The Telegraph reports that the rich turning to gold bars for safety.
(emphasis mine) [my comment]
Merrill Lynch says rich turning to gold bars for safety
Merrill Lynch has revealed that some of its richest clients are so alarmed by the state of the financial system and signs of political instability around the world that they are now insisting on the purchase of gold bars, shunning derivatives or "paper" proxies.
By Ambrose Evans-Pritchard
Last Updated: 10:32AM GMT 09 Jan 2009
Rich investors are spurning gold exchange traded funds in favour of krugerrands.
Gary Dugan, the chief investment officer for the US bank, said there has been a remarkable change in sentiment. "People are genuinely worried about what the world is going to look like in 2009. It is amazing how many clients want physical gold, not ETFs," he said, referring to exchange trade funds listed in London, New York, and other bourses.
"They are so worried they want a portable asset in their house. I never thought I would be getting calls from clients saying they want a box of krugerrands," he said.
Merrill predicted that gold would soon blast through its all time-high of $1,030 an ounce, and would hit $1,150 by June.
The metal should do well whatever happens. If deflation sets in and rocks the economic system it will serve as a safe-haven, but if massive monetary stimulus gains traction and sets off inflation once again it will also come into its own as a store of value. "It's win-win either way," said Mr Dugan.
He added that deflation may prove the greater risk in coming months [it won't]. "It's very difficult to get the deflation psychology out of the human brain once prices start falling [If the citizens of Weimar Germany could get over this "deflation psychology", then Americans can too]. People stop buying things because they think it will be cheaper if they wait."
Merrill expects global inflation to hover near zero, with rates of minus 1pc in the industrial economies [Merrill was saying, "don't sell your stocks" back in October 2007. Bad advice]. This means that yields on AAA sovereign bonds now at 3pc will offer a real return of 4pc a year, which is stellar in this grim climate. "Don't start selling your government bonds," Mr Dugan said, dismissing talk of a bond bubble as misguided [another mindless deflationist].
My reaction: I have always recommended physical gold. ETFs like GLD should only be used for retirement accounts where owning physical gold isn't an option.
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Eric, your last couple of articles seemed to confirm that deflation has us by the "you know whats".
In this current environment I would "hold my fire" on gold. Deflation is running like a wild fire and when we hit bottom is when I would buy gold because then the "fiscal stimulous" will be overwhelming.
A big blind spot for deflationists is that they don't or can not imagine the government literally dropping money from the skies. They don't realise that our capacity to manufactor money is GREATER than the Weimar republic because its all ELECTRONIC.
They WILL pay people via unemployment subsidies etc. to dig holes if they must. But they will INFLATE. So, think market action=deflation, government action =inflation. Government action will be inflationary to be sure.
Where is the best place to own gold? I found out GLD doesn't have 100% reserves and its mostly paper gold for future delivery. I have turned to GTU and CEF; these hold 90% physical bullion in a treasurery rated vault in Canada. Recently i have found goldmoney.com and I kind of like it because I own the underlying asset. I am still a little uncomfortable with it though because I am not sure I could take physical delivery of a small amount. Is there company that lets you buy and sell physical gold coins or silver coins? Where is the best place to own gold besides my house?
Well, it took them long enough! But it's good news that the rich are piling in because it means goldbugs are no longer on the fringe.
Andy,
The easiest and most expedient way to buy gold is GoldMoney.com. Physical gold is good too, but it's hard to locate good product today and can take a while to get delivered.
Personally, I wouldn't touch ETFs with a ten-foot pole. I have a gnawing suspicion that the same people manipulating the COMEX are principals in the ETFs, which is not a very reassuring thought. Also, some analysts have suggested that naked short selling is going on in the ETFs and that they don't always have physical metal to back all their shares. There are too many uncertainties with ETFs for me.
Dave
http://daveeriqat.wordpress.com/
P.S. If you insist on physical gold, OnlyGold.com in Phoenix, Arizona and APMEX.com in Oklahoma are two excellent sources.
Dave
http://daveeriqat.wordpress.com/
I think GoldMoney has an arrangement with Kitco.com
whereby those with a GoldMoney holding can order coins from Kitco.com for physical delivery. Here is Kitco.com link with the GoldMoney info on left side:
https://online.kitco.com/bullion/
completelist.html
With all due respect, Anonymous, I think you have it backwards. Kitco sells GoldMoney "goldgrams" as a reseller.
It doesn't appear to offer any option for paying for physical gold with goldgrams.
Dave
http://daveeriqat.wordpress.com/
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