Gold in Motion: What Does it Mean?

It's been some time since Venezuela shipped its gold home.  Much more recently (and surprisingly) Germany set in motion plans to do the same--and was told it would take seven years!  More incredibly, the state of Texas wants their gold on Texas soil.

Now it appears that countries and states are perhaps not the only ones who want their gold "closer to home"  Check out this from Bull Market Thinking.

"A stunning piece of information was brought to my attention yesterday. Amid all the mainstream talk of the end of the gold bull market (and the end of the gold mining industry), something has been discretely happening behind the scenes.

Over the last 90 days without any announcement, stocks of gold held at Comex warehouses plunged by the largest figure ever on record during a single quarter since eligible record keeping began in 2001 (roughly the beginning of the bull market). See chart below."

"Bottom line: While mainstream voices question whether or not gold is still in a bull market, smart money appears to be questioning something else. They appear to be asking themselves, “Do we want to continue storing our physical metal within the Comex system? How can we best whisk it away from fraud, theft, or bankruptcy (including our own)?”

I can't tell you what this means, but it does raise a question.  Is that gold you own, and store elsewhere, or that gold or silver ETF, ETN etc., really as safe as you want it to be?

To paraphrase the Dos Equis man, "Stay careful my friends."

Reducing Counter-Party Risk in Your IRA

Terry Coxon recently did a great article on owning gold in your IRA for Casey Research.  I highly recommend that you read the article in its entirety.  He covers a variety of issues related to having gold in your IRA extremely well.

The one that I found most interesting, though, is a technique for eliminating counter-party risk while holding gold in your IRA.  Now it's not particularly difficult to hold gold in your IRA.  And for those who only require "gold like" performance, there are, of course, the gold ETF's.

Here's the thing.  Many of us hold gold as a form of crisis insurance.  I can't speak for you, but in a crisis, I don't want to count on anyone to hold my most precious assets.  And Terry Coxon just may have the answer.

"There is a third alternative, which I've dubbed the Open Opportunity IRA, that starts with a simple idea but opens many doors for you. It's an IRA that directly holds just one thing – a limited liability company that you manage. The IRA custodian is the legal owner of the LLC, but you deal with the custodian only during the setup process. During that process, assets are rolled over from your old IRA to the new custodian and then into the LLC. After that, you as Manager of the LLC have your hands on the steering wheel and can invest and reinvest in just about anything with any broker, dealer or other party, and you can do so without waiting for the custodian to approve anything and without paying the custodian for storage or for handling transactions."

I have to say that after the last few years I am more than intrigued at the thought of securing my retirement assets far from Wall Street.  It seems very clear to me that while Wall Street manages to treat Wall Street.  Well, it treats the rest of us poorly on a fairly regular basis.  Wouldn't it be nice to put at least a portion of your retirement savings out of reach of Wall Street?

"In the case of gold and silver, since the metal will be owned by the LLC and not by the IRA custodian, you will be limited to American Eagles and Buffaloes. But you are free to buy them from any source that is not related to you, and you can store them in whatever way you think is best – in a safe deposit box, under the floorboards at home, or in the back of your refrigerator. And they don't need to stay or even be purchased in the US."

I have to say this seems almost too good to be true.  So as always, please be sure to investigate this idea to your own satisfaction.

Take Possession of Your Gold and Silver

The following is from another fascinating post on Zero Hedge:

"While Gerald Celente is crying about his lost six-figure account, Bill Fleckenstein also has personal money tied up with MF Global. He is hopeful that he will get it back but is critical of the authority figures involved. Celente does not expect to get all of his money back. Ann Barnhardt of Barnhardt Capital Management has shuttered its operations after six-years in the business. She did not feel like her clients’ funds were safe in the futures and options market any more. Lawrence Lepard, who posted on Zero Hedge, wonders if the MF Global failure was a hit job done by the Fed. My point is not about who is right or wrong . . .

The author, in addition to coining the phrase "fractal in a frying pan," makes the point that a global banking meltdown we are all at great risk of losing assets we believed to be safe.

I have no idea who first said that gold has no counterparty risk.  It's quite likely that I first saw the idea expressed by Bill Bonner in his Daily Reckoning.  In any case, it's probably worth considering that idea at least one more time.

Insurance contracts, stocks, mutual funds, ETF's, CDs, annuities, bonds, dollars, and a host of other investments all share one potentially fatal flaw.  Each is only as reliable as some party on the other side of the equation.

A gold or silver coin in your hand is an entirely different matter.  While it's true that you may need another party to trade it to, thousands of years of history suggests that your gold or silver coin will remain a safe store of value.

And please note that I did say "in your hand."  Iin good times or even fair times I have a reasonable amount of faith in GLD, SLV, Perth Mint Certificates and the like.  It seems fairly likely, though, that we have bad times ahead.  Plan accordingly.

Porter Stansberry: Bullion over ETF's

The following quote is by Porter Stansberry from Stansberry's Investment Advisory.   It's a paid subscription, so please don't expect to see the full text via that link unless you're willing to subscribe.

"I believe it is critical to hold physical bullion, not an exchange-traded fund (ETF) that invests in gold. The volume of contracts that trade on the futures markets (where ETFs control a lot of metal) dwarfs the amount of actual physical gold in the entire world. This indicates two things to me... 

First, the price of gold is likely depressed by selling in the futures markets. Whether that's a conspiracy or simply good trading, I can't say. .  .   But whether the price of gold and silver is manipulated doesn't really matter to me because, like it or not, the price is eventually going higher.

The second thing the volume of futures trading relative to the supply of gold tells me is... sooner or later... there will be a run into physical gold. When that happens, the futures markets will collapse because there won't be enough metal to meet demands for physical delivery."

I don't often use a quote unless I can link to the original material. I made an exception here for a couple of reasons. First, I think Stansberry has a lot on the ball. You might even want to subscribe.

The reason I couldn't resist this quote though, is that it makes two really vital points. The first is that investing in precious metals ETF's is very different from investing in precious metals bullion. The results may be similar--last year, this year, next year, and beyond. But someday, they made the diverge dramatically, and perhaps even catastrophically, for those who have relied on ETF's.

The other key point, which is implied if not stated, is that we may not recognize the difference between ETF and bullion until a run on bullion (and crashing ETF prices) occurs. At that point, of course, it will be too late to adjust your holdings without suffering significant financial loss.