Tuesday, Aug 28, 2007
Possibilities of what lies ahead
kitco: Serious Credit Collapse Could Strengthen Dollar and Hit Gold
How this crisis might play out
Posted by sold 2 rent 1 @ 05:58 PM (1027 views) Add Comment
12 Comments
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1. whiteknight said...
There are far better places to be than the USD which is the currency of a bankrupt nation.
The only thing that is supporting the USD is a lack of imagination and habit which dies hard.
When it does die it will die very hard indeed.
It boring.
As i mentioned in my chess analogy. Everybody runs here. Then they run there. Then they finally start using logic and may get near the destination they need to be.
Things look a bit bad - everybody runs to a "safe haven". US Treasuries!! Give me a break. How about resource backed currenices.
Russia only need to hang tough a little longer for example. Must be irritating. The market can remain irrational and stupid, far ,far ,far longer than a person can remain solvent. Not another sovereign state though.
2. Whiteknight said...
.. and if you are going to hold gold. Better make sure its real physical gold .... oh i get it . You were referring to a piece of paper from a bank or something that SAID you owned gold.
Nevermind.
3. whiteknight said...
.. and if you own gold you had better make sure it is real physical gold..... oh.. i see.. you meant that you had a piece of paper from a bank that said you owned some gold...
nevermind.
4. paolo88888 said...
whiteknight,
Why do you advocate holding physical gold, rather than, for example an ETF such as IAU - "ISHARES COMEX GOLD TRUST". It is a stock in a company which owns physical gold. Are you suggesting that there will not be buyers for the shares or that governments will seize or nationalise them?
I have read that if you take physical gold away from official vaults then it effectively looses value because of the cost of having it verified as to weight and purity before it can be sold on. Plus the problems of secure storage. So physical gold gives you both risk and overheads, which appear to me to be worse that the costs and risks of ETFs.
5. Tickock said...
paolo,
You will probably read lots of things that suggest you should just leave your money in the 'paper/digital' system and not buy real Gold.
After all, imagine what would happen if everyone did that!
If you own ETF shares, why not ask for the serial numbers of the physical bullion bars that you own, and see what they say?
6. Whiteknight said...
I am an advocate of being wary when it comes to the IOU note issued against something i cannot see .... by somebody i do not know. And many times by people i do know.
Personally i cannot afford enough security to keep large amounts of physical gold ...... although sometimes the best way to hide things is in plain view and distributed ( i have had my eye on a new weights kit for a while .. a can of black paint ......... ....... dont worry - joking)
Portable wealth is always good. Diamonds, gold in rings etc. There are historical reasons for many of these things.
You are right on the exchange and liquidity issue. There arent that many gold assayer's down my local market anymore. As a bigger and longer term store it might work.
A large underground oil tank might be of use.
Anyway... back to being serious.
7. ck one said...
Yes interesting one re the gold, I've got 1/2 a kilo in secure storage in London and Zurich thru bullionvault.com, have to agree with both of you guys here (White and Paolo)... Physical gold is best in theory but as soon as your high street punter takes delivery the purity of it comes into question plus renting a deposit box in a bank vault isn't exactly cheap.
But conversely a piece of paper saying you have got gold doesn't necessarily mean that exact amount of gold is yours in a secure store with your name on it, a number of players have been known to rent out gold supposedly owned by others!
I looked into it and concluded that bullion vault seemed legit and represented the best of both worlds... but you never know I might just end up finding that bullion vault is as dodgy as a flaky CDO and the owners disappear into the night with my cash!...
8. ck one said...
Yes interesting one re the gold, I've got 1/2 a kilo in secure storage in London and Zurich thru bullionvault.com, have to agree with both of you guys here (White and Paolo)... Physical gold is best in theory but as soon as your high street punter takes delivery the purity of it comes into question plus renting a deposit box in a bank vault isn't exactly cheap.
But conversely a piece of paper saying you have got gold doesn't necessarily mean that exact amount of gold is yours in a secure store with your name on it, a number of players have been known to rent out gold supposedly owned by others!
I looked into it and concluded that bullion vault seemed legit and represented the best of both worlds... but you never know I might just end up finding that bullion vault is as dodgy as a flaky CDO and the owners disappear into the night with my cash!...
9. ck one said...
I find it very interesting that Gold is being classed as a risky asset and as such should be sold down when all indications are that we are going to see a significant slow down in western economic growth but with serve inflationary pressures remaining. When we also take into account the physical jewellery demand in East Asia and to a greater extent India which are the new world engines of growth I become more astonished by these predictions of sliding gold value...
Call me a traditionalist but ever since God's dog was a pup, gold has been seen as a safe haven during times of economic uncertainty, my personal take on the current negative publicity for gold is down to VI's once again... Lets talk it down while we gooble it up say those senior bods of Bank Large, New York.
Other theories anyone?
10. paolo88888 said...
Tickock,
I "imagine" that everything would be fine! Most investors would buy and sell ETFs to speculate on price movements. When a large user wanted to take delivery of the actual metal, they would look at the price of the ETF relative to its NAV, and if it was lower, would buy a large block of ETFs - one or more creation units - and redeem them. Result is, ETF prices cannot fall to far below the gold price. ETFs really are a neat idea.
However, there have always been mutterings on this site about not trusting paper/digital gold, and this has made me nervous about my gold ETF, but not nervous enough to make me sell. The directors of the large companies that run ETFs know they would face jail if they do fraud, or even if they are just negligent in running the company; but if they behave the 0.4% management fee gives them a good salary and pension while taking no investment risk and doing not too much work - no equity analysis, just buy the gold, arrange a vault and fill in the paperwork.
Nothing is absolutely safe, but just why would you not trust ETFs?
11. paolo88888 said...
"why not ask for the serial numbers of the physical bullion bars that you own, and see what they say?"
They could just make them up - I can't march into their vault with a clip-board and check them!
What exactly is your problem? It may be that the ETFs are using futures to replicate their holding. As I understand it other ETFs such as DBA (agriculture, wheat etc). does do this. I would not see this as a problem, because the traders on Chicago Metals Exchange are vetted first. For example they would have to ultimately represent a producer of gold such as Ashanti. So although I have read that IAU holds metal, futures are just as good from my perspective.
12. sold 2 rent 1 said...
The best way is to diversify.
How about a portfolio of:
- physical gold coins in your house/garden
- gold stored in vaults in Zurich/London
- UK Gold Unit trusts / ISAs
- Junior / exploration 1 / exploration 2 mining stocks on different exchanges (Canada and USA)