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."

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.

Silver headed down to $14?

Well, at least according to this article on BusinessWeek.com.

Silver, the worst-performing precious metal this year, may drop as much as 11 percent to $14 an ounce, according to technical analysis by Barclays Capital.

The attached chart shows prices formed a so-called “head and shoulders top” and then failed to hold above a 27-month pivot line, which the bank says is a bearish signal. The second chart shows a drop to about $14 would equate to a 50 percent retracement of the metal’s advance from October 2008 to December last year, according to a series of numbers known as the Fibonacci sequence.

I mention this because it's in the news, but honestly, it's not really news I care about.  I've bought silver at prices ranging from $12-18.  I plan on continuing to buy for the foreseeable future.

Sure, I'd like to pick up more at $14, but I think the upside so far outweighs the downside that I'm not really worried about a move of a dollar or two either way.  Should you hold off a planned purchase to save a couple of dollars an ounce?  Sure, as long as you're sure it's coming.  Of course if you are, you should probably be buying put options on SLV.

When you think about it that way, it sort of makes you wonder how sure you are, doesn't it?



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