The New Trend In Gold

470
Mon, Nov 5, 2012 - 9:25pm

Our bullion and coin affiliation, the Hard Assets Alliance, recently published this very interesting paper in conjunction with Casey Research.

The paper is printed below and I want you to read it very carefully. Study the charts, too. Then, what are your conclusions? Do you agree with the central tenet of the paper, namely that demand for paper metal is waning, or do the charts tell a different story?

I look forward to reading your comments.

TF

The New Trend in Gold

By The Hard Assets Alliance Team

It's not too often that you see a major shift within the gold market.

The last such recalibration in sentiment for gold investors was the introduction of the first gold-backed ETF in 2004, and the subsequent explosion in exchange-traded products (ETPs) for bullion and precious-metals equities.

Today, another tidal change is under way, as the flow of funds into structured bullion products ebbs. I think this shift – as you'll read about in a moment – signals two things. First, it confirms that growing numbers of investors are increasingly nervous about the reckless monetary and fiscal paths being pursued on a global scale. Identifying this trend early on will let investors position themselves accordingly.

Second, it tells me that acting now – securing the gold you want and need – is critical to withstanding the likely fallout ahead from the mountain of unpayable government debt and promised benefits. If we're correct about the dismal future of all major currencies – the dollar's inexorable decay in purchasing power and the "race to the bottom" between it and other currencies – then failing to act will greatly degrade your future standard of living.

What is this new trend? It's simple, yet powerful...

Investors are shifting from paper to physical

We began to watch this trend after it was reported last year that billionaire hedge fund manager John Paulson dumped his shares in the ETF GLD, opting instead to purchase physical metal. Since then, the shift out of paper proxies for gold and into the metal itself has picked up steam, and it's now clear that a new investor trend is under way.

Here's the evidence. The following chart shows the total purchases since 2001 of gold coins and bars versus the net additions to gold ETPs.

Total coin and bar purchases are up 96% since 2009, while net additions to ETPs are down 73% over the same period.

While ETPs include the ownership of physical bars, it's clear that increasing numbers of investors are buying more bullion than proxies. This is a remarkable shift, especially given the claimed popularity of GLD.

The shift is even more dramatic with silver.

Investors have tripled their silver bullion purchases since 2007, while the exchange-traded vehicles sold 26 million ounces more than what they bought to back their funds last year.

Why is this happening? And what does it mean?

Certainly some of the shift stems from concerns with the funds themselves. While we discount allegations that these funds don't possess the metal they claim to hold, there are other issues, such as complicated custodial structures and the possibility of leasing or substituting paper certificates for physical metal.

Another reason for the shift is certainly due to global economic, fiscal, and monetary concerns. As fears of systemic risk ratchet higher, it's only natural for investors to gravitate toward the safest methods for holding physical metal. Throw in events like what happened to MF Global last year, and it's easy to understand why many investors would prefer holding their own bullion over a fund.

More important, what should we do as a result of this trend?

First, this is not a "keeping up with the Joneses" debate. We support the overall thrust of this shift into physical metal; gold is not an obscure metal that sits in a vault and "does nothing." It offers direct and immediate financial protection for you and your family like nothing else can.

Remember that gold is above all else the world's best, time-tested form of money – something people were duped into doubting in the 20th century, but are now beginning to remember. Today's environment is exactly one in which gold shines: eroding purchasing power of paper currencies, vulnerable global economies, fears of inflation and/or deflation, a shaky banking system, insurmountable public debt levels, and fanciful money-printing schemes… if there were ever a time to own gold, this is it.

Having metal in your control and at your disposal empowers you in times of turmoil and lets you avoid dependence on counterparties.

Second, this trend carries a subtle signal: diversify. If risks are at a level sufficient to encourage holding physical metal, it's also worth diversifying that risk. Stash some at home, use private vaults, and store some internationally. Even large institutional investors frequently use more than one facility. No single method or location is risk-free, so spread it around.

An easy way to do that is with a new breakthrough program: Hard Assets Alliance. Storage locations include Zurich, London, Melbourne, New York, Salt Lake City and Singapore. You can conduct all services online, and the metal is fully allocated and registered in your name. Selling and taking delivery are as easy as buying or selling GLD. Perhaps most attractive is that your order is bid out to a network of dealers who compete for your business, ensuring you get the best available price. All of the details are available in our free Action Kit.

Remember: once Main Street enters the precious metals market – whether it's an overnight event or a slow awakening over time – we expect supply for physical metal to become increasingly spotty, premiums to rise, and much higher gold and silver prices to ensue. That process may be under way now, so our advice is to make sure your stash of gold and silver is big enough to get to the other side of the crisis intact.

Bottom line: this is a trend you want to be a part of – and you don't want to be late.

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  470 Comments

Groaner
Nov 6, 2012 - 1:50pm

Good news! Good news!

I just killed 2 flies that were buzzing around my head...I have a good feeling going forward now.

not kidding they were driving me nuts, and you guys know thats true.

MrC
Nov 6, 2012 - 1:53pm

wow, oil is on fire ... nice

wow, oil is on fire ... nice to see silver and gold up aswell

Nov 6, 2012 - 1:59pm

Groaner- congratulations!

However, that is the first positive emotion I have ever heard you express on this blog. Is everything OK with you? Just checking.

Perhaps this silver amulet will set things right in your world again.

GroanerSouthern Cross
Nov 6, 2012 - 2:00pm

SouthernCross

You should consider a Bible study to obtain accurate knowledge of the truth.. I cant believe people eat this up...

fly a christian and american flag? huuh?

tyberious
Nov 6, 2012 - 2:00pm

Jim Willie: U.S. recovery is

Jim Willie: U.S. recovery is a fairy tale – Part 1

from Gold Money News:

Jim Willie, statistical analyst and newsletter writer at GoldenJackass.com, talks to GoldMoney’s Alasdair Macleod about the economy, the impact of a zero interest rate policy, and flaws in economic statistics.

Willie states that the Federal Reserve’s ongoing efforts to debase the US dollar are contributing to a relentless deterioration of the US economy.

The Fed is committed to keeping interest rates at zero, and therefore has to continue to intervene in the bond market. As opposed to mainstream economic thought, Willie argues that the extraordinary low interest rates are not stimulating the economy, but rather destroying capital and hindering genuine growth.

When money has a negative real cost, market participants are forced to hedge — for instance, by buying commodities. At the same time the housing market is stuck in decline even though official statistics will have you believe otherwise. Bank inventory of foreclosure homes is not clearing and still sitting at 9-11 million homes. Willie emphasises that economic statistics in the US are distorted and that the US has actually been in recession for the last four years — government unemployment statistics are in his view flawed. He expects the recession to accelerate over the coming mo

GroanerPining 4 the Fjords
Nov 6, 2012 - 2:01pm

Hey thats a riot,, my new motto,, just killed a fly..

Have you killed a fly today?

they do bug me..

GroanerPining 4 the Fjords
Nov 6, 2012 - 2:10pm

Pining 4

I am not always negative.

I just got back from being out in the ministry and I returned on a man I talked to a couple of weeks ago and he me that told his wife died last year and was able to show him some scriptures on the resurrection of the dead and the hope of seeing her again, healthy and young right here on a paradise earth under the 1000 year rein of Christ.

He is a very wealthy man and I was impressed that he listened to the message.. Of course its not mine. To me that was very positive

Dyna mo humPining 4 the Fjords
Nov 6, 2012 - 2:11pm

Pining!

About your sense of humor. Its a gift and you use it well!

Bugzy
Nov 6, 2012 - 2:12pm

Oil and Gold

I guess folk have already made their minds up who to vote for by this morning.

No need to keep spending a fortune, keeping all those motorists happy, and Gold bugs sad.

Shoe in me thinks.

Bugzy

Edit: Wow, this heaven sounds awfully dull. Why does one need all this Gold if there are no pockets in shrouds? Are we hoping to buy our way in? It is harder for a camel to pass through.....

Oh never mind....... I hope you feel very secure in the knowledge that (fill in the blank).

Peace to all. Even the crazy ones.

Nov 6, 2012 - 2:19pm

Groaner

That is a positive message, and I hope he was able to hear you. I do not really believe that in real life you are a grumpy Gus all the time, I just get a kick out of your persona on this site- consistently "Groaning" about how we are constantly getting screwed by the markets. It is how I feel too most of the time, actually! So for the record, I think your consistent persona here is quite funny (probably because the things you are moaning about are absolutely true, and frustrating to us all).

Don't you go changing!

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