Investment writer Jeff Neilson writes a critique of Adam Hamilton’s article entitled ‘GLD Conspiracy Theories’.  In the article Mr. Hamilton expresses comfort with the audit practices of the GLD ETF. Mr. Neilson points to some holes in his argument. One interesting point made: “All that has ever been established is that the bullion banks have enough bullion to cover either their short positions or the custodian agreements. If these bankers had to choose between defaulting on their own short positions – which would permanently discredit them in commodity markets, or defaulting on their custodian agreements (and pay a small fine), which course of action would these bankers be most likely to take?”

This means (if true) that the GLD ETF’s are not nearly as sound as many (even some ‘experts’) assume them to be. It’s a point I’ve been banging on for a long time now. Frankly, if you want true security, get the real stuff. If you are happy to speculate, buy the GLD ETF. Here is Mr. Neilson’s article:  Even Gold Experts Fooled by Bullion ETF’s

Harrods London is now in the gold selling business. They report good sales of the bright metal and so far, no one returning to sell back to them. Chris Hall, Harrods head of gold is qouted as saying, “Sales are ahead of our expectations,” says Chris Hall, Harrods’ head of gold, as he shows a collection that ranges from tiny wafers of 5g, costing about $200, to a central bank-style 400 troy ounce bar valued at $480,000 (€329,000, £296,000). “People are buying several at the same time,” he says of a bar costing about $38,500. “Not one is coming back to sell.” Quoted from FT.com

So the next leg in the movement of gold (and other precious metals) – sales in department stores. Still lots of room for metals to grow, but when your girl guide tries to sell you bullion or ETF shares at your door, you will know it it time to sell. Until, then, continue to buy on dips and of course according to your financial plan.

Have a great evening.

Anthony

This report from New York Times highlights the drop in gold: “Gold prices fell 1 percent to four-week lows in Europe on Friday, giving up the gains which earlier took them above $1,140 per ounce, as upbeat U.S. economic data lifted the dollar.” If you’re sitting on the fence about purchasing gold, silver or platinum, now would be a good time to get off and buy. The longer-term outlook is still looking up IMO. More on the article here…New York Times

This from the latest Bullion Buzz Newsletter. It’s a quote from Mike Hewitt: “The official gold reserves in the United States steadily increased during the first half of the 20th century. Accumulation was particularly rapid following the Gold Reserve Act of 1934 which officially raised the price of gold from US$20.67 to US$35 per troy ounce. Large shipments of gold bullion went west across the Atlantic as the European central banks sold off their gold reserves for American currency. This flow of gold reversed its course beginning in the late ’50s until the gold window was closed on August 15th 1971. From that date onward, aside from some sales in 1975 and 1978, the U.S. official gold reserve has remained steady…”

This article focuses on the US gold reserve historically and today. Not a pretty picture. Lots more in this newsletter including comments by Julian Phillips, Boll Bonner, and Jeff Nielson. More here: Bullion Buzz eNewsletter

A report from iStockAnalyst says that the Chinese government is encouraging local to by gold and silver. It’s not quite as simple as that, but close as the report goes on to describe. An interesting report from someone who was actually in China and made some purchases. Here is an excerpt: “A few months ago, a number of gold and silver investment sites reported on something surprising out of China. The rumor is that the government was running ads on TV encouraging people to go down to their local bank and buy gold and silver bullion. Just walk in, hand over the cash, and walk out with metal in your pocket.” Full report here: iStockAnalyst

I just finished reading the November 27th report on gold and financial markets by John Embry. Mr. Embry is a precious metals manager at Sprott Asset Management in Canada. The article was printed in ‘Investors Digest of Canada’.

Mr. Embry raises concerns (among others) about the manipulation of gold by governments — the U.S. especially — in an attempt to put a positive spin on Treasury debt issues and on financial markets. He goes on to say that this manipulation may be short-lived since the damand for real gold is increasing. Interesting also his discussion about certain rumors. He says “…there are strong rumors that the Germans have requested that the gold held for their account in the U.S. be repatriated, while Hong Kong has announced that it is going to have its own depository near the airport to hold Asian gold, thus removing it from the increasingly suspect London market. In both instances, this reflects growing concern that the gold being held on behalf of others in both the U.S. and England might not all be there.”

Is your gold safe? Are you holding ‘paper gold’ through ETF shares? Don’t take chances, talk to me now about buying real bullion and storing it safely. View the whole Embry article here: Financial Front: The Four Horsemen are Riding

Gold took a drop today (biggest 1 year) due to US dollar rising. See this article from Bloomberg News: Gold Falls Most…. Of course, market corrections in precious metals will take place from time to time. Therefore, it is important to keep the longer-term picture in mind when you view gold, silver and platinum. Gold has a lot longer to run in my opinion.

Here’s a video interview with the highly respected economist David Rosenberg on the prospects for gold. One of the points he makes is that while ‘fiat’ currencies (all the paper money floating around, including the US dollar) have been in growth mode for years, gold has not. Outside of any other considerations, there simply is not enough supply to go around. Watch the CNBC video here:

Drive by US dollar weakness, gold climbed the mountain again today for the third straight day. Gold touched $1227.50 an ounce in New York. According to Bloomberg gold is up 38% this year. You can read the full story here: Bloomberg Press

Legendary gold investor and market expert James Sinclair ponders the question ‘why is HSBC backing out of the gold storage business?’. James’ musings have ring of truth. Here is an excerpt:

‘I still am plagued by the question, WHY? You make more money from investor accounts than you ever will from large commercials in the same amount of space.Storage is space times charges which equals revenue. After that it is all computerized billing and confirmation.

With gold climbing steadily higher while showing signs that presage a ballistic move upwards, I have to conclude that there is a problem in the gold market itself stirring below sight that the community has little or no idea about.’ Read more here: Fake Gold…

Gold is taking a breather as concern over debt problems in Dubai caused investors to sell commodities and equities across the board. Gold, while holding up better than many other assets, took its biggest one-day fall in a year. Silver also followed in gold’s footsteps – down about 5%.

Dubai announced a six-month moratorium on debt obligations. The shortfall could be labeled in effect, a sovereign default by Dubai, and it raises the possibility of additional sovereign defaults as the global financial crisis begun months ago continues to work its way through the global economy.

Still, gold appears to have a lot of underlying support as a crisis/inflation hedge. According to Risa Maeda of Reuters, “Bullion has risen more than 30 percent this year, including a rise of 12 percent in November alone on dollar weakness, expectations of further reserve diversification by central banks and fears of inflation next year.” And the current crisis will do nothing to hurt it in the mid to longer-term.

So, if you have been waiting for precious metals to take a pull-back before investing, now is your chance. Visit me over at bullionhold to buy bullion safely.