Thursday, July 7, 2016

Most of the world still doesn't get it as money rushes into paper gold ETF's rather than physical metals

Money is an interesting thing.  First, people spend their lives trying to accumulate as much of it as possible but then hand off that money to a stranger with a title or Degree to 'protect' and 'grow' that money over the course of their working lives.

And secondly, people spend more time watching reality television per day than they do in learning to understand the very financial systems in which their lives are so tied to out of apathy, laziness, or misguided trust.

2008 should have been a wake-up call to most investors and especially those who have their money tied up in stocks, bonds, annuities, or other paper assets.  But just as remembrance in the events of 9/11 have faded away more than a decade after the attack, so too have people forgotten how fragile and corrupt the paper based Wall Street market system really is.

Which is why it should come as no surprise that the recent moves into gold and silver have primarily been done using paper based ETF's, and not through the purchasing of real and tangible metals which have no counter-party risk at all to the mechanisms of the financial system.

As Bloomberg notes, holdings in bullion-backed exchange-traded funds rose 4.1 tons to 2,001.4 tons on Wednesday, data compiled by Bloomberg show. That’s larger than the alleged gold reserves held by China (in reality China holds far more gold but it willing to only represent a fraction of its official holdings) the biggest consumer and a consistent central-bank buyer in recent months. The latest increase followed the biggest one-day gain since 2009 in the SPDR Gold Shares, the largest gold ETF. 
Global assets in the funds have surged 37 percent this year and prices are near a two-year high as slowing growth, negative rates in Europe and Japan and the likelihood that the Federal Reserve won’t hike further combined to boost demand. The U.K.’s vote last month to quit the European Union has added further impetus to that pro-bullion mix. Gold has likely entered the early stages of the next bull run, according to UBS Group AG, while ABN Amro Group NV says prices may hit $1,425 this quarter. 
“Investment demand has been very strong, with institutional buyers of ETFs the big gorilla in the room,” said John Butler, a vice president at GoldMoney, which provides custodian and investment services in Toronto. “We’ve reached a psychological tipping point where people see a material increase in the risk of a repeat of what we saw in 2008.” Client demand has been so strong recently that GoldMoney has struggled to keep up, he said. - Bloomberg
As the old saying goes, if you don't hold it, you don't own it.


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