Paper gold market defaults loom ?

[oddlots]

http://www.cnbc.com/id/15840232?video=880574352

The disparity between paper and gold has been mentioned many times. I seem to recall some discussion of COMEX not allowing traders to take delivery, insisting on trades settled in dollars. Any thoughts on how plausible this is?

[cakins]

Re: Paper gold market defaults loom ?

Very plausible.

More and more, people seem to be understanding the purpose of precious metals - an escape from the financial system in the midst of a systemic financial crisis, even in a negative interest rate environment. Paper silver is good for gamblers, chartists, and the like. Physical silver is a hedge.

I heard an analogy that I like: Somebody buys a gun for home defense. They do not buy "Lehman Bros. Gun Certificates," and deter bad guys with a paper receipt. You either have it in hand or you've been had.

COMEX, ETFs, Perth mint certs, Kitco pool accounts, etc. are in my opinion frauds. Miners are stocks for unprofitable businesses. Investors who buy paper might as well buy GOOG or pets.com.

People are waking up, as the price manipulations in silver have become increasingly obvious in the face of overwhelming demand and shortages in the real world. We're just starting to see the same thing in gold, although several months after the silver shortages and not nearly to the same extent.

Ultimately, this will be the undoing of the swindles at COMEX for silver and for gold, to a lesser extent. Unfortunately, all of those who wanted to be cute and hold paper may be burned.

[Tulpen]

Re: Paper gold market defaults loom ?

They do not buy "Lehman Bros. Gun Certificates," and deter bad guys with a paper receipt. You either have it in hand or you've been had.

I am willing to write default swaps against those certificates, for a nice fee of course.

[cakins]

Re: Paper gold market defaults loom ?

I am willing to write default swaps against those certificates, for a nice fee of course.

I'll write default swaps on your default swaps! Make the check out to "CASH." :cool:

[skalliwag]

Re: Paper gold market defaults loom ?

Can you guys explain what you mean by paper gold defaults to a newby?

[The Outback Oracle]

Re: Paper gold market defaults loom ?

It is 5.20 pm EST in Aus right now. I sent an email placing an order for gold this morning at 9.30 am with the Perth Mint. I have sent 2 emails and have now just phoned them. After the phone had rung for about 3 minutes at my dealers number, teh switchboard answered and explained to me that all the dewalers were busy and there were 10 callers waiting in line in front of me.

[ltullos]

Re: Paper gold market defaults loom ?

I'm holding a position of GLD within my IRA as this is the only practical way that I know to invest in gold through this account. I'm well aware of the warnings against holding paper, but have rationalized that so long as I leave the party early and don't get trampled by everyone rushing to the exit I'll be OK (sure I'm the only one thinking this). Anyway, I not so comfortable with this decision, but just feel it is better alternative than leaving these funds sitting in gov't bonds. Can someone lay out a credible scenario has how GLD defaults might go down and leading edge warning signs to watch?

[ajerimez2]

Re: Paper gold market defaults loom ?

This is an excellent and important question. I'm sure a significant portion of iTulipers, if not a majority, are invested in PMs via ETFs. I personally own both GLD and DGP, the double-long ETF.

Would EJ or some other authority please weigh in on the safety of these ETFs? The last thing we need is to be right on gold but lose out because of a paper default. Should I dump my ETFs and go straight to Kitco?

[raja]

Re: Paper gold market defaults loom ?

Would EJ or some other authority please weigh in on the safety of these ETFs? The last thing we need is to be right on gold but lose out because of a paper default. Should I dump my ETFs and go straight to Kitco?

I'm not an authority . . . .
But FWIW . . . CEF and GTU are based in Canada, and they have the gold and silver in the bank vaults. I don't see how they could fail unless there is a collapse of society as a whole and the stock market doesn't exist. Possible, but not likely, IMHO.

Many people consider GLD and SLV suspect . . . that the metals might not all be there.

[we_are_toast]

Re: Paper gold market defaults loom ?

I'll write default swaps on your default swaps! Make the check out to "CASH." :cool:

I'll bundle your swaps into a toasty new security and sell it to a European bank with the promise of ever increasing dividends. Payment in gold or silver coin only.

[sn1p3r]

Re: Paper gold market defaults loom ?

I'm holding a position of GLD within my IRA as this is the only practical way that I know to invest in gold through this account. I'm well aware of the warnings against holding paper, but have rationalized that so long as I leave the party early and don't get trampled by everyone rushing to the exit I'll be OK (sure I'm the only one thinking this). Anyway, I not so comfortable with this decision, but just feel it is better alternative than leaving these funds sitting in gov't bonds. Can someone lay out a credible scenario has how GLD defaults might go down and leading edge warning signs to watch?

I'm in the same boat and weighing the odds on the tax penalty of taking it out early. On 1 hand I could lose some % (20?) of my money to inflation (more if hyperinflation) while it goes up based on GLD but on the other hand if I cash it out I only lose 10% on top of taxes I would pay which at this point isn't much but the question still remains, when you cash out...what to buy? Hard to find physical anymore, got plenty of food, bullets, etc. I guess maybe find a GOOD deal on land....thoughts?

[jtabeb]

Re: Paper gold market defaults loom ?

I'm in the same boat and weighing the odds on the tax penalty of taking it out early. On 1 hand I could lose some % (20?) of my money to inflation (more if hyperinflation) while it goes up based on GLD but on the other hand if I cash it out I only lose 10% on top of taxes I would pay which at this point isn't much but the question still remains, when you cash out...what to buy? Hard to find physical anymore, got plenty of food, bullets, etc. I guess maybe find a GOOD deal on land....thoughts?

Lets see you can use PAPER TO STILL GET REAL GOLD AND SILVER? What was your question again?

Land is good too. Had my mom sell her house and by gold in '05, JUST told here to go buy a house again (like friday). She is on a fix income and has unlimeted exposure to inflation in rental costs so I told her she needed to fix that. NOW is the time.

If you have food and guns and bullets (as I do) then you know paper is crap, why are you even asking the question. You know what you should be doing, GET TO IT MAN!

bullion direct is out of Plat, and Paladium. Only have limitied 1 oz Au and Ag left in stock, don't be a fool and be left holding paper anything as the supply of PM is disappearing right before your eyes. Don't take my word for it, go check for yourself.

www.bulliondirect.com

[Mn_Mark]

Re: Paper gold market defaults loom ?

I also have my retirement account largely in GLD (and GDX which is in terrible shape lately) and am concerned about paper defaults.

One thing I've been wondering is if there is such a shortage of physical out there that the Mint has to suspend making gold coins, where are the managers of GLD finding enough physical gold to buy to put in their vault and back up the money flooding into their ETF?

[Guest]

Re: Paper gold market defaults loom ?

This is an excellent and important question. I'm sure a significant portion of iTulipers, if not a majority, are invested in PMs via ETFs. I personally own both GLD and DGP, the double-long ETF.

Would EJ or some other authority please weigh in on the safety of these ETFs? The last thing we need is to be right on gold but lose out because of a paper default. Should I dump my ETFs and go straight to Kitco?

I also own both. But from my understanding on GLD you own a share of the gold they hold in a vault. There are differing comments on how well audited it is, but unless they're fraudsters there is gold there.

What I don't understand about the physical gold guys saying it's only useful if you have coins in a safe at home, is that you cannot presently really spend your gold coins at the retail level. I cannot go offer 25 oz of gold for a car at a dealership. I have to go sell that gold first for dollars.

In the process, one would get completely raped in transaction costs. And how easy is it to do that?

Come armageddon, that physical gold would be nice to have around. But can't people just keep gold in their portfolio in this convenient method until then?

[Guest]

Re: Paper gold market defaults loom ?

I would note that at least one major critic spreading this theory is a major competitor of gold ETF's. Yet after researching it, his gold system struck me as less established and less trustworthy than GLD!