Gold: Over-Owned or Over-Reported?

By: Adrian Ash | Wed, Jul 7, 2010
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Hey, let's ignore the facts. Just feel the frenzy...!

DID YOU HEAR about the giant gold coin auctioned in Austria late last month?

Of course you did - courtesy of Bloomberg if not CBS, the Daily Mail, BBC, BusinessWeek, USAToday, France24, Vancouver Sun, Wall Street Journal, Financial Times, Daily Telegraph, San Fran' Chronicle, Khaleej Times or The Australian...

You could hardly kick the cat for tripping over this story. Which is more than can be said for bidders missing the auction. Not even the final buyer turned up. Madrid's Oro Direct sent a written bid instead.

"There were no counter offers," as Reuters confessed, "in an auction room packed with more journalists than potential buyers."

Still, it made good copy. Or it would have, had the story gone to plan. Because the 100-kilo gold coin - one of only five $1m Canadian Maple Leafs ever produced by the Royal Canadian Mint - sold for just melt value (€3.27m), rather than the 28% premium touted to the financial pages by the auctioneer's advisors.

But hey, let's ignore the facts. Just feel the frenzy! There's a crazy gold rush going on. Everyone agrees! Or at least, everyone in the financial media. Finance.Yahoo now quotes gold futures prices in its Market Summary box on the homepage, right alongside New York's big stock indices, crude oil contracts, and 10-year Treasury-bond yields. Reuters' homepage also features gold investment news whenever it can, putting news of a $2 rally in wholesale prices second only on Tuesday morning to the Nikkei hitting 7-month lows, and ahead of crude oil's drop to 4-week lows "on economic pessimism."

So never mind that Reuters' gold piece didn't feature in the top 10 either shared or viewed stories. No matter that - up there at the top - "Jessica Simpson" continued trending on Yahoo searches, as did Lindsay Lohan, with Bruce Willis and his new cologne now hot on her heels, and Orlando Bloom's Hugo Boss contract not far behind.

Gold Mined as % of World Stock

See, humanity isn't fixated on celebrity, oh no. It's been filling its boots with gold bars and coins instead...a sure sign of global financial panic and a clanging bell that the top must be in.

Gold is over-owned, not over-reported. Saturation is here! Those guys shouting "Bubble!" at the Wall Street Journal and the Sydney Morning Herald...they're smart contrarians, not jobbing hacks simply pitching for this year's "Phil Space" award. Oh sure, they didn't call gold when it hit 20-year lows a decade ago. But they can spot a bubble when they see one. Right?

"Gold investment is very visible, but expression is low," said John Levin, HSBC's head precious metals trader in London, at the FT's Silver Conference in the City last month.

On a show of hands from the audience - some 100-odd delegates - less than half owned or were invested in precious metals. And that was amongst the most qualified sample of the world's population you could wish for...an institutional precious metals conference in the City of London, heart of the world's professional bullion market.

"We're only now seeing big money accounts," he said, "true investment...portfolio allocations seeking gold and silver in a secure location, where they can just put it to bed."

"We're almost at the beginning of the real run," Levin added, inviting delegates to ask their friends, family and acquaintances just how much gold and silver they'd rushed into lately when next they met.

Put down your iPad, newspaper or TV remote, and go do the same perhaps.

 


 

Adrian Ash

Author: Adrian Ash

Adrian Ash
BullionVault.com

Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK's leading financial advisory for private investors, Adrian Ash is the head of research at BullionVault, where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

About BullionVault

BullionVault is the secure, low-cost gold and silver exchange for private investors. It enables you to buy and sell professional-grade bullion at live prices online, storing your physical property in market-accredited, non-bank vaults in London, New York and Zurich.

By February 2011, less than six years after launch, more than 21,000 people from 97 countries used BullionVault, owning well over 21 tonnes of physical gold (US$940m) and 140 tonnes of physical silver (US$129m) as their outright property. There is no minimum investment and users can deal as little as one gram at a time. Each user's unique holding is proven, each day, by the public reconciliation of client property with formal bullion-market bar lists.

BullionVault is a full member of professional trade body the London Bullion Market Association (LBMA). Its innovative online platform was recognized in 2009 by the UK's prestigious Queen's Awards for Enterprise. In June 2010, the gold industry's key market-development body the World Gold Council (www.gold.org) joined with the internet and technology fund Augmentum Capital, which is backed by the London listed Rothschild Investment Trust (RIT Capital Partners), in making an $18.8 million (£12.5m) investment in the business.

For more information, visit http://www.bullionvault.com

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Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/