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AvidFan

Gold Profit Taking

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Just a thought. I've been considering Gold investment for a while. I see how easy this is with the likes of GoldMoney, etc.

If you take this particular company as an example, I'm wondering how "stable" it base is. Sure, it has HUGE gold reserves but given Gold's relatively "peaky" behaviour, if there was large-scale profit taking, who bankrolls this?

Someone has to at least promise to pay them cash at at least the spot price for every sale made, at the time of the sale. Who does GoldMoney sell to? Would they honour a peaking Gold price??

I ask because I've also been considering coins. Not one of the coin dealers will sell for less than 5.25% above spot, and in the recent boom they've never offered more than 95% of spot. It seems as though they've got some protection against price fluctuations.

Surely companies like Goldmoney have no protection. Is it therefore better to buy physical and accept the fact you can't buy and sell at the stroke of a key?

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I don't know about GoldMoney, but I thought gold-backed digital currencies had 100% gold backing for all their liabilities, and no cash liabilities.

They pay all their suppliers and costs in gold, taken from the annual fee charged for storage and have sufficient reserves to distribute 100% if everyone wanted their gold back. At least that's how e-gold and Pecunix work as I understand them.

Correct, Gold Money is 100% backed by gold (I use them). There are no cash transactions. You do pay a 0.1gram monthly fee (approx 92p a month) which is taken from your gold account.

AvidFan, When you sell your gold you sell at the spot price, i.e. you sell to the market. When you sell, your sale is processed there and then - there is no need to honor any price, you can only sell at the 'going rate'. The money then is sent to your bank account (or whatever you choose).

Gold is a currency in itself, the long-term value doesn't fluctuate as you can't create gold out of nothing. Its the other currencies that fluctuate sterling/dollar. I'm sure someone will trip me up over this way of thinking. I'm just betting that sterling will fall over time!

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From personal experience I recently sold some of my Goldmoney holding and the money was sent straight to my account.

It works like this - they have a huge pile of Gold in a warehouse near Heathrow airport. There is even a photo of the warehouse on the website. Most of that gold is vested in the Goldmoney holders. Some of it belongs to the company. If you buy 1oz of gold then they deduct that from the company holding and add it to yours.

If you manage to accumulate a kilo bar you are entitled to turn up at the warehouse and personally pick it up, if you want to. Any less and they will credit your amount in cash at the spot price for the gold you want to sell. This is obviously the only practical way to do it because the gold is held in bullion bars of one kilo each.

So if everyone wanted to sell, it wouldnt be a problem.

For me, the problem for Goldmoney would be if too many people tried to open a Goldmoney account. If the amount of Gold bought approached the total value of the holding in the warehouse then they would have to top it up by buying extra bullion.

Theoretically they might not be able to get hold of the physical gold, or (if Goldmoney really took off) the warehouse may not be big enough to hold it.

Also a comet may land on the warehouse and melt the gold into a solid blob ( there is an insurance policy built in to the Goldmoney operation but does it cover comets? )

I am sure that they have thought of most of these things. It would be interesting to see what happened to companies like Goldmoney if gold really did take off. Would governments allow them to operate freely??

Anyway, for the time being I can recommend them, as long as you have checked the skies for falling astro-debris and made sure that Al Queida is not planning a gold heist at Heathrow.

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I maybe being a bit dumb here but I inturpreted the question slightly differently.

If lots of people have gold money accounts and the price of gold doubles in say 6 months (for arguments sake) and then there was large scale profit taking by lots of the lots of people, where does gold money get the cash from that it needs to pay out on those sales? If all the gold buyers think the market has reached its peak who will goldmoney sell the gold to at spot price to be able to pay all their customers that are selling. Noting that in real life not everyone would sell at the same time but this is just a what if.........

I'm still learning about this so does that make sense?

Just a thought. I've been considering Gold investment for a while. I see how easy this is with the likes of GoldMoney, etc.

If you take this particular company as an example, I'm wondering how "stable" it base is. Sure, it has HUGE gold reserves but given Gold's relatively "peaky" behaviour, if there was large-scale profit taking, who bankrolls this?

Someone has to at least promise to pay them cash at at least the spot price for every sale made, at the time of the sale. Who does GoldMoney sell to? Would they honour a peaking Gold price??

I ask because I've also been considering coins. Not one of the coin dealers will sell for less than 5.25% above spot, and in the recent boom they've never offered more than 95% of spot. It seems as though they've got some protection against price fluctuations.

Surely companies like Goldmoney have no protection. Is it therefore better to buy physical and accept the fact you can't buy and sell at the stroke of a key?

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I maybe being a bit dumb here but I inturpreted the question slightly differently.

If lots of people have gold money accounts and the price of gold doubles in say 6 months (for arguments sake) and then there was large scale profit taking by lots of the lots of people, where does gold money get the cash from that it needs to pay out on those sales? If all the gold buyers think the market has reached its peak who will goldmoney sell the gold to at spot price to be able to pay all their customers that are selling. Noting that in real life not everyone would sell at the same time but this is just a what if.........

I'm still learning about this so does that make sense?

If there was lots of profit taking at the peak then the price will fall, if everyone wanted to sell the price would probably collapse - but there would be a fundemental reason why 'everyone' would want to sell. If you look at gold over the past week [and a bit] you will see there was alot of profit taking, and the price did fall [about 8% in $ I think], but the price fell to a point when it was worth buying again, which is where it is at now.

I think gold money deals with the normal gold market, so there is not a micro economy within gold money. Can anyone add any more on this?

When you sell your gold, you sell it to someone else (the market) and they pay you the going rate (i.e. cash). The going rate (spot price) is determined by supply and demand, i.e. how much buyers are willing to pay at that time.

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I don't know the answer for sure, but what I assume is the following -

The spot price on the Goldmoney website changes by the second, up and down. When you click your mouse to sell, goldmoney guarantees you that spot price.

I assume they must have some form of broker system that immediately places a sale contract for that amount of gold at that price. For example it took a few days for them to process the payment after I sold, the price of gold was dropping like a stone, yet they paid me at the spot price at the time of sale.

So, in theory, there might be a problem for them if many, many people clicked their mouses simultaneously at a high price whilst Gold was rapidly dropping. I suppose it depends on the efficacy of their automatic contract system or whatever. Because you can sell 24 hours a day, online, and they are committed to the spot price at that time.

Maybe it is worth giving them a ring and asking?

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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