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| Where is the Gold? |
"I would hypothesize that the central bankers know
their policy of printing money is the most irresponsible thing imaginable, and
they are suppressing gold and silver prices to hide their irresponsibility.
When one is printing that much money, gold and silver prices are the first
things you would expect to rise. If we saw gold going to $2,000 per ounce, the
price of oil would probably go to a new high and the price of agricultural
commodities would go up. Then you would have a huge inflation problem on your
hands. "*
This despite having an unlimited Quantative Easing as a way
to reduce the countries debt (The more
money is printed the less value it has and therefore the less value the debt
has).
As a result, although the price of real gold is being firmly
pushed down, buying gold is still the best
way to preserve assets as, apart from it being real money, many other nations
fully recognise the true value of gold and continue to buy it at breakneck
speed and that adds value to the precious metal also. We are talking real gold here, not paper
gold. What is fostered off onto the general public however is that paper gold
is the real gold and real gold is not!
Looking at this from a legal perspective one could say that
calling something “paper gold” but selling only paper (backed by nothing) is a
form of fraud. In addition, selling
“paper gold”, backed by real bullion, where, to quote, Jeff Nielson of Gold
commentary ‘no actual ownership of gold’ forms part of the sale could, in my opinion, also be
considered a covert form of fraud.
Banks have not been immune to this viral infection. Morgan Stanley is a typical example. They
sold “paper gold” to some of their clients through ‘bullion accounts’ assuring
them their gold was safely tucked away and could be claimed or redeemed
anytime. This was not the case however as when some clients attempted to redeem
their gold, it did not in fact exist. It
was paper gold, not real gold. Morgan
Stanley got a rap on the knuckles for that deception**, but it does point to
the importance of ensuring that gold you buy is in fact gold and not paper
gold and that redemption of the gold
is guaranteed if, at any time, the
client wants it.
The lesson here being that when one buys gold, buyer beware!
There is no substitute for doing due diligence and actually reading the terms
and conditions under which you are parting with your money and buying gold.
For example. This applies very much to the SPDR Gold Trust –
more commonly known by its market symbol “GLD”.
If you want to know how banks can “sell paper gold” while not actually selling
gold, simply read the GLD prospectus. A good analysis of this is available at
Gold Commentary***.
If every client of GLD decided they wanted to close their
account and take the proceedings in gold it is extremely unlikely they would all
get their gold, partially because there is insufficient gold in the account to
allow every client to take their gold but also because, per their terms and
conditions, the Custodian has no obligation to deliver gold to the account or
unit holders. This could be considered ‘wilful default’,
where the custodian possesses the gold, purely to satisfy legal requirements,
but is unwilling to part with it.
The moral of the story is, of course, buy actual real gold
not paper gold. Then you will always be able to answer the question. Where is the gold?
*http://www.theaureport.com/pub/na/15052
**http://uk.reuters.com/article/2007/06/12/morganstanley-suit-idUKN1228014520070612
***
http://www.bullionbullscanada.com/gold-commentary/13341-the-seven-sins-of-gld
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