Wealthy investors drain supplies of gold

[JoeSixpack]

Wealthy investors drain supplies of gold by hoarding bullion bars

By Javier Blas in Kyoto
Published: October 1 2008 03:00 | Last updated: October 1 2008 03:00

Investors in gold are demanding "unprecedented" physical levels of bullion bars and coins and moving them into their own vaults as fears about the health of the global financial system deepen.
Industry executives and bankers at the London Bullion Market Association annual meeting said the extent of the move into physical gold was unseen and driven by the very rich [...]



http://www.ft.com/cms/s/0/692c787e-8...nclick_check=1

[rj1]

Re: Wealthy investors drain supplies of gold

Investors in gold are demanding "unprecedented" physical levels of bullion bars and coins and moving them into their own vaults as fears about the health of the global financial system deepen.

They have actual vaults?

We're talking high rollers here.

Anyone up for touring one?

[FRED]

Re: Wealthy investors drain supplies of gold

Wealthy investors drain supplies of gold by hoarding bullion bars

By Javier Blas in Kyoto
Published: October 1 2008 03:00 | Last updated: October 1 2008 03:00

Investors in gold are demanding "unprecedented" physical levels of bullion bars and coins and moving them into their own vaults as fears about the health of the global financial system deepen.
Industry executives and bankers at the London Bullion Market Association annual meeting said the extent of the move into physical gold was unseen and driven by the very rich [...]

http://www.ft.com/cms/s/0/692c787e-8...nclick_check=1

DJIA falls 7% while gold rises 14%: DJIA/gold ratio reversion continues

Sentiment reality check: Where are we on the road to “Equities are dead”?

“Gold still represents the ultimate form of payment in the world. Fiat money in extremis is accepted by nobody. Gold is always accepted."
- Alan Greenspan - May 20, 1999

Update on gold for iTulipers who have been with us since 2001. In August of that year we issued our contrarian recommendation to buy gold when the price was $271. 2001 was not the height of popular sentiment for stocks – that occurred a year earlier. But it was surely the bottom in sentiment for gold.

[snip]

Only the top 25% of US households have enough net worth to buy much silver and gold to hedge dollar risk. Realistically, only the top 5% can buy a meaningful quantity to impact the price.

You may have noticed all the “sell your ‘unwanted gold’” ads on TV for the past year or so. Those are aimed at the bottom 70% of US wealth holders who have all of the debt and little savings, what used to be the American middle class. They not only can’t buy gold or silver, they are selling it to pay debts and taxes and for oil and rent. They will do that until they run out of things to sell.

Say your net worth is $10M and you want to put 10% into a precious metals as a currency hedge, how are you going to buy enough physical silver for it to matter? You’d have to buy 100,000 ounces at $10 to get 10% coverage. Where are you going to put it? Gold at $900 is far more practical, requiring a few safe boxes with 1,100 ounces in them total. Ultimately this is why silver prices will lag gold as a currency debasement hedge. more...

[idianov]

Re: Wealthy investors drain supplies of gold

FRED,

have you accounted for impact on silver supply from reduced base metal mining as credit crisis hits producers (silver is a large byproduct from base metal mines) and increased demand from several physical gold and silver trusts such as CEF and Bullion Millennium Fund?

CENTRAL FUND OF CANADA LIMITED

For Immediate Release to Canada News Wire and U.S. Disclosure Circuit

TSX SYMBOLS: CEF.A and CEF.U
AMEX SYMBOL: CEF

CENTRAL FUND FILES SHELF PROSPECTUS

TORONTO, Ontario (March 24, 2008/CNW/) - Central Fund of Canada Limited (“Central Fund”) of Calgary, Alberta is pleased to announce that it has filed a preliminary base shelf prospectus (the “Prospectus”) with the securities commissions in each of the provinces and territories of Canada, except Quebec, and a registration statement with the United States Securities and Exchange Commission. This registration will allow Central Fund to offer and issue Class A non-voting, fully participating shares of Central Fund (the “Class A Shares”) by way of one or more Prospectus Supplements at any time during the 25-month period that the Prospectus remains in place. Central Fund does not presently foresee authorizing an immediate share issue. The purpose of the filing of the Prospectus is to enable greater efficiency for share offerings in the future when conditions for issues of shares may be considered as favorable for existing shareholders and new subscribers in due course.

Under the Prospectus, the Class A Shares may be issued from time to time at the discretion of Central Fund, with an aggregate offering amount not to exceed US$750,000,000. Central Fund will only proceed with any such offering if it is non-dilutive to the net asset value of the Class A shares owned by the existing shareholders of Central Fund. Substantially all of the net proceeds of any such offering will be used to purchase gold and silver bullion, in keeping with the policies established by the board of directors of Central Fund. Any additional capital raised by any such offering is expected to reduce the operating expense ratio in favour of the shareholders of Central Fund.

More...

Igor

[D-Mack]

Re: Wealthy investors drain supplies of gold

rest of the text


http://us.ft.com/ftgateway/superpage...8163525&page=2

http://itulip.com/forums/showthread.php?t=5628

[Guest]

Re: Wealthy investors drain supplies of gold

Fred - iTulip's position below is one (of the very few) which I don't have a high assurance on. Think about this a moment to discover the actionable investment fallacies.

A) By being vastly more bulky, one is merely noting how cheap Silver is - a not inconsiderable point when it comes to investments. Ratios of 60+ silver ounces to gold are most likely not the historical ratios - most particularly not in extended periods of currency turmoil, let alone a world of rapidly depleting mineral resources, of which silver is on the short, short list to deplete.

B) the above ground silver stockpiles for all actionable purposes, need to be evaluated in net dollars, not in net ounces, and compared to gold net dollar amounts. Compared in dollars, the pile of silver available is minute compared to gold. And that is the crux of this investment proxy for owning gold - a single billionaire today could (in purchasing power) literally corner the silver market.

Does iTulip really think that will not present an irresistibly tempting target to someone or even just two or three collusive billionaire players (they are a dime a dozen in the world today), when gold is soaring up to $2500+ an ounce?

What iTulip seems uncertain about is whether silver has historically always remained tethered to gold to a great extent. It has. Only it's tether is not like a rope or chain, so much as an elastic band. And we all know what happens to elastic bands when they get stretched impossibly tight. They either break, or they snap back hard.

Who is betting that the tether between silver and gold will break here? iTulip is betting that? Maybe you guys are merely making observations about drastic volatility - for which silver is notorious. The only question here is whether gold will rise into what is developing. Give it a one year or 18 month lag at most, silver is highly likely to remain in some rough ratio to that rise in gold, if gold hangs onto those gains.

\Say your net worth is $10M and you want to put 10% into a precious metals as a currency hedge, how are you going to buy enough physical silver for it to matter? You’d have to buy 100,000 ounces at $10 to get 10% coverage. Where are you going to put it? Gold at $900 is far more practical, requiring a few safe boxes with 1,100 ounces in them total. Ultimately this is why silver prices will lag gold as a currency debasement hedge. more...

[j4f2h0]

Re: Wealthy investors drain supplies of gold

DJIA falls 7% while gold rises 14%: DJIA/gold ratio reversion continues

Sentiment reality check: Where are we on the road to “Equities are dead”?

“Gold still represents the ultimate form of payment in the world. Fiat money in extremis is accepted by nobody. Gold is always accepted."
- Alan Greenspan - May 20, 1999

Update on gold for iTulipers who have been with us since 2001. In August of that year we issued our contrarian recommendation to buy gold when the price was $271. 2001 was not the height of popular sentiment for stocks – that occurred a year earlier. But it was surely the bottom in sentiment for gold.

[snip]

Only the top 25% of US households have enough net worth to buy much silver and gold to hedge dollar risk. Realistically, only the top 5% can buy a meaningful quantity to impact the price.

You may have noticed all the “sell your ‘unwanted gold’” ads on TV for the past year or so. Those are aimed at the bottom 70% of US wealth holders who have all of the debt and little savings, what used to be the American middle class. They not only can’t buy gold or silver, they are selling it to pay debts and taxes and for oil and rent. They will do that until they run out of things to sell.

Say your net worth is $10M and you want to put 10% into a precious metals as a currency hedge, how are you going to buy enough physical silver for it to matter? You’d have to buy 100,000 ounces at $10 to get 10% coverage. Where are you going to put it? Gold at $900 is far more practical, requiring a few safe boxes with 1,100 ounces in them total. Ultimately this is why silver prices will lag gold as a currency debasement hedge. more...

I keep hearing this argument, and this argument has some serious holes in it. For starters PLEASE SHOW ME WHERE even 1 percent of people worth 10m could even FIND ENOUGH SILVER to allocate even 5 percent of their wealth??? This wont happen because not enough silver exist for the wealthy to do that!

So anyone who uses this as reasoning why silver wont perform as well as gold is not taking the time to look at the bigger picture. And the bigger picture is THERE IS NOT ENOUGH PHYSICAL SILVER IN THE MARKET PLACE TO SATISFY THIS HYPOTHETICAL DEMAND!

[j4f2h0]

Re: Wealthy investors drain supplies of gold

Fred - iTulip's position below is one (of the very few) which I don't have a high assurance on. Think about this a moment to discover the actionable investment fallacies.

A) By being vastly more bulky, one is merely noting how cheap Silver is - a not inconsiderable point when it comes to investments. Ratios of 60+ silver ounces to gold are most likely not the historical ratios - most particularly not in extended periods of currency turmoil, let alone a world of rapidly depleting mineral resources, of which silver is on the short, short list to deplete.

B) the above ground silver stockpiles for all actionable purposes, need to be evaluated in net dollars, not in net ounces, and compared to gold net dollar amounts. Compared in dollars, the pile of silver available is minute compared to gold. And that is the crux of this investment proxy for owning gold - a single billionaire today could (in purchasing power) literally corner the silver market.

Does iTulip really think that will not present an irresistibly tempting target to someone or even just two or three collusive billionaire players (they are a dime a dozen in the world today), when gold is soaring up to $2500+ an ounce?

What iTulip seems uncertain about is whether silver has historically always remained tethered to gold to a great extent. It has. Only it's tether is not like a rope or chain, so much as an elastic band. And we all know what happens to elastic bands when they get stretched impossibly tight. They either break, or they snap back hard.

Who is betting that the tether between silver and gold will break here? iTulip is betting that? Maybe you guys are merely making observations about drastic volatility - for which silver is notorious. The only question here is whether gold will rise into what is developing. Give it a one year or 18 month lag at most, silver is highly likely to remain in some rough ratio to that rise in gold, if gold hangs onto those gains.

U are much better with words than i am Lukester!

[Guest]

Re: Wealthy investors drain supplies of gold

Yeah well, ask me about my silver holdings, which are down going on 40%. That part makes us silver investors look real stupid at present. I try to avoid arguing strenuously for my own investment positions, A) because it brings bad luck, and B) because it encourages positive reaffirmation bias which does not make one more astute. Better to remain always skeptical of one's investments.

[phirang]

Re: Wealthy investors drain supplies of gold

Yeah well, ask me about my silver holdings, which are down going on 40%. That part makes us silver investors look real stupid at present. I try to avoid arguing strenuously for my own investment positions, A) because it brings bad luck, and B) because it encourages positive reaffirmation bias which does not make one more astute. Better to remain always skeptical of one's investments.

Could be a lot worse...

[Guest]

Re: Wealthy investors drain supplies of gold

Phirang -

You wrote:

Could be a lot worse...

In my opinion it will be.

Secular commodity bear markets can cut coimmodity groups down by 70%, no? I think what we have in the CRB (or CCI rather, as it backs out the inordinate weight of oil in the CRB) s one of the six biggest bear market drwdowns in the past 200 years. This is what Gann Global tells me, and they back it with the historical data. They go on to note that retreats of this magnitude and brevity of time almost always (9 out of 10 times) are only the first leg, of the declines. Lot of starry eyed precious metal investors here will have their commitment challenged hard. I'm looking at a 65%++ potential drawdown in my net worth and having to stick fast to my convictions here. Tell me all about it. I did not short when the shorting would have been low risk. I'm looking for shorting advice at this juncture. Got any advice?

[jtabeb]

Re: Wealthy investors drain supplies of gold

Yeah well, ask me about my silver holdings, which are down going on 40%. That part makes us silver investors look real stupid at present. I try to avoid arguing strenuously for my own investment positions, A) because it brings bad luck, and B) because it encourages positive reaffirmation bias which does not make one more astute. Better to remain always skeptical of one's investments.

Read this, then tell me if you still feel stupid. (I'll be you get a big shit-eating grin on your face, I sure did).

http://www.itulip.com/forums/showthread.php?t=5692

[godraz]

Re: Wealthy investors drain supplies of gold

Obviously, something is screwy when the Comex market pushes down the price of PM's, while looking at any PM dealer's inventory page sez: OUT OF STOCK over and over again.

http://www.golddealer.com/bullionpage.html

The question arises: Who do you trust? The guys trading the funny paper or the guys trading the real goods.

[phirang]

Re: Wealthy investors drain supplies of gold

Obviously, something is screwy when the Comex market pushes down the price of PM's, while looking at any PM dealer's inventory page sez: OUT OF STOCK over and over again.

http://www.golddealer.com/bullionpage.html

The question arises: Who do you trust? The guys trading the funny paper or the guys trading the real goods.

2 words: Hunt Brothers

[chrisk]

Re: Wealthy investors drain supplies of gold

have you accounted for impact on silver supply from reduced base metal mining as credit crisis hits producers (silver is a large byproduct from base metal mines) and increased demand from several physical gold and silver trusts such as CEF and Bullion Millennium Fund?

Igor

Good points. Also, it's not just U.S. investors who matter. There are plenty of Asians with savings to protect, and plenty of them can afford silver much easier than gold.