Paper gold & silver vs. physical pricing

[cbc58]

I know there is a disconnect between paper and physical metals, but what do others think about buying SLV or GLD at these levels if you can't get your hands on the physical material.

My thinking is that if it shoots up then at least you have some medium term protection and you can get out before it goes to crazy if you worry about the actual backing.

At some point the disconnect has to shrink or disappear and real prices will become more transparent. Is this a logical approach to take?

[the count]

problem is you are only holding a couple slips of paper. my employer lost millions when one of the brokerages (refco) went under. kitco, monex and all those guys are not regulated in any way. nor is your invested fdic insured. so if what you are looking for is just a trading vehicle paper might work for you. but if you are looking at gold as a safety net of last resort you want the physical stuff.

[rapidtrends]

My thoughts are that in time it may become increasingly difficult to acquire physical gold at the retail level. This is a repeat of history.

I have suspected for some time that this would happen, but didnt imagine it would happen so quickly.

For a time I have thought, at some point, the only way people will be able to get into gold in large quantities, not a coin here or a coin there, especially if we see a default at Comex, is through a firm with access to gold and silver at the refinery level, and not just any refinery, it will have to be the big ones.

I have reports coming in from all over the world of shortage, its not just the USA. our business partners in Canada, UK, Germany, Singapore, Australia, all say there are long lines where there is gold, and mostly there is no way to meet the demand.

I am continually asked these days "Is AFE having shortage problems?". My answer is, no, not yet. The reason for that is AFE has institutional accounts with some of the largest LBMA certified refineries in the world, so when AFE pours a LBMA bar for a client, it is coming directly from tonnage daily of flow of gold that came right from the mines.

Frankly, ETF's and other paper products are promises to pay because you dont legally own the gold.

Many Goldbugs will argue to take delivery only. I agree with that, but only to a point. I have a good stack of gold in a safe place in my home as well, but there comes a point where you may only be encouraging unwanted visitors. We have clients with hundreds of thousands and millions in gold and silver, and at some point it doesnt make sense to keep that in your closet.

In addition, in a market like the one we have now, a large quantity will only be able to be sourced through a firm with access to gold at the core of the industry, unless you want to take delivery of comex bars.

Finally, having all your "gold eggs" in one basket is no more intelligent than having all of your portfolio in one stock. Diversification to our wealthy clients means holding bullion in multiple places stored privately OUTSIDE the commercial banking system, not all under your bed or in your closet.

[Bruno]

My thoughts are that in time it may become increasingly difficult to acquire physical gold at the retail level. This is a repeat of history.

I have suspected for some time that this would happen, but didnt imagine it would happen so quickly.

For a time I have thought, at some point, the only way people will be able to get into gold in large quantities, not a coin here or a coin there, especially if we see a default at Comex, is through a firm with access to gold and silver at the refinery level, and not just any refinery, it will have to be the big ones.

I have reports coming in from all over the world of shortage, its not just the USA. our business partners in Canada, UK, Germany, Singapore, Australia, all say there are long lines where there is gold, and mostly there is no way to meet the demand.

I am continually asked these days "Is AFE having shortage problems?". My answer is, no, not yet. The reason for that is AFE has institutional accounts with some of the largest LBMA certified refineries in the world, so when AFE pours a LBMA bar for a client, it is coming directly from tonnage daily of flow of gold that came right from the mines.

Frankly, ETF's and other paper products are promises to pay because you dont legally own the gold.

Many Goldbugs will argue to take delivery only. I agree with that, but only to a point. I have a good stack of gold in a safe place in my home as well, but there comes a point where you may only be encouraging unwanted visitors. We have clients with hundreds of thousands and millions in gold and silver, and at some point it doesnt make sense to keep that in your closet.

In addition, in a market like the one we have now, a large quantity will only be able to be sourced through a firm with access to gold at the core of the industry, unless you want to take delivery of comex bars.

Finally, having all your "gold eggs" in one basket is no more intelligent than having all of your portfolio in one stock. Diversification to our wealthy clients means holding bullion in multiple places stored privately OUTSIDE the commercial banking system, not all under your bed or in your closet.

Thank you for your knowledgeable advice as always.

Peter Schiff recommends Perth Mint for storage? What are your experiences?

[rapidtrends]

Bruno, I have been in contact with Peter several times over the last few weeks. He has a very solid grasp of the macro economy and he is a very smart guy whom I like alot.

His background is in securities though, and I would not call him an expert when it comes to the bullion industry.

Perth Mint certs are fine as a way to further diversify your portfolio, but I do not consider them as strong as private custodial vaulting via bailment law, because Perth Mint certs are claims on an un-allocated pool.

In order of preference on how to own gold I would say:

1. Take some physical delivery to your comfort level, this varies by person what is comfortable
2. Hold gold in a few places outside the jurisdiction of the country you live in, vaulted privately, outside the commercial banking system, allocated or allocated pool preferred
3. Then after you have a solid base there if you want to dabble in Perth Mint Certs or ETFs (those fall into the same category in my eyes) then go for it

In terms of reputable private custodians, there are a few:

A. Bullionvault - Strength is low spreads, if you want to trade the market a good way to go
B. Goldmoney - Strength is strong infrastructure in place to be used as an alternate currency system
C. Anglo Far-East (the "original private custodian") - Strength is in privacy, and extraordinary governance

The way to go would be based on what you are looking for the most, low spreads, ease of transactions with other users, or privacy and governance.

[Bruno]

Bruno, I have been in contact with Peter several times over the last few weeks. He has a very solid grasp of the macro economy and he is a very smart guy whom I like alot.

His background is in securities though, and I would not call him an expert when it comes to the bullion industry.

Perth Mint certs are fine as a way to further diversify your portfolio, but I do not consider them as strong as private custodial vaulting via bailment law, because Perth Mint certs are claims on an un-allocated pool.

In order of preference on how to own gold I would say:

1. Take some physical delivery to your comfort level, this varies by person what is comfortable
2. Hold gold in a few places outside the jurisdiction of the country you live in, vaulted privately, outside the commercial banking system, allocated or allocated pool preferred
3. Then after you have a solid base there if you want to dabble in Perth Mint Certs or ETFs (those fall into the same category in my eyes) then go for it

In terms of reputable private custodians, there are a few:

A. Bullionvault - Strength is low spreads, if you want to trade the market a good way to go
B. Goldmoney - Strength is strong infrastructure in place to be used as an alternate currency system
C. Anglo Far-East (the "original private custodian") - Strength is in privacy, and extraordinary governance

The way to go would be based on what you are looking for the most, low spreads, ease of transactions with other users, or privacy and governance.

Thanks for the breakdown. That certainly helps to make a more informed decision.

Make sure to let Peter know how many out there appreciate his voice.