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All that glistens is gold…rarely have you heard that told

October 11th, 2008 by admin | Filed under Daily News.

I was looking for some gold coins the other day, to protect myself from the gathering maelstrom. I think the price of gold is going to do really well as the Central banks continue to debase the currencies through massive currency expansion programs. 

So I called a bullion dealer…no luck. He’d sold out. I rang a few buddies and they told me of queues for several London bullion dealers. Ok, I thought, EBay…my old friend… will come to my rescue. I logged into eBay to look for some 1 oz gold coins. To my absolute amazement, I found that 1oz gold coins were changing hands at a 26% premium to the spot price of gold! I was stunned. Holy Moly! I better get this sorted before the rout turns into a feeding frenzy for gold. I reluctantly bought 2 1 oz coins at the price offered….$1150 per ounce anbd added them to my collection. This highlights a very important shift that I hadn’t seen before in the gold bullion market.

The paper market for gold is no longer trusted. How can it be when the physical prices are so far removed from the gold spot price? The reason is that people are terrified of the counter party risk not only in the credit markets, but also in the gold market. It also reflects the panic and the mad scramble that has set into the Gold market to reflect the real fear in the banks safety. People are genuinely, truly terrified! How else can this huge premium be explained?

I’m not buying gold for this reason. I’m buying it as an inflation hedge for when the printing presses at the Fed go into full, round the clock operation, as they have to do. Once this happens, we will have hyper inflation and gold will be one of the few sources of capital security that there are…as it has proven over thousands of years and will likely prove for thousands more. I didn’t notice many people calling it a barbarous relic…even the IMF love it…otherwise why do they have so much of it?

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