's the same market that gets gold delivered into your hands in the first place. To say that that infrastructure wont hold up, and gold mines will be worthless, futures contracts will be worthless, etc, IS a mad-max world.

That simply wont happen.

If it does, though, gold mining companies will still be worth something -- and if they're not, it's because law has broken down, and guns become the most valuable commodity.

There is already plenty of documentation that the stock markets have long been trading in more stocks than actually were issued by companies in question, via "naked shorts" and other methods. Every time this happens, it dilutes the value of shares held by "honest" investors who thought that, when they bought a paper (or, more likely, electronic) share in a company, they were buying a limited item that would retain wealth rather than evaporate in wealth due to counterfeit shares being created out of thin air.

What's to stop the same thing from happening with "gold-backed" paper? In fact, if you examine the links in the original post, there are strong reasons for believeing that this is already happening.

reply to post by silent thunder


Yea, that happens, but:

A) It's illegal
B) Not enough naked positions exist to cause serious over-all market capitalization dilution, but they can manipulate the stock price by overriding normal stock supply/demand.
C) All naked shorts are eventually covered, and if a brokerage is caught engaging in it, they could be shut down.

So it's not an end of the world thing, but it does exist.

Originally posted by hoghead cheese
I've heard about this earlier this summer about Comex and their delivery problems and such. It's exactly as everyone has thought, Comex doesn't have the gold to make good on all of the paper slips for the gold they said was there. Some have said that we may see the implosion of Comex.

Star and Flag for the OP.

Yeah this is coming, its also been said that they cannot get enough
gold ore to meet demand for finished product.

Gold supply running low

It is fairly well covered in mainstream press too.

If the paper gold scandal comes out, it will bankrupt a few of them
unless the tax payer gets to bail out more lying cheating filthy
pieces of dog manure that are too big to fail.

Trash belongs in the trash can, not in my wallet.





[edit on 12-11-2009 by Ex_MislTech]

reply to post by Kaytagg


It may not be "the end of the world," but Wall Street and the Gov'ts track record in punishing those who engage in illegal activities such as naked shorts is quite poor over the last decade or so. I think we all have reasons to be extremely leery of the legal system's ability and willingness to enforce financial rule of law these days.

From the link provided by Sigismundus....

It is now obvious that considerable quantities of U.S. gold coin were never surrendered at the time of the original order. Some coin was withheld because it was in the possession of foreign citizens, banks, or governments, and some because its owners chose to defy their government because of what they considered to be an arbitrary and unjust confiscation. Considerable quantities of American gold coin also found residence in Canada.

In fact , research by Milton Friedman and Anna Schwartz...A Monetary History of the United States 1867-1960...tells us that only 21.9% of the Gold in circulation was surrendered...the balance retained illegally in private hands.

No prosecutions.

Now if anyone really believes that today's American Gold investor is spewing warm fuzzies for TPTB...and more inclined to belly-up ole yeller than the citizens of yore , then I have some shares in the company formerly known as CIT I'd like to sell ya.

At the time of Roosevelt's Gold confiscation , the US was in the grip of a true , serious deflationary spiral. We were on a Gold Standard and both Gold and paper dollars circulated freely as currency....the entire population held Gold along with FRN's. Today , the number of Americans with a serious allocation to Gold as an investment is infinitesimal by comparison.

The cure for deflation is the polar opposite....inflation. Much like today , people/institutions were saving/hoarding , and the gubmn't desperately needed to devalue the dollar in order to stimulate spending/jump-start the economy.....impossible under a Gold Standard. Devalue paper dollars and Gresham's Law would engage...people would simply move their savings into Gold. The result would be no net increase in spending.

This was Roosevelt's conundrum. His solution was to confiscate Gold , and immediately devalue the dollar by 41%.

Guess what...it worked , but we're no longer on a Gold Standard folks , and unfortunately not many Americans own the stuff anyway. Most Gold is already held by the official sector...they're free to print and devalue Bucky until the cows come home (USDX .52 or lower).....and they will

So the point of confiscation would be ?

***

Ultra high-end numismatics may do quite well , but on buying semi-numismatic Gold (pre 1933 Double Eagles) , nobody but the snake-oil salesmen that sell 'em would recommend them over investment grade bullion (BU Gold American Eagles , Canadian Maple Leafs , SA Krugs etc) , especially for first-time Gold investors. The market for numismatics isn't very liquid...not many folks willing to pay the extra $200-$500 premium over investment grade coins...and that's for circulated pre-1933. Since Gold made it's decisive break above 1,000 , the premium/spread on semi's is narrowing...and will continue to narrow as Gold advances. IOW , what you paid for collector value today , you may not recover tomorrow. We're witnessing a sea change in attitude...Gold trading as currency. Moving forward , actual bullion content will be the only metric that matters.

In the 1960's when the Gold:Numismatic premium was wide , boatloads of phony pre-1933 Double Eagles were minted in Lebanon...don't get stuck with one.


***


Gold/Silver ETF's emerged at auspicious moments in this generational bull market. They're primary purpose is to divert investment capital , currently about $70 billion , from the dwindling physical market...to...the bogus paper market. Who set these vehicles up ? The same commercial bullion banks responsible for today's COMEX short-to-long ratio 2.95 to 1

Go figure


***


Just another jerk on the speculation bus...nothing I write should be interpreted as reliable investment advice.

As I personaly predicted now stratagists are talking the same...

"Gold’s ‘Money’ Value is $4,000 to $11,000: Market Strategist "
Gold will reach 2k with out a sweat.....!
www.cnbc.com...

My last 2 buys in gold have increased 16% netting roughly 17K

GOLD $75.25 $83.27 10.66%
GLD $107.00 $112.94 5.55%

Might look into silver and some more 'real' gold soon(next week)