Hedge fund to offer shares priced in gold

[cobben]

Trial ballon, perhaps blowoff phase just starting up?

Don't miss out, get it while it's hot!

http://www.telegraph.co.uk/finance/p...d-in-gold.html

"
Osmium Capital Management, a Bermuda-based money manager, says investors who take this option will gain the same exposure to the fund's investments as those whose holdings are denominated in conventional currencies, but they will also benefit if the gold price rises.
. . .
the fund would hedge its exposure to the price of gold by selling gold for cash and buying gold forward on a monthly basis, just as it hedges against conventional currency fluctuations.
The result is that the investor will be able to hold the equivalent of a long gold position, Osmium said. "The gold [share] class will be invested in the same pool of assets as the other currency classes, except that this return will be denominated in terms of troy ounces of gold and exposed to the price of gold relative to the currency in which the subscription was made,"
. . . "

[GRG55]

Re: Hedge fund to offer shares priced in gold

Trial ballon, perhaps blowoff phase just starting up?

Don't miss out, get it while it's hot!

http://www.telegraph.co.uk/finance/p...d-in-gold.html

"
Osmium Capital Management, a Bermuda-based money manager, says investors who take this option will gain the same exposure to the fund's investments as those whose holdings are denominated in conventional currencies, but they will also benefit if the gold price rises.
. . .
the fund would hedge its exposure to the price of gold by selling gold for cash and buying gold forward on a monthly basis, just as it hedges against conventional currency fluctuations.
The result is that the investor will be able to hold the equivalent of a long gold position, Osmium said. "The gold [share] class will be invested in the same pool of assets as the other currency classes, except that this return will be denominated in terms of troy ounces of gold and exposed to the price of gold relative to the currency in which the subscription was made,"
. . . "

The fund is just acknowledging that gold is a currency. It isn't "buying gold" as an investment/speculation any more than it is "buying yen, or Euros" as an investment/speculation to hedge the currency risk on its holdings. Seems to me it's just offering its clients another currency option. Nothing more.

The blow off, if it happens, will be marked by something like people lined up outside their banks trying to convert their savings account holdings into wafers. That's what happened last time...don't see any reason why history won't rhyme.

[cobben]

Re: Hedge fund to offer shares priced in gold

It is hedging in gold against the currency of the customer, i.e. the customer is getting the equivalent of a "gold swap" as part of the share deal. This is not active speculation from the hedge fund, I agree.

It's just that gold is not a currency currently, not anywhere in the world that I know of, nor convertible.

It's not "legal tender", therefore it's not a currency, I don't care what the rabid goldbugs are saying. That doesn't mean it's not a good investment currently.

[metalman]

Re: Hedge fund to offer shares priced in gold

The blow off, if it happens, will be marked by something like people lined up outside their banks trying to convert their savings account holdings into wafers. That's what happened last time...don't see any reason why history won't rhyme.

heavy on the word 'trying' because this time... one... joe six ain't got nothing in his savings account and... two... all the rich guys already bought up most of the gold and even at these prices, without credit to run ops, miners can't dig up more.

[GRG55]

Re: Hedge fund to offer shares priced in gold

heavy on the word 'trying' because this time... one... joe six ain't got nothing in his savings account and... two... all the rich guys already bought up most of the gold and even at these prices, without credit to run ops, miners can't dig up more.

You might be surprised...



Today "feels" much like 1974/75 in some ways.

• Economy in a spiral dive, and unemployment rising, after an energy price shock.
• Talk of the USA losing its global dominance...moral leadership [Watergate]...end of empire...yada, yada.
• Trying to recover from a recently departed President and Administration in which there was no confidence [both Nixon and Agnew had resigned in disgrace].
• Much talk about key industries having permanently lost in competition with foreigners - including the US automakers losing to the Japanese econoboxes [sound familiar?].
• A mood of austerity descending over the land [people were criticising their neighbours for wasting energy if they put out any Christmas lights that winter].

Nevertheless, after five more years of relentlessly rising inflation, courtesy of your friendly local Federal Reserve, somehow some people in 1980 seemed to have enough savings to want to line up to convert them to gold right at the top. Won't happen again? Let's wait and see.

[GRG55]

Re: Hedge fund to offer shares priced in gold

It is hedging in gold against the currency of the customer, i.e. the customer is getting the equivalent of a "gold swap" as part of the share deal. This is not active speculation from the hedge fund, I agree.

It's just that gold is not a currency currently, not anywhere in the world that I know of, nor convertible.

It's not "legal tender", therefore it's not a currency, I don't care what the rabid goldbugs are saying. That doesn't mean it's not a good investment currently.

Fellow Canadian Don Coxe [as you can probably tell, I love quoting my countrymen ] had a couple of interesting points in his weekly call last Friday.

1. During the last great inflationary period, the 1970's, private investors had two other comparatively sound currencies to flee to if they did not wish to hold US Dollars...the partially gold-backed Swiss Franc, and the inflation-phobic Bundesbank's Deutschmark. Today those are no longer viable options.
2. During the "Cold War" period it was understood that the USA bore the brunt of the military "protection" cost in the West, and this helped maintain the arrangement whereby other central banks supported the US Dollar by holding significant reserves in US Dollar assets. The "war on terror" doesn't seem to be generating quite the same level of loyalty.:rolleyes:

Given the reaction of gold to recent comments from a SNB VP and, last week, the revelation of details of the US stimulus plan, sure seems to me the fourth currency has arrived.