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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−1 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.
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.
John
Rubino
DollarCollapse.com
John
Rubino is co-author, with GoldMoneys James Turk, of The Coming Collapse of the
Dollar and How to Profit From It (Doubleday, December 2004), and author of
How to Profit from the Coming Real Estate Bust (Rodale, 2003) and Main
Street, Not Wall Street (Morrow, 1998). After earning a Finance MBA from New
York University, he spent the 1980s on Wall Street, as a Eurodollar trader,
equity analyst and junk bond analyst. During the 1990s he was a featured
columnist with TheStreet.com and a frequent contributor to Individual
Investor, Online Investor, and Consumers Digest, among many other publications.
He now writes for Fidelity Magazine, CFA, and Proto.
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