Monday, September 17, 2012

Buy Real Gold, not Paper Gold

Buy real gold not paper gold
Buy real gold, not paper gold.

What is paper gold?  Paper gold is a substitute for real gold.  Some institutions, usually banks and Asian Banks in particular, offer an alternative to owning real gold on the basis that it is easy, convenient, and safe.  In fact it is usually very unsafe and not unlike buying a gold exchange traded fund (gold etf) in which one does not actually own gold at all.  Paper gold is simply a piece of paper that represents the gold value with no guarantees. It does not mean you own gold but are simply a creditor of the institution who issued the piece of paper (often a nice attractive certificate). This applies to pool accounts, future accounts, the various gold exchange traded funds, Gold ‘passbook’ accounts and a myriad of other names for basically the same thing. A piece of paper with the word gold written on it.

When it comes to buying gold, there is nothing like the real McCoy.

Paper gold, in fact, is considered by many analysts to be a tool used by banks to ‘manipulate’ the gold price, since it is easier to buy and sell paper gold with the press of a button than to actually buy and sell real gold.

Important advantages to buying real gold bullion are:

Gold bullion cannot go bankrupt.

Gold bullion retains its value regardless of the gold price.

Gold bullion is valued all around the world.

Gold Bullion does not depend on any other factors to retain its value. I.e. it cannot be manipulated by buying and selling it. 

Unlike paper gold, real gold bullion can be redeemed.  Paper gold has the real potential to be subject to bankruptcy.

Gold is independent of states, currencies, productivity and credit worthiness. Some economic or political influences may affect the price of gold, but its value and its acceptability remains independent of them.

Experts advise private investors to hold between 5 and 10% of their wealth in the long term in precious metals. Experience has shown that the regular purchase of gold coins helps to protect the smaller investor against price fluctuations.

Gold has always been prized as precious and valuable. Over the years gold has proven itself to be one of the most reliable stores of value.

Despite possible price fluctuations on the open market, the value of gold has remained remarkably stable and repeatedly demonstrates the tendency to rise.

Gold is traded around the globe 24 hours a day. With gold you possess an international currency which can always be sold around the world at any time.

When you own real gold bullion you OWN the gold bullion.  Not sharing gold with others and therefore suffer the potential of not receiving your gold should you choose to redeem it, because ‘there is not enough to go around.’

Trading in paper gold is also considered a non protected deposit.  Should the bank go bankrupt (and they do) you can loose all your investment.  

For example the Hang Seng Bank offers a paper gold account but this type of account is NOT protected by the Deposit Protection Scheme in Hong Kong. Further more, repayment under the Accounts are NOT guaranteed by the Hong Kong SAR Government's Exchange Fund.

You can find this lack of protection for the account holder applies in all the respective countries for the following banks including:

ANZ Singapore - Gold Account
Bank of China - Precious Metals Passbook Account
HSBC - Gold Passbook
ICBC - Industrial and Commercial Bank of China - Paper Gold Scheme
Maybank - Gold Investment Account
Shanghai Commercial Bank   
UOB Singapore - Gold Savings Account

In fact, when it comes down to it, there is no substitute at all for gold and it is highly recommended that, if you want to buy gold, you buy real gold, not paper gold.

Tuesday, September 11, 2012

Buy Gold in Russia

To buy gold in Russia one can simply go to a Russian bank and buy investment gold coins.  Russian banks are selling investment gold coins the appeal of which is due to the exemption of VAT on the coins and no import duty.
According to the World Gold Council in their recent 2012 report, the two main forms of gold investment in Russia are physical bullion such as gold coins and gold bars, and unallocated gold accounts. The Sberbank of Russia is probably the most dominant bank offering unallocated Metal Accounts but as one does not have actual ownership of the gold in these accounts but simply ‘share’ the gold, this is not recommended as banks and governments have a habit of using the assets of others in times of need.  Better to actually have and hold the gold you buy.

Buying real gold bullion in Russia is recommended as Russia has a healthy gold production, with 8 percent of the world’s gold mine production and Russian gold demand remains strong at an annual growth rate of almost 35 percent.

In 2011, Russia had total gold reserves of 5000 tonnes and this seems set to increase.

Most of Russian gold comes from the regions of Amur, Irkutsk, Khabarovsk, Kransnoyyarst, Magadan and Sakha-Yakutia. The largest Russian Gold producer is Polyus Gold International (Polyus) and 9th largest in the world. Other big producers are Polymetal Kinross Gold Corp. Petropavlovsk plc and High River Gold and GV Gold. The 4 largest gold mines in Russia produce nearly 40% of the annual Russian gold production.

For the past three years Russia has also been buying gold at a rate of 10.2 tonnes per month.  This is an incredible amount of gold and gives rise to speculation that Russia is thinking in terms of gold being used to back its currency.
In fact, Russia has also been a proponent of gold being included in a new world currency basket based on special drawing rights issued by the IMF. Alexei Ulyukayev, CBRs first Deputy Chairman not long ago stated that “for Russia gold will always be a natural quality asset."Bloomberg 3rd March 2010. And this is demonstrated with the CBR (Central Bank of Russia) showing a preference for gold in the management of its reserves.  Gold as a component of Russia's reserves was equal in 2003, then steadily dropped to a low point in 2008 and has since been on a heavy the rise again.

Russian demand for gold jewelry continues to grow at about 8.7 percent per annum as it has over the past ten years and in 2011 rose 16.3 percent, reaching 76.7 tonnes.  Russia is now the forth largest gold jewelery consumer behind India, China and the US.

As the Russian economy continues to grow at almost 4 percent a year we can expect to see more people buying gold and increased demand in investment gold.