Tuesday, Apr 06, 2010
Whats going on here then?
Commodity Online: Will fraud lift gold prices to $10,000/ounce?
"There is 100-times more paper-gold outstanding than physical gold.".........Any thoughts on this? and yes I know its a bit off topic but its also very relevant.
Basically if this article isn't a load of rubbish then there may be trouble ahead.
Posted by titaniccaptain @ 12:16 PM (1495 views) Add Comment
29 Comments
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1. uncle tom said...
When you get excited, breathless articles like this, there's rarely much truth in what is being written..
2. rumble said...
There's more paper everything. It's a paper world. The facade behind which games can be played and bullsht denied.
Don't know if you saw this one last week.
3. quiet guy said...
Tut tut Titanic Captain!
What Uncle Tom says.
Not long ago, there were rumours about fake gold bars going around the gold bulls - no substantiating evidence came forth. As I understand it, ETFs are not the same thing as gold and shouldn't be considered as such. I'm still a metals bull but $10,000 per ounce is crazy talk.
Try Denninger for a more balanced view:
http://market-ticker.denninger.net/archives/2138-Dont-Invest-In-Ridiculously-Rigged-And-Thin-Markets.html
4. debtfree said...
@1. uncle tom said...
When you get excited, breathless articles like this, there's rarely much truth in what is being written..
How can you say there isn't any truth when copies of emails and exact timing of price manipulation were given ?
@3 quiet guy... $10,000 does seem a bit high, but during the last gold bull, the yellow metal ran from $35 an ounce to $850, a 24-fold increase. This bull started with gold at $255.95, meaning that if historic trends hold, the price target would be $6,214 an ounce.
5. titaniccaptain said...
@quiet guy I am also interested in metals but this article stood out because it wasn't on a conspiracy site although a commodities web site also has a VI.
The broader the debate the better....even if you don't agree.
6. titaniccaptain said...
"ETFs are not the same thing as gold and shouldn't be considered as such.".........exactly.
7. titaniccaptain said...
Were you looking for this Rumble?
http://kingworldnews.com/kingworldnews/Broadcast_Gold+/Entries/2010/3/30_Andrew_Maguire_files/Andrew%20Maguire%203%3A30%3A2010.mp3
8. estrader said...
@6 "ETFs are not the same thing as gold and shouldn't be considered as such.".........exactly."
This is a false and misleading statement. There are generally 2 types of ETF structures
1) Synthetic/Replicating
2) Physical
1) Synthetic ETF's involve counterparty risk because there is no underlying asset backing the ETF shares, It is a counterparty instead who promises to pay the value of the underlying asset.
2) Physical ETF's in which every single share is backed by a *physical* allocation in an asset whether it is a share or commodity like precious metals. These are subjected to constant and regular auditing of assets as well as daily NAV adjustments. You can redeem shares in these ETF's for the precious metal. The assets are usually ring fenced from the authorised participant. But, if you still think this is too risky then you can buy gold and have it stored at the Perth mint where it is backed by the Western Australian Government.
http://www.perthmint.com.au/investment_invest_in_gold_government_guarantee.aspx
9. titaniccaptain said...
@Estrader
"There are generally 2 types of ETF structures"........yes but apparently both seem to be acting as synthetic.
10. titaniccaptain said...
@Estrader
I may be wrong on this but have a listen to the link I gave to rumble.....food for thought.
11. jack c said...
There's a lady who's sure all that glitters is Gold and she's buying a stairway to heaven.........
12. estrader said...
@ 10, I have listened to it before and there is nothing new, shocking or remarkable about it. Manipulation is as old as the hills. I have tried to explain it before, ie/ strong hands, weak hands and the public but nobody seems to care, understand or both. That doesn't expose PHYSICAL ETF's as a fraud, it was merely an insight into how prices can be manipulated on a futures exchange...big deal, really. I've been watching the markets long enough to recognise what is what. I found the 'expose' rather boring to be honest.
About physical ETF’s:
http://www.etfsecurities.com/en/faqs/etfs_faqs.asp#13
http://www.etfsecurities.com/en/updates/document_pdfs/ETFS_Physical_Gold_Fact_sheet.pdf
13. titaniccaptain said...
Excellent.....that's that out of the way.
Time will tell
14. jack c said...
@titaniccaptain - there is an Exchange Traded Funds Magazine which you might find of interest - access via www.ifaonline.co.uk/etfm
Hope it helps
15. titaniccaptain said...
Thanks Jack C will take a good look.
There is quite a bit of stuff out there on this ETF fraud.......all very interesting stuff whatever the truth is.
16. Mr G said...
Yes, and my house is going to be worth a million pounds next year.
17. estrader said...
@15 TC
I can't figure out what you mean by "on this ETF fraud"? Where in the interview are ETF's referenced? Don't confuse the futures market with ETF's because there is a very big difference. This interview is about trading futures. When somebody buys a futures contract in a physical commodity, they are buying at a whatever the market price is 'today' and expect to take physical delivery of the commodity upon expiry of the contract. Whoever sold the futures contract to them must make the delivery. Speculators generally don't expect to make or take delivery of the commodity and usually close all open positions before delivery. I believe the whistleblower is implying that there is 100 times the number of 'ounces' in gold futures contracts then there are actual physical ounces of gold to cover them. This means there wouldn’t be enough cold to cover delivery on the futures contracts.
Physical ETF's are different in that they already have the gold allocated to them when the units are first created. When you buy a physical ETF share it is merely a case of changing the name on the allocated gold. No different to buying a house off someone. The house is there, already in existence. ie/ The title has a physical asset backing it. When you buy the house, all that happens is the name is changed on the title, they don't have to create a whole new house.
18. Xpresso66 said...
I must be missing something ... News surfaces of Gold being leveraged at ratios of around 100:1, plus various parties are exposed manipulating Precious Metals markets by massive naked shorting, while the CFTC (U.S. Commodity Futures Trading Commission) looks on and does nothing, and the general response is 'ho hum' and questions about the validity of the allegations come to the fore. Even though the evidence was presented to the CFTC hearing, ... its not like they're making this up.
So what does this mean? Basically it means there's a massive gold shortage, and lots of people who think they own gold don't. What happens when there are massive shortages of precious metals? ... the prices jumps up ... what happens to people massively shorting a commodity that jumps rapidly in price? ... they go bankrupt....
I guess there's nothing to worry about then, and you should definitely steer clear of Gold as its gotta go down ... ho hum.
19. titaniccaptain said...
popping out Estrader but I will get back on this later!!!!
20. titaniccaptain said...
@Estrader
A quick something before Wife drags me to shops........
http://www.commodityonline.com/news/Gold-ETFs-or-fraud-funds-27108-3-1.html
21. estrader said...
@18 TC
"However, some gold ETFs buy and hold the physical bullion, while others invest in *futures* contracts."
This is basically what I was trying to explain, physical Vs synthetic ETF's. Only invest in ETF's that have a *physical* holding and make sure they don't trade, lease or lend any of their precious metals. I wrote to ETF securities and they assured me they don't do this with their metal, it is all allocated, audited and locked in a safe. The problem I can see is that when/if this physical Vs futures fiasco blows up, good ETF's will get the same treatment as bad, just like Banks.
You have to weigh up what you think is better for you. Would you feel 'safer' buying £X of (precious metal) and storing it yourself with the risk of having it stolen or lost, or buying via an ETF and worrying about this 'fraud'.
22. Crunchy said...
Sore losers!
23. jack c said...
TC - the other thing you can do (an extension of estrader's points) is limit your exposure to the ETF via a collective investment eg one of the Jupiter Merlin Portfolio's - you already know my thoughts on the benefits of a well diversified portfolio. This way you can have the desired exposure to Gold without so much of the risk.
24. paranoia blue said...
estrader
I hold a fair amount with bullionvault.com.
I’m pretty laidback with their set-up.
25. quiet guy said...
@estrader
"what I was trying to explain, physical Vs synthetic ETF's."
Great comments. I have to admit that I didn't understand the differences.
26. 51ck-6-51x said...
The article says, in short, that a higher paper to asset ratio in a futures market means that there is a greater risk of a liquidity crisis and an ensuing run on the asset. I agree that such a scenario would lead to a stupendous price but not that the risk of the scenaio increases. Think about it - What could such a scenario actually be that made everyone suddenly want physical delivery?
1) a collapse in paper currencies (or just the dollar would do) occurs and so everyone wants physical delivery rather than some "worthless paper".
2) the discovery of some fantastical property of gold that meant a small (relative to futures contracts) quantity was really worth far more than anything else. Again _everyone_ wants physical delivery since it's value is currently unrealisable.
In both of these cases the value of gold actually increases due to an unrelated cause - all that the ratio would do in these cases is increase the speed at which the fair value is realised. I would opine that it's probably 100 to 1 because the most that ever settle physically are way below 1%. I think, when it comes down to it, this article is making the typical mistake of implying causation in the incorrect direction from an observed correlation.
27. Dpa said...
ha
Ha
HA
What now, STR parasites?
28. goweresque said...
IMO the point of buying gold is not an investment per se, its an insurance policy if the paper currency world goes t1ts up. And if that happens you need the gold in your hand. Not a piece of paper that says someone has to pay you X (in more paper currency) or the right to some alleged gold locked in a vault somewhere, possibly overseas. Gold sovereigns (or other gold coins) would be my preference.
29. estrader said...
@24 That is a fair point, but most things you own in life have nothing more than a piece of paper saying you own it (or not). I am renting a flat, however, there is no difference between living here as a tenant and living here as an owner occupant. Nothing but pieces of paper somwehere.