As the world raises its eyebrows at the news out of Europe, buying gold is becoming more of a clear signal here in the US.
Posted by Adam King on December 12, 2011
Buying Physical Gold
December 12, 2011 – As the world raises its eyebrows at the news out of Europe, buying gold is becoming more of a clear signal here in the US. Gold in this market, of course, makes logical sense in addition to investment sense. Gold, not stock, is the best performing asset of the last twelve months. Though prices have dipped on the expectation that the European summit might yield some meaningful results, the reality of the situation is becoming clear. The European debt problem persists despite all interventions taken thus far.
Gold will rise as this becomes evident in the coming weeks. As it does, investors who have already chosen the only smart money, gold, will benefit. But this also throws a light on the physical ownership question. MF Global, the American bank that went bust due to a bad bet on European debt, is currently in a law dispute with HSBC over who owns the physical gold and silver underlying a $850,000 set of contracts. This is particularly important, not because of the given amount of the dispute. The contracts in question actually pertain to only one disputed owner.
It demonstrates, however, that underlying physical gold, which operates on a fractional reserve-lending basis, is unsafe in the vaults of banks. We know MF Global was commingling accounts. That’s how they were able to fund their $53 billion losing bet on Europe—customer money. And this was made fully legal and permissible by the governmental regulatory body in charge of overseeing those transactions, the Commodities Futures Trading Commission.
The concern is that banks, as demonstrated by the particular gold and silver bars at issue in the lawsuit, are commingling their customer’s gold. There are many words being thrown around the net, such as “rehypothecating,” but this is just fancy jargon to say, “other people’s money.”
There is no indication, whatsoever, that MF Global, HSBC, or JP Morgan would not, could not, or have not been using gold and silver they hold in their vaults on behalf of customers as capital or collateral in the investment speculations they make in the course of business. If that bet goes bad, what happens to the gold?
The point is simple. Gold is the best way to invest your now, but be aware of the risks the banking sector is taking with greater and greater frequency. Ask yourself if you want to trust banks that have already proved their irresponsibility multiple times. Buying gold and holding is the best way.
Stewart Lawson
Senior Staff Writer – Certified Gold Exchange
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US Gold Market
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