Financial News
Tara Loader Wilkinson
15 Nov 2010
A lawsuit filed last week against global banks JP Morgan and HSBC by investors in the US, over an alleged conspiracy to manipulate the market for silver futures, was the latest news to take the shine off the gold derivatives industry, wealth managers said. JP Morgan did not return calls for comment. HSBC declined to comment.
Ned Naylor-Leyland, partner at Cheviot Asset Management, said a lack of trust in banks and the spectre of counterparty risk was a problem. “I hear Swiss banks are turning out their vaults for clients wanting to take home their gold. Trust is wearing thin.”
The suggestion of manipulation followed assertions that paper claims on gold far outweighed the physical asset. This year, Jeffrey Christian, managing director of commodities market researcher CPM Group, said a hundred times more gold and silver changes hands each year than is produced or used.
According to the World Gold Council, global demand for gold bars climbed by a third between the second quarter of 2009 and the same period this year, while demand for gold ETFs and similar products rocketed 414%.
Nicholas Brooks, head of research and strategy at ETF Securities, said concerns that many ETFs are not backed by physical assets are overblown. He said: “Our ETFs are 100% backed by physical gold in vaults in London. There are other gold investment vehicles listed globally that do not provide the same level of detail on their holdings or independent audits and this may be a factor fuelling some of the conspiracy theories.” LINK...
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We have been advising our clients to take the common sense approach to this problem. Think about the fundamental reason why people invest in Gold in the first place? For insurance against a failing financial system, a loss of confidence in government and the economy. So why would you trust your "Gold Insurance" in the hands of the creators of the problem to begin with? Maybe the ETF's really do have the gold they say they do, but their prospectus' clearly state that they can trade derivatives, so who really knows? We believe there's NO substitute for physical Gold in YOUR HAND!
As the old saying goes, "He who holds the Gold, makes the rules." BK
