The Strange Case of Dr GLD & Mr Bullion
Graham Summers
Gold’s been acting fishy…
Gold is somewhat unique amongst investments in that it trades both in physical form- bullion, or the actual metal- and as an equity- the Gold ETF (GLD). The differences between the two are striking:
|
Gold ETF |
Bullion |
|
Extremely liquid |
Far less liquid |
|
Requires an online brokerage account |
Requires an actual dealer |
|
You own a % of a trust that owns actual gold |
You own actual gold |
|
Can be manipulated by traders |
Cannot be manipulated by traders |
|
Is an equity-based inflation hedge |
Catastrophe insurance |
As you can see, gold trades in two very different forms. And the differences between the two investments go a long way towards explaining the massive discrepancy occurring between the “paper” and “physical” gold markets today.
Gold, posted its biggest one day drop last Friday when stocks began a massive reversal. The talking heads, seeing this, took gold’s previous rally as a fluke¾ the precious metal had spiked from $740 to nearly $900 the previous two weeks as investors sought safe haven. However, none of them bothered mentioning that the drop in gold occurred entirely in the “paper” market.
Indeed, “physical” demand, particularly for gold coins, is red hot. In fact, demand has been so high that the US Mint announced it was temporarily suspending sales of American Gold Eagles, a popular bullion coin, due to shortages.
David Beahm, VP of Blanchard and Co, one of the largest US bullion dealers told Reuters that both the American Eagle and American Buffalo one-ounce gold coins are completely sold out. "Nobody has the Eagles or the Buffalos right now. We bought 2,000 ounces late last week, and those were the last 2,000 ounces that we can find in the marketplace," said Beahm.
Beahm’s not the only one.
I called up my friend Parket Vogt at Camino Coins. Camino’s been dealing bullion for 50 years and Parker says he’s never seen anything like the action of the last week. “Graham, people are going nuts. I actually had to stop selling Krugerrands because premiums are too high. One guy actually called up and bought 500 ounces of gold in on order. That is the single largest sale I’ve had in my entire career.”
Because of this, I view this current pullback in gold as a buying opportunity. This financial crisis is nowhere near over. And gold is still THE great storehouse of value. And while paper gold has dropped, physical gold isn’t showing any signs of a let-up.
Graham Summers
Bio: Graham Summers Graham Summers is the founder and editor in chief for GPS Capital Research. He writes International Wealth Advisory, a monthly investment advisory covering the most profitable opportunities in financial markets today. To date, the International Wealth Advisory portfolio has outperformed the S&P 500 by a wide margin.
PS. I’ve put together a free special report on an unusual opportunity in gold. It’s a single investment sitting atop 713 million ounces of gold. Today, the market values this mountain of wealth at a measly $166 an ounce. There’s easily the potential for a triple digit gains here. To learn more, visit www.globalstockmonitor.com
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