May 04, 2005

Global Property Bubble?
by Mark O'Byrne

Weekly Markets

Stock markets were mixed if largely unchanged and interest-rate markets were also unsettled and volatile.
Commodities and precious metals were mixed but largely down with oil dropping more than 10%.
The slowest US gross domestic product growth in two years - at a 3.1% annual rate in the first quarter of 2005 - subdued sentiment in many markets. Analysts had expected GDP growth of some 3.5%.

Precious Metals

Gold was up marginally some $0.70 for the week. From $433.70 to $434.40

Silver was again volatile and was down 5.3% for the week from $7.26 to $6.87. It thus gave up much of last weeks 3.71% gain.

Platinum (July) was down 0.3% for the week: from $873 per ounce to $867.

Palladium (June) was down 2.5%: from $201 per ounce to $196.

The UK precious metals consultancy Gold Field Mineral Services Limited (GFMS) released a bullish gold report - suggesting the gold price is likely to reach $500. GFMS are normally quite conservative in their forecasts and not known for bullish precious metal forecasts.

They cited the fundamental factors of supply and demand and the weak macroeconomic fundamentals of the US economy as the primary drivers of the bull market in gold. According to their Chairman, Phillip Klapwijk, the increasing upside potential was due to the continuing twin US deficits, the precarious US dollar and the possibility of a sharp slowdown in the US economy.

The GFMS survey also said mine production fell 5% in 2004, the largest decline in annual mine output since 1943. Production dropped by 128 tons to 2,464 tons on operational delays, poor weather and mine closures. Gold supply through scrap metal and official sector sales also fell.

GFMS believe there is a clear upside for the gold price, chiefly stemming from investment potential. Mr Klapwijk noted, "With the twin US deficits marching forward unchecked, dollar weakness, and eventually, a sharp slowdown in the US economy are distinct possibilities. Ally that with an event driven rally in the oil price, then gold heading for the $500-mark no longer looks fanciful." Furthermore, the consultancy believes that the down side is quite restrained, given the robust nature of physical demand and its ability to respond to a dip in the price.

Australia's The Privateer noted "the very tight trading range that has persisted for almost a month has now been broken out of on the upside.... Gold has broken back above both its longer-term (20 day) moving average (MA) and shorter-term (10 day) MA. And once again, the shorter-term MA has moved back above the longer-term MA - always a pre-requisite for a concerted upmove on the daily chart. The last time this happened Gold rallied to an intraday high of $US 448.

"On the point and figure chart, the trading range as shown by the very compressed sideways action has now been broken on the upside. What was a potential double bottom at the $US 424 level last week has now become an actual double bottom, always a STRONG sign that Gold has established support upon which to build another upward thrust."

The Gartman Letter posts a gold chart since 2000 showing five triangles (the last forming right now) and remarks:
"We really are not much for pattern recognition, but when a pattern repeats and repeats only a fool would not pay attention. In gold (in US dollar terms) it has been one "triangle" after another through the entire bull move, with another developing presently. As in the past, this one is likely to resolve itself with prices moving higher, and so we remain bullish."

Adam Hamilton of Zeal Intelligence writes is his essay 'Euro Gold Stealth Bull' that:
"Today euro gold's secular support is near EUR325, not too far from EUR350. This is much higher than the EUR300 support levels of early 2003, the last time euro gold tried to break the EUR350 chains. From this much higher base, which is rising constantly, euro gold has a growing probability of rising beyond EUR350 and staying there for good.

I continue to believe that this probable coming EUR350 breakout will prove to be the single most important technical event of this entire gold bull to date. I think it is a far bigger deal even than gold climbing north of $500 in dollar terms. EUR350 could very well prove to be the very catalyst that ignites Stage Two, when gold rises in all currencies instead of just primarily the US dollar.

Why is this EUR350 breakout so crucial? Regardless of the technical arguments for an already underway stealth bull in euro gold the EUR350 high-water mark of recent years still colors the perceptions of most European contrarians. They are well aware of the dollar bear and dollar gold bull, but until they see gold rise to new bull-to-date highs in their local currency they will remain skeptical that gold has any real strength beyond the dollar's weakness.

EUR350 has an excellent chance of unleashing great pools of European capital that have largely remained on the sidelines until now. This added international gold demand could very well catapult it up into Stage Two where it starts rising at a more rapid pace in all currencies, not just the US dollar. More than any other single factor, international investor participation could radically change the face of this entire gold bull.

At Zeal we are continuing to closely monitor the euro gold situation and will certainly report .... when it once again challenges EUR350. This will probably be an excellent opportunity to add new trades since a further surge in gold is probable once the Europeans believe EUR350 is decisively broken and start chasing gold again.

In the meantime, if you are European, I hope you consider the possibility that euro gold has already been in a moderate stealth bull. It is not the unsustainable anomalies that make a bull or bear, but the prevailing primary trend. And while most of the gold action has been due to the dollar bear, not all of it has."

We were featured in Business Plus magazine in an article about investing and diversifying into gold.

The article on the whole was good and balanced. There was a slight caveat that should IMF gold sales resume the price of gold could fall to some $300. We do not know of any respected commodity or currency analyst who believes that given the many fundamental factors that have led to gold's 70% increase in the last 4 years it could somehow now fall back to $300. The reality regarding the unlikelihood of IMF gold sales is often not grasped which is understandable given the lack of sound analysis of the subject.

The reality is that the chance of IMF gold sales are slim to none. As not only are the US, the majority IMF shareholders, against it so are the other IMF shareholders. The President of the ECB, Jean Claude Trichet, the head of the Bundesbank, the Canadian Finance Minister and many others have come out against the proposal. It has also been pointed out how it would be as easy to revalue the gold to today's gold market prices ( the gold is valued at 1945 prices) and forgive the debt to the deserving developing countries in dollar terms.

Business Plus reported how the respected entrepreneur and expert in the field of oil, precious metal and natural resource industries John Teeling was also enthusiastic about gold's prospects due to powerful global players aligning themselves for a future global confrontation. Such geopolitical uncertainty would lead to a demand for hard tangible assets such as gold.

Oil

Oil was again massively volatile and ended down 10.2% after last week's 6.2% surge. It was down $5.67 for the week closing at $49.72 from $55.39. The decline was blamed on evidence of a slowing US economy. Economists had expected first quarter growth to be some 3.5% when it turned out to be only 3.1%.

It was the first time that the price of oil has fallen below the $50 mark in two months and the increasing average oil prices of recent months in now leading to increased inflation and slowing growth concerns.

The elder statesman of the oil industry and former oil executive , T Boone Pickens who is now the CEO of hedge fund BP Capital, told CNBC that oil production is now peaking globally especially in Russia and Saudi Arabia. He predicts that we will never again see prices in the $40 to $50 range and that oil will be over $60 per barrel by the end of 2005 and gasoline at $3.00 per gallon at the pump. Average prices in the US right now are at around $2.00 per gallon. A further 50% increase in gasoline prices in the very oil dependent US economy would seriously impinge on long term economic growth prospects.

Other Commodities

Reuters Commodities Research Bureau's Index was down 0.5% to 304.88 from 306.53 last Friday.
The CRB's year to date gains are 7.7%. Since hitting a low of 182.83 in October 2001 it is up some 70%.

The Reuters CRB Index ( the 17 basic components include hard tangible assets such as Metals, Textiles and Fibers, Livestock and Products, Fats and Oils, Raw Industrials, Foodstuffs). One of the CRB index's greatest strengths is the fact that there is an equal weighting of all of its 17 components. This weighting assures that no price increase in any single commodity, like oil, can significantly skew the entire index. Significant moves in the CRB are only possible when the majority of its component commodities are moving in unison with a particular primary trend. Oil, silver and gold only account for 3/17th of the entire index.

The Goldman Sachs Commodities Index was down 6.8%. The GSCI is a world production-weighted commodity index which next year will be composed of 24 liquid exchange traded futures contracts. The GSCI includes energy, industrial metals, precious metals, agricultural and livestock products. It is up 15.3% year to date.

Base metals
Base metal prices mostly declined amid the economic slowdown in the US.
"Slowing economic growth" would lead to "slowing growth in metal demand", Briggs said.
By Friday, three-month copper prices slid to $3,213 per tonne on the London Metal Exchange Friday from $3,267 a week earlier.
Three-month aluminium prices moved to $1,814 per tonne Friday from $1,868.
Three-month nickel prices gained to $16,000 per tonne on Friday from $15,875.
Three-month lead prices advanced to $958 per tonne Friday from $944.
Three-month zinc prices fell to $1,293 per tonne Friday from $1,303.
Three-month tin prices stood at $8,010 per tonne Friday from $8,150.

Rubber
Rubber prices were mixed amid heavy rainfall in producer countries in Asia.
"It's been a fairly quiet subdued market, on the whole, a downward" trend, one anonymous London trader said.
The upcoming "Golden Week" of holidays in China and Japan next week pointed to thin trading conditions, he added.
In Osaka, the RSS 3 June contract dropped to 140 US cents on Friday, from 141.90¢ a week earlier.
Singapore's RSS 3 June contract rose to 131¢ on Friday, from 129.75¢.

Cocoa
Cocoa futures posted moderate gains as the world's top producer Ivory Coast moved a step closer towards peace.
"A breakthrough on the political stalemate that has dominated prices. . . has pressured prices down," said Refco analyst Ann Prendergast.
Ivory Coast announced it would hold a first round of presidential polls on October 30, taking a major step forward towards implementing a peace deal signed earlier this month in Pretoria.
On Liffe, London's futures exchange, the price of cocoa for July delivery gained to £817 per tonne on Friday from £815 a week earlier.
On the CSCE, the New York futures market, the July contract added to $1,497 per tonne on Friday, from $1,496.

Coffee
Coffee prices rallied amid the ongoing threat of freezing weather hitting harvests in leading producer Brazil.
"Local meteorologists are alerting farmers to the increased possibilities of a crop-damaging freeze in 2005," Prendergast said.
On Liffe, Robusta quality for July delivery firmed to $1,086 per tonne on Friday from $1,065 a week earlier.
On New York's CSCE market, Arabica for July delivery rose to 126.80¢ per pound on Friday, from 122.20¢.

Sugar
Sugar prices pushed upwards while strong demand was expected from Asia and Russia.
"Traders are looking to a resurgence of physical offtake from Russia, China and India to shore up prices in an atmosphere of limited supply," Prendergast said.
Indonesian officials ordered 227,000 tons of raw sugar last week.
By Friday on Liffe, the price of a tonne of white sugar for August delivery climbed to $246.50 on Friday from 244.80 a week earlier. On the CSCE in New York, a pound of unrefined sugar for July delivery stood at 8.48¢ on Friday from 8.38¢.

Soya and grains
Soya and grains prices were mixed while weather conditions in key producer the US remained humid.
"The market will continue to go down as long as the weather remains favourable," said Fimat analyst Dan Cekander.
On Liffe, wheat for May delivery stood at £65.75 per tonne on Friday from £67.30 a week earlier.
In Chicago, the price of wheat for May delivery gained to 325¢ per bushel Friday from 310.25¢.
Maize for May delivery declined to 205.25¢ per bushel on Friday from 210.25¢.
Soyabeans for May delivery fell to 624¢ per bushel on Friday from 637.50¢.
May-dated soyabean meal - used in animal feed - dropped to $195.60 per tonne on Friday from 197.30.

Cotton
Cotton prices progressed as keen demand continued.
"The market remains supported by decent demand but future prices may have a hard time sustaining the rally given the amount of supply available," Prendergast said.
New York's July contract increased to 57.20¢ per pound on Friday from 54.40¢ the previous week.
The Cotton Outlook Index of physical cotton stood at 58.55¢ on Thursday from 56.55¢ a week earlier. - AFP

Bloomberg's Koh Chin Ling and Jason Gale reported on China's continuing insatiable appetite for raw materials and commodities. "China, the world's biggest cotton user, may boost imports of the fiber by 83 percent in the year starting Aug. 1 because of rising demand from textile mills and a smaller harvest, a U.S. agricultural attache said. China may import 3.3 million metric tons of cotton (15.2 million bales) in the next marketing year."

Currencies

The US dollar index was up some 1% from 83.50 to 84.44.

Most currencies were down against the dollar for the week.

The euro gave up it's gains of last week and was down 1.95 points or 1.49% for the week to close at 1.2858 from 1.3053.

Talk of Chinese revaluation supported the Asian currencies. For the week, the Indonesian rupiah and Japanese yen gained more than 1%. The Taiwan dollar, South Korean won, Singapore dollar, and Australian dollar all gained about 0.7%.

Bonds

The treasury and bond markets sold off with a consequent rise in yields.

The 10-Year Treasury note yield was down 5 basis points for the week to 4.20%.

Five-year Treasury yields dipped 2 basis points, ending the week at 3.90%.

Two-year Treasury yields ended the week up 5 basis points to 3.65%.

Long-bond (30 year) yields dropped 6 basis points to 4.51%.

The spread between 2 and 30-year government yields sank to a multi-year low of 86. The 2 year note yield rising and the 10 year note yield falling indicates there are increasing worries about a future recession. Greenspan's "conundrum" is that in an economy which is meant to be recovering capital should flow out of the bond markets with a consequent rise in yields.

Besides the fundamental health of the US economy there is also concerns regarding the likelihood of General Motor's debt grading being down graded to junk status and the implication this will have on the bond and wider markets.

'Bond Market Braces for GM's Cut to Junk'

Ellen Simon, business writer the Associated Press wrote how 'High-Yield Bond Market's Troubles May Be Harbinger of Rough Days to Come for Economy'

Hard times for high-yield bonds may presage more rough days for stock markets and the economy.

Investors typically demand higher returns on high-yield debt, commonly referred to as junk bonds, to compensate for the risk that the issuers could go broke and not pay them back. That's why bond rating agencies term them "below investment grade" securities.

But in recent years default rates have been low and institutions and individual investors in search of higher payouts have snapped up billions of dollars worth of these bonds or mutual funds that specialize in them. Among the companies whose debt trades as junk are Qwest Communications International Inc., Nextel Communications Inc. and El Paso Corp.

Now investors are backing away from junk bonds as the economy shows signs of slowing and the Federal Reserve keeps bumping up interest rates. Almost $1.5 billion in high-yield bond offerings were postponed last week, some leveraged buyout deals could be in trouble, and mutual fund investors are starting to cash out of high-yield bond funds.

"Historically, the debt market, especially the high-yield market, has frequently served as an early warning signal for broader weakness in the capital markets," said Duncan Yin, a research analyst at CRT Capital Group, a Stamford, Conn.-based broker-dealer specializing in distressed securities.

Many of the factors causing the junk bond market to cool are unique to it.

For instance, analysts are forecasting that General Motors Corp., which is rated one notch above junk by the three largest bond ratings agencies, will be downgraded to junk status sometime this summer, said Brian Arsenault, the high-yield strategist for Morgan Stanley.

They expect Ford Motor Co. to stay investment grade until 2006, but after that, its debt may be junk, too, Arsenault said.

The fear is that those downgrades will mean the junk-bond category will be awash with new debt. The total value of junk securities is about $900 billion, Arsenault said. GM's rated debt, which doesn't include the car loans its financing arm makes to customers, total $200 billion, according to Standard & Poor's.

The volume of GM debt has investors worried that some institutions, including insurance companies and state pension funds, would be forced to unload their GM bonds because of rules requiring them to only hold investment-grade securities.

Stocks

The Stock Markets performance was mixed.

The Dow Jones Industrial Average was up 0.3% for the week to 10,192.
The S&P 500 Index, of more significance than the DOW, was also up 0.4%.
The Nasdaq Composite was down 0.4% for the week. This after last week's 1.26% drop and the week before's 4.56% drop.
The Transports were down marginally. This was unusual considering the oil price collapse.
The more defensive Utilities were up 1%.
The Morgan Stanley Consumer index was was up fractionally.
The Morgan Stanley Cyclical index was down 1%.
The small cap Russell 2000 and S&P400 Mid-cap indices were down 1.7% and unchanged respectively.
The NASDAQ100 and the Morgan Stanley High Tech index were both largely unchanged.
The Semiconductors were down 1%.
The Street.com Internet Index and NASDAQ Telecommunications indices were down 1% and down marginally respectively.
Biotechs are down 1%.
The Broker/Dealers were up 1.25% and the Banks were up 2%.

Corporate 'insiders', that is directors and senior management are selling in record numbers. During this past March alone insiders sold 60 times more company shares than they purchased (60:1). This is close to the most extreme ratio ever. How extreme is this? Historically speaking, a 20:1 selling to buying ratio is considered a bearish indicator; today's figure is 3x as great.

But as for what the crowd of investors is doing, AAII's survey shows that "67% of the individual investors' portfolios remain invested in stocks." Another recent survey shows that a near record 57.4% of U.S. households own equities.

Thus the investing actions of what is cynically known on Wall Street as the 'smart money' and the 'dumb money' is clearly flashing warning signals.

It may be prudent to reduce exposure to property and equities and increase exposure to more defensive conservative asset classes such as cash deposits and gold.

Commentary

The week was dominated by the less than expected US GDP growth numbers. Now even the most sanguine bulls on the US economy are having to acknowledge that the US economy is at the very least entering what they refer to as a 'soft patch'. The administration of President George W. Bush and more starry eyed economists and financial commentators have remained relentlessly optimistic about the outlook for the US economy but are now being confronted by some economic realities which will be harder to ignore.

This 'soft patch' is not likely to be helped by very high oil and commodity prices which are now beginning to create inflation. Higher prices or goods are not being matched by higher wages and this along with increasing interest rates may soon impinge on the voracious US consumer who have been crucial in propelling global economic growth in recent years.

Talk of the economy entering a 'slow patch' is now being accompanied by talk of a global housing bubble. Housing starts fell by a very large 17.6% in March and this may be a harbinger of things to come and there is increasing concerns regarding property prices globally and whether the bubble is soon to burst. Consumer confidence in the US declined for the third month in a row in April, with expectations for the months ahead slipping to the lowest level in nearly two years. US durable goods orders unexpectedly fell 2.8%: this was also the biggest fall in two years.

Donald Trump told CNBC that he did not believe that property prices were in a bubble but said that he was very worried by the rising price of oil and inflation which is affecting both the construction industry and the consumer.

Warren Buffet answered Berkshire Hathaway Inc. shareholders questions on a range of questions. On real estate Buffet said "A lot of the psychological well being of the American public comes from how well they've done with their house over the years.... Certainly at the high end of the real estate market in some areas, you've seen extraordinary movement.... People go crazy in economics periodically, in all kinds of ways. Residential housing has different behavioural characteristics, simply because people live there. But when you get prices increasing faster than the underlying costs, sometimes there can be pretty serious consequences."

Buffet also warned regarding the huge trade and current account deficits and the threat of a major terrorist incident and the need to be prepared for the worst that can happen.

Buffet is the most astute and prudent investor of our time and it is important to take note of his opinions. The rest of his thoughts on the challenges facing the US economy can be found at The Oracle Speaks - Warns of Property Bubble - CNN/Money.

Despite the most extreme and unprecedented monetary and fiscal stimulus in the history of the world Americans are now deeper in debt than ever before in history. Credit expanded by $10 trillion between 2000 and 2004 compared to nominal GDP growth of only $1.9 trillion.

Federal Reserve Governor Dr. Donald Kohn warned that a housing bubble may exist, that the US economy was in unfamiliar territory and that complacency would be ill advised.

He focused on the potential risks stemming from a number of imbalances he said lay under the "placid surface" of the economy, most notably the record shortfall in the U.S. current account, the broadest measure of the nation's foreign trade and one that shows Americans spending far more than they produce.

In addition, Kohn said, were the related imbalances of the sizable federal budget deficit and low U.S. household saving rate, and the big run-up in home prices, which he said raised questions over whether a house-price bubble might exist. "The magnitude of these imbalances is increasingly moving into unfamiliar territory," Kohn said.

"In all likelihood, adjustment toward reduced imbalances in the United States and globally will be handled well by markets without, by themselves, disrupting the good, overall performance of the U.S. economy," he said. "Still, complacency would be ill-advised," Kohn cautioned, saying it was possible asset prices would shift abruptly.

Opinions

"But caution does seem to be in order.

There can't be any certainty that property prices will continue their steep, relentless rise, particularly since interest rates are going up, perhaps higher than previously feared if oil starts to inject inflation into the economy.

And rising interest rates ought to give some pause for thought to anyone thinking of borrowing big sums to buy assets that may not rise in price.

Big debts when asset prices are falling is bad arithmetic."
Stephen Evans, US House Market Boom Set for Bust?, US Business Correspondent, BBC

Buffett: "A lot of the psychological well being of the American public comes from how well they've done with their house over the years. If indeed there's been a bubble, and it's pricked at some point, the net effect on Berkshire might well be positive [because the company's financial strength would allow it to buy real-estate-related businesses at bargain prices.

"Certainly at the high end of the real estate market in some areas, you've seen extraordinary movement.... People go crazy in economics periodically, in all kinds of ways. Residential housing has different behavioural characteristics, simply because people live there. But when you get prices increasing faster than the underlying costs, sometimes there can be pretty serious consequences."

Munger: "You have a real asset-price bubble in places like parts of California and the suburbs of Washington, D.C."

Buffett: "I recently sold a house in Laguna for $3.5 million. It was on about 2,000 square feet of land, maybe a twentieth of an acre, and the house might cost about $500,000 if you wanted to replace it. So the land sold for something like $60 million an acre."

Munger: "I know someone who lives next door to what you would actually call a fairly modest house that just sold for $17 million. There are some very extreme housing price bubbles going on."
Warren Buffet, The Oracle Speaks - Warns of Property Bubble - CNN/Money

"Interest rates are starting to increase and many homeowners are finding themselves falling behind with their mortgage payments." This is reflected in the number of people who can't make their mortgage payments, which, according to Foreclosure.com, is up, as the number of "Foreclosure listings nationwide went up 50% from February to march 2005." Numbers-wise, they say, "over one million Americans were late on their mortgage payment last month and half went into foreclosure."
National Legal Debt Centre

"The great American housing bubble, like its obese counterparts in the United Kingdom, Ireland, the Netherlands, Spain and Australia, is a classical zero-sum game. Without generating an atom of new wealth, land inflation ruthlessly redistributes wealth from asset-seekers to asset-holders, reinforcing divisions within as well as between social classes."
Mike Davis, 'Riotous Real Estate', Los Angeles Times

"In all my years in this business, never before have I seen a central bank attempt to spin the debate as America's Federal Reserve has over the past six or seven years. From the New Paradigm mantra of the late 1990s to today's new theories of the current-account adjustment, the US central bank has led the charge in attempting to rewrite conventional macroeconomics and in making an effort to convince market participants of the wisdom of its revisionist theories. The problem is that this recasting of macro is very self-serving. It is a concentrated effort on the part of the Fed to exonerate itself from the Original Sin of failing to address asset bubbles. The result is an ever-deepening moral hazard dilemma that poses grave threats to financial markets.

I am not a believer in conspiracy theories. But the Fed's behavior since the late 1990s is starting to change my mind."
Stephen Roach, 'Global: Original Sin', Morgan Stanley

"In all likelihood, adjustment toward reduced imbalances in the United States and globally will be handled well by markets without, by themselves, disrupting the good, overall performance of the U.S. economy.... Still, complacency would be ill-advised.... asset prices could move by large amounts unexpectedly."
Donald Kohn, 'Imbalances in the U.S. Economy', Federal Reserve Board

"I teach Financial Management on a part-time basis in Dublin City University and a central tenet of what I teach concerns the virtues of portfolio diversification. I am a firm believer and have argued in numerous presentations on the topic of Property v Equities that it is not a case of either/or, but a case of both. I would be a big fan of holding gold as part of a diversified portfolio and would feel more confident about it than any other asset class at the moment."
Jim Power, Chief Economist, Friends First Ireland

Opinions and Quotes can be found in articles in the News and Commentary sections of www.gold.ie.

Mark O'Byrne
www.goldassets.co.uk

Brief Profile
Mark O'Byrne is Executive Director of Gold and Silver Investments Limited (www.goldassets.co.uk). He is regularly quoted and writes in the international financial media and was awarded Ireland's prestigious Money Mate and Investor Magazine Financial Analyst of 2006. He is a financial analyst who believes that due to the current macroeconomic and geopolitical situation, saving and investing a small portion of one's wealth in precious metals is both prudent and wise. Gold and Silver Investments Limited believe that hard tangible assets and monetary assets such as gold and silver, the world's oldest forms of money, will once again become the safe haven assets of choice in the coming years. The increasing economic and geopolitical uncertainties at the dawn of the 21st Century mean that gold, silver and platinum will become increasingly important in the new century as a means of preserving financial wealth.

Gold & Silver Investments Limited is a precious metals brokerage company which sells and buys a wide variety of gold, silver and platinum numismatic and bullion products to all class of investor, companies and institutions in Ireland, the UK and internationally taking payment in all major currencies. We assist our clientele in diversifying their assets with a comprehensive range of precious metal coin and bar products and by allocated and unallocated precious metal storage facilities licensed by the Chicago Board of Trade (CBOT), Comex and Nymex and by other precious metal storage programs.

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