 Is Your Gold Really
There?
John Rubino
Jun 17, 2009
I was getting ready to post
an update on GoldMoney's new service that allows customers to
take delivery of their gold and silver in smaller, more practical
bars. But Run To Gold's Trace Mayer got there first, with an
article that also explains the controversy now raging over
whether mints and other bullion storage firms can be trusted.
In a nutshell:
The Royal Canadian Mint, it
seems, has misplaced $20 million of precious metals. Though probably
(mostly) just a bookkeeping error, it has a lot of account
holders wondering if their metal is really there, and has led
some advisors to recommend that clients demand delivery of their
bullion. Taking the other side of the issue, Kitco's John Nadler
labeled those advocating taking possession of stored bullion
"saboteurs" and advised worried account holders to
"get a grip."
Mayer disagrees, and begins
his rebuttal with a quote from GATA:
Yes, there well may be plenty
of gold left at the Royal Canadian Mint, as was insisted upon,
with great agitation and anxiety, by the paper gold marketer
quoted in today's Ottawa Citizen story, dispatched to you a little
while ago - just as there may be plenty of gold left at Fort
Knox. But those are not the most compelling questions. No, the
most compelling questions are: Who really owns that gold?
And how many people have claims to it?
Then he explains why this matters:
Gold is one of the most transparent
of assets. Au, or gold, has the periodic number of 79, a boiling
point of 2,856°C or 5,173°F, a standard atomic weight
of 196.966569 g/mol and is metallic yellow in appearance. On
the other hand, the gold market is extremely murky with many
shadowy characters lurking in the unsavory places attempting
to place risky barriers between owners and their gold. [Editor's note: More
gold info here]
There are many untrustworthy
agents which purport to help you answer the questions of how
to buy gold or silver but really attempt to sell you paper silver
and paper gold which, in many cases, is merely a form of fool's
silver or fool's gold.
I have thoroughly reviewed
the prospectus and found problems with the GLD and SLV ETFs and
later found another problem with the GLD ETF where the 10-K precludes
the right to audit physical gold inventories. There are other
third-party storage services such as E-gold or the Perth Mint
in Australia. But in July 2008 E-Gold pleaded guilty to
money laundering charges in US federal court. As mentioned
earlier, the nation of Canada's Royal Canadian Mint withheld
employee bonuses and sent in external auditors to determine the
cause of a multi-million dollar 'unreconciled difference' between
the financial accounting and the physical bullion.
The primary reason people own
gold or silver is to reduce risk; counter-party, payment, performance,
currency crisis, etc. At all times and in all circumstances
gold and silver remain money. Gold and silver are insurance
for when everything else fails.
What exactly should these 'saboteurs'
and those sadly misinformed souls who listen to them 'get a grip'
on? I think some physical gold would be a good idea. After all,
none of these issues matter until they are the only things that
matter. Demanding physical delivery of physical gold or
silver bullion is always a good exercise. It keeps the
third parties and vaults busy, provides jobs and allows the owner
of the bullion to have a cute piece of metal to pet.
On the question of where best
to store precious metals:
When combing through a prospectus
or user agreement the language to find should be extremely simple
and clear. Here is an example from the GoldMoney User Agreement
under VIII. Section E:
"A User may, by providing
GoldMoney with delivery instructions, which instructions must
be in the form prescribed from time to time by GoldMoney and
the Vault, at any time request GoldMoney to change the goldgrams
and silver ounces in his Holding into grams of gold or ounces
of silver that are available for physical delivery to the User,
provided that there are sufficient goldgrams and silver ounces
to take delivery of a London Good Delivery bar of gold, which
bar weighs approximately twelve thousand five hundred (12,500)
grams, or bar of silver, which bar weighs approximately one thousand
(1,000) ounces. GoldMoney will not charge a fee for its service,
but fees may be charged by the Vault for acting on the delivery
instructions."
On 7 May 2009 they announced
that "In conjunction with Baird & Co. customers can
now redeem and take physical delivery of their gold in convenient
units of 100 gram or one kilo (1,000 gram) gold bars."
When I experimented with this
option I received this message:
"Only Holdings with verified
owners that are resident in the following countries can currently
redeem bars: United Kingdom, Guernsey, Isle of Man, Jersey. We
expect to make these bars available to all of our customers in
June 2009 after the initial trial launch has been completed."
I am excited to see the ability
to take physical possession at any time of gold in smaller amounts
than 400 ounce LBMA bars. This is an example of what to
look for in the language of the legal documents of the third-party
service you use to store your physical gold or silver bullion.
I agree on all counts:
Taking delivery of physical gold and silver is good for both
the individual and the system. And all allocated storage services
are not created equal. Some hold verifiable, unencumbered
metal, while others may not. So before you commit capital to
something that purports to be "risk free" like allocated
storage, read the prospectus and make sure the metal is there,
and available on demand.
Trace Mayer has a book,
by the way: The Great Credit Contraction:
available
here as an eBook download.
John Rubino
email: emanager@dollarcollapse.com
website: Dollar
Collapse
321gold Ltd
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