Central Banks Are Still Big Gold Buyers; My Doubts About GLD; ECB Schemes Lift Gold
Gold is showing relative short term strength once again. Details on how the European Central Bank will proceed with its ambitious bond buying program via the ESM (European Stability Mechanism) have been leaked. Those who are not completely sold on the idea of fiat bond buying by deploying wads of funny money cash with the help of the International Monetary Fund (IMF, which is largely dependent on the U.S.) fear faster inflation.
As a result, gold continues to find support at around the $1,770 zone. This is good news for the gold bulls as it has focused attention on the European financial crisis and away from the issue of gold plated Tungsten bars. That tungsten stuff being passed off as real gold will fester in the background and will no doubt become a larger issue, eventually, especially for an entity like GLD. I see GLD as useful for short term speculating via call and put options to play the short term gyrations in the spot price of gold. Same for SLV, the silver ETF. Holding GLD long term? I have my doubts.
Of its over 1,300 tons of gold bars, are all bars really pure bars? IF an independent assayer could provide an unconditional ‘yes’ I would then warm up to GLD. But we know that there shall never be a 3rd party auditor who would vouch for the GLD holdings being genuine gold. So color me a GLD skeptic. At the end of the day, GLD is a paper form of gold, worth the paper it’s printed on. You have no direct ownership of the gold in the GLD vault. Should there be a problems with its tons and tons of gold, then you’re up a certain stinky creek without a paddle.
This is why I like physical, vertified and verified rare gold coins.
Again, I am not telling you to sell your GLD right now, but to be very cognizant of the risks and have an escape plan should things go willy nilly.
Related: Gold edges up; central banks add to bullion holdings in July and August http://ecoti.ms/CWKkfa. NB, central banks are adding to physical gold holdings (the real thing) and paper GLD!
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Author Jim Kingsland
Market commentator with focus on Gold and Silver after long broadcast career at FNN, Bloomberg, and Fox. #RandomHouse published author on PMs. Jim has also been involved in projects for CAC and Coinplex.
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