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TMFAleph1 (94.88)

Gold: Listen to the Money Printers

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September 27, 2010 – Comments (4) | RELATED TICKERS: ABX , IAU , GLD

Another bullish sign from central bankers. I welcome all constructive/ civil feedback.

Alex D

4 Comments – Post Your Own

#1) On September 27, 2010 at 11:29 PM, XMFSinchiruna (27.35) wrote:

Alex, I'm not a fan of this particular article.

You either believe that gold is going higher, or you don't. Anything in between only adds unnecesarily to confusion among investors. You offer no specific reason for your discomfort in recommending exposure here.

In the first paragraph, you suggest that gold hit a record high "on news that many European central banks have all but ceased gold sales". I find those causal statements linking a days price action to a single news item highly problematic in all but the rarest cases where such correlation can be safely interpreted.

As for UK's untimely gold sales, there are potential explanations that are quite apart from presumptions of hapless malfeasance.

Finally, I submit that none of the three bullion vehicles listed at the close of the article represent suitable vehicles for bullion exposure.

http://www.fool.com/investing/general/2010/06/01/how-to-get-physical-with-gold.aspx

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#2) On September 28, 2010 at 12:52 AM, TMFAleph1 (94.88) wrote:

Chris--

Thanks for your feedback. Let me address these points in order:

- I cannot offer certainty or even conviction where I think there is none to be had. As far as a reason for my discomfort, I was very clear: It's impossible to assign an intrinsic value to gold. That is surely enough reason for value-oriented investor to be uncomfortable.

- On the second point, I have to agree that the statement was cavalier and the manufacturing of causality is something that I myself find annoying in the financial media.

- I don't follow you here: I did not claim or imply malfeasance on the part of the UK Treasury.

- As for the last point, I've thought about this and I simply don't agree with hardened gold enthusiasts regarding the nature or magnitude of the risks they ascribe to physical gold ETFs. I think organizations like GATA allow their natural propensity to explain everything in terms of manipulation or 'suppression' get the better of their judgement sometimes.

Cheers,

Alex D

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#3) On September 28, 2010 at 1:13 AM, TMFAleph1 (94.88) wrote:

Chris,

Reviewing your article, I do think the difference in tax treatment is a powerful argument in favor of the Sprott fund.

Alex D

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#4) On September 28, 2010 at 8:48 AM, XMFSinchiruna (27.35) wrote:

TMFMarathonMan

Hi Alex,

Thanks for taking my comments constructively, as they were intended. It was not my place to fault you for presenting gold as a conundrum ... that is your prerogative if that is how you perceive the outlook. It just caught me by surprise because I had understood your outlook to be somewhat stronger in the bull camp.

Malfeasance was a poor word choice on my part. But I've encountered plentiful interpretations of the UK gold sales portray them as a straightforward blunder of ill-fated timing. I do not view that simple explanation as likely to account for the motivations to sell when they did. Further investigation is required, but in the meantime I don't think it provides a solid example of how disconnected central bankers are from market dynamics. There is more than meets the eye here.

I agree that GATA exhibits zeal in attempting to make its case, but having reviewed substantial evidence on the matter, and especially considering the whistleblowing testimony of the London bullion trader with respect to wanton price manipulation, the case for systematic manipulation conducted by bullion banks including those very banks acting as custodians for the bullion ETFs you mention is very strong indeed. The article you linked to does nothing to refute GATA's allegation that bullion banks are being permitted by the futures exchange to settle contracts with delivery of ETF shares in lieu of bullion.

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