Why You Should Buy Physical Gold

The best way to go long gold is to buy the real thing itself. If anything, you are helping your investment by taking more physical gold out of the market and helping break the back of the gold-suppression scheme employed by several central banks led by the Fed. Unless you know a good Alchemist, physical gold cannot be created out of thin air or lead unlike paper gold that the Fed can create through the exchanges such as Nymex. The only good Alchemist I knew was the novel by Paulo Coelho and to a lot of people’s disappointment it did not give you any secrets about alchemy and ways to become rich. It sure is not through paper gold, however. If any of you have been watching how paper gold is traded in these exchanges, you would see some very interesting patterns. “Someone” comes in at certain points when liquidity seems to be drying or there is an upward pressure in the price of gold and sells roughly 2-5% of annual global gold production in less than one minute and BOOM, the price of gold drops 10 bucks or 20 bucks if this “someone” is lucky. If you do the math, the financial institution or person that is selling this gold is selling anywhere between $1-10 billion of gold. Assuming 20% margin being put up, that is $200-2,000 million dollars being sold in less than a minute with no regard for the price. Now who has that much gold or would not care about the price assuming this is not their full position? I am not aware of any financial institution that can do that besides the Fed or a very big financial institution other than JPM, which, along with Goldman Sachs, is doing “god’s work” for the Fed. Arguably, the Fed is managed by these institutions anyway. And this is in addition to all the other evidence of manipulation, such as no one ever seeing the gold that Fort Knox or the NY Fed claims to hold, rhetoric by Greenspan and Volcker about controlling the price of gold and how it should be done – talking about democracy and a free market economy (yeah right) –, the anti-gold propaganda we see everywhere, and the information from the Bank of International Settlements showing that there is over 20k metric tons of gold short. It is common knowledge that it is mostly the NY Fed that leases out or shorts gold –which happens to be more than the approximately 8k metric tones of gold the US claims to have in supply. GATA (gata.org) has a lot of good links and information on this if you would like to do further research on the topic. The most accessible forms of paper gold available are gold futures – which you can buy in the Nymex or the other exchanges that offer them – ETFs (the most popular being GLD for all the wrong reasons – more later on why you should steer away from GLD soon), and other derivatives such as swaps or notes. It is heard time and time again that the futures exchanges give you a lot of trouble when you ask for delivery of your gold and a lot of times almost fail on delivery and get bailed out by central banks that support this scheme. The problem is that the paper gold market is a Ponzi scheme. There are more claims than there is physical gold in the warehouses. That is an unsustainable situation and one that is exploited by the gold-suppression scheme to hold the price of gold down –which is the reason gold is not in the $2-5k range right now after the financial system blow-out. You never see the price of gold being brought down by the sale of physical gold. It is always through the paper/futures market. The IMF bluffs and threatens to sell gold over and over again to bring the price down and never really sells the gold. It was very amusing to watch the BRIC countries, and surprisingly India rather than the expected China, call that bluff and say that they want to buy any physical gold the IMF has to sell; the IMF was forced to sell it to save face and not make it common knowledge that they backed out of their bluff. And what happened to the price? The price went from slightly over $1k to around $1140 so far and it is still rising and will rise more. Just a couple days ago Blackrock commodities fund manager Evy Hambro came out and acknowledged that central banks around the world will be net buyers of gold. That is good news for gold holders because the overhang for the gold price is being removed on top of the extra demand from such strong institutions. As a gold holder you should do your part to help your own portfolio and buy physical gold and help end the scheme that is keeping the price of gold down. Another reason to buy physical gold is the confiscation risk. It could be a remote risk but it did happen in 1933. FDR confiscated all gold from people of this country and the next day devalued the dollar (revalued gold) by almost 70%. In a free country people were not allow to own gold. Free market and democracy, right???? Still to this day, the anti-gold propaganda exists in this society from the media (owned by the same interest groups that want fiat money to be the form or just plain stupid) to our textbook and professors sponsored by the same financial institutions. US is the only country where it is hard to buy physical gold. In any other country, you can go to a bank or post office or some other location and buy gold bars or coins. The Fed and the Treasury do not want you to buy physical gold because that will stop the supremacy of paper money which they easily print and distribute to their friends as they did to the banks (Goldman – god’s hand – hear me!) and dilute you similar to diluting shareholders by printing more shares. They decrease our buying power and would rather help insolvent banks than the people they should be giving the trillions to and shutting down those banks that are ruining this country and our children’s future. Moral hazard be damned. That’s why you should buy physical gold! Now, let’s mention a few things about GLD, which claims to be backed 100% by physical gold, but most likely is not. For one thing, they do not even audit the gold properly, rely on third parties, and spend too much time stating that if the auditors and the custodians do something wrong they are not liable. They must know something is wrong if they spend so much time covering their “donkeys (click here for the prospectus)”. The funniest coincidence of all is that their custodian HSBC’s gold derivatives book is very close in size to what GLD claims to own in physical gold (click here for the derivatives position of HSBC reported by the OCC as of March 31st then go to page 30). That’s too big a coincidence if you ask me. I was once at a meeting with some executives from the commodities exchange and GLD managers. They say that they hold the gold in a vault in London, but they trade in the paper market in New York. When I ask them if they take physical delivery, they said yes. When I asked them how they transfered it to the vault in London if they were taking delivery in New York [??], they were puzzled. I had to clarify myself by asking if they flew it, shipped it with transatlantic ships, or trucked it over the ocean or had Olympic swimmers tie bars on their backs and swim across the Atlantic with them. They had no answer. Other people in the room were starting to get very curious, so the exchange managers felt like they had to step in to save the GLD mangers by saying that they keep the gold in the exchange’s warehouse. But wait a minute, I thought they kept all the gold in the London vault, no???? Apparently Einhorn of Greenlight Capital had enough issues with GLD that he sold his whole position and bought physical gold . There are several other ETFs that claim to hold physical gold. Some of these say they store the gold in the Swiss Kantonal region. Another less known US exchange traded ETF is SGOL managed by ETFSecurities which claims to hold its physical gold in a vault in Switzerland. If you are determined to go paper you are better off buying the Kantonal ETFs or SGOL before you buy futures or GLD.