While there are a number of specialist companies such as BullionStar servicing Singapore’s retail gold bullion market, the most unusual place to buy gold bars in Singapore must be the Mustafa Centre in the Little India neighborhood.
Located in a building on Syed Alwi Road, and part of another adjacent building on Serangoon Road, the Mustafa Centre is a cluttered haphazard department store and arcade that seems to sell everything from clothes to electronics, from perfumes to gold jewelry, and everything in between. It is also known as being one of the biggest gold jewelry outlets in Singapore.
Crowded and Congested
The Mustafa Centre itself is frequently crowded, often congested, and stays open 24 hours a day. Even trying to approach one of the entrances to the Mustafa Centre can be a stressful experience, and this is after navigating through a maze of often crowded streets if you find yourself approaching from the nearest MRT Station, which is itself a 15 minute walk from Mustafa’s premises.
Once you do happen to find Mustafa’s gold jewelry section, which is located in the basement 1 level of one of the centre's buildings, you will have to navigate past a floorspace crammed with clothes displays before stumbling upon a series of interconnected aisles assigned to gold jewelry.
While this jewelry space is about the size of a basketball court and stacked full of counters displaying gold earrings, gold rings, and gold chains and necklaces, the gold bar and gold coin display is relegated to a tiny rectangular counter, as if it was an after-thought among the masses of gold jewelry being hawked. This small gold bar and coin counter is itself cluttered, and badly presented, and is reminiscent of the display cases of a second-hand IT equipment shop.
The advertised prices for the limited selection of gold bars and gold coins that are on offer at Mustafa consists of a partially typed and partially hand-written price list page that sits on top of the counter. When this correspondent visited on the Sunday afternoon of 29 October, the price list strangely had the dates 28 - 29 October scrawled at the top, as if it had just been written one time that weekend on the Saturday and then not updated over the weekend.
The accuracy of the prices on that particular price list are therefore called into question. Where the Mustafa Centre sources its gold prices or 'Gold Rate' from is also not clear. In India and India's expat communities, 'Gold Rate' is a term often used to refer to the gold price.
Mustafa's bullion products and their prices, although typed, are squashed on to the list, with various hand-written notes along the left and right side margins. Strangely, parts of the list are highlighted in yellow highlighter marker. What this signifies we do not know, but perhaps it refers to the products that are in stock as opposed to out of stock.
Within the actual display cases of Mustafa's gold bar display cases, the gold bars are very much crammed into the display area as if everything in stock is actually on display. The old adage of "more is less" as regards presentation and visual display seems to have been lost on whoever lays out the Mustafa display cases.
Disappointingly, there is also a very limited range and brands of gold bars and gold coins actually offered by Mustafa's gold bullion counter, with nearly everything in the bar section being of the PAMP brand, and with very few gold coin types at all.
A number of precious metals research consultancies regularly do field trips to bullion markets around the world, including Singapore, so as to gauge at first hand the level of retail demand for bullion in a particular market. As regards Singapore, some anecdotal evidence we have heard from these consultancies is that it is virtually impossible to calculate the level of gold bullion demand in the Little India area.
Some of the reason for this is because gold bars and gold coins regularly arrive into Little India that have been hand carried from countries such as Dubai or other regional markets. And so this gold would not be reflected in the Singapore supply statistics of, for example, the Swiss refineries or the Canadian and Australian mints.
There are also a lot of resales of gold bullion in Little India, such as a parent swapping gold bars for gold jewelry to give to a sibling as a wedding present. It is therefore difficult to estimate where the gold bullion sold in Little India comes from. Not Mustafa specifically, but this issue must be borne in mind as regards Little India in general.
BullionStar's Spacious Shop and Showroom
In contrast to Little India's Mustafa, BullionStar could not be more different. BullionStar's shop and bullion showroom in central Singapore is located in an easily accessible and well-known section of New Bridge Road across from Clarke Quay Central Shopping mall. BullionStar's premises is also adjacent to the Clarke Quay MRT station. Those working in the Central Business District (CBD) will find that BullionStar is just a short lunchtime walk from the CBD. And from Chinatown, BullionStar's showroom is less than a 10 minute walk.
All of the gold bars and gold coins in the extensive range of gold bullion stocked by BullionStar are sourced either directly from the world's most prestigious precious metals refineries and mints such as Argor-Heraeus, PAMP, Heraeus, Valcambi, and the Royal Canadian Mint, or are supplied directly to BullionStar by the world's most renowned precious metals wholesalers such as Dillon Gage and A-Mark. BullionStar staff are also knowledgeable about all aspects of the range of gold and silver bullion stocked.
In BullionStar's shop and showroom, the floor-space is generous, the design calm and ergonomic, with many display cases devoted to gold bullion and silver bullion. Nothing is cluttered, and visitors and customers entering the air-conditioned showroom will be able to browse and view a huge range of gold bars and gold coins, and silver bars and silver coins, with every product type stylishly and spaciously displayed in its own display case. All display cases are also well-lit and well presented.
An impressive feature which BullionStar customers find useful are the electronic screens next to each display case which show updated prices for those products. These prices are live and are displayed electronically and updated electronically in real-time.
A final point to note is that the Mustafa Centre's gold bullion counter does relatively poorly in customer reviews, with customer feedback of poor customer service, dis-interested staff, and prices higher than elsewhere in Singapore. Based on reviews on the Singapore website 'Bullion Reviews', Mustafa scores lowest out of all 6 Singapore bullion dealers featured, with Mustafa getting a total score of 3.9 from 27 reviews.
In contrast, on the same review site, BullionStar receives a total score of 9.1 from 131 reviews. And BullionStar's prices are generally perceived to be some of the most competitive, if not the most competitive, in Singapore.
Gold is a highly valuable asset. When your buy gold, It is critical to store your gold bars and gold coins in a location that is secure but at the same time accessible.
Inside a Home
There are many places to store gold and other precious metals in your home, with some places more secure and covert than others. Luckily, since physical gold has a high value-to-weight ratio, for most people, storing their gold bars and gold coins won’t take up too much space.
1. Floorboards: Gold can be hidden under floorboards between joists, preferably under a short section of board covered by a rug or carpet.
2. Chimney: Positioning gold in a recess within a disused fireplace chimney stack is also an option.
3. Within a Wall: A natural hollow or cavity in an internal wall, or a hidden panel in a wall, are also worth considering.
4. Frozen Food: Hiding gold bars and gold coins within frozen food in a freezer is possible, for example, actually buried and frozen within minced meat or in a large tub of ice-cream. Horizontal chest freezers used for long-term deep freeze storage of supermarket produce are ideal for this tactic.
5. Piping: In a kitchen, possible covert storage locations include within a section of disused kitchen piping, or indeed within a section of false piping that has been specifically designed to accommodate your gold bars and coins, but which does not function as a real pipe.
6. Air-Conditioning: Gold can be concealed within an air-conditioning duct, which has the added benefit of usually being above head height.
7. Furniture: Heavy objects such as immovable furniture can also be considered as hiding places for gold, places that may not be obvious to time constrained intruders. For example, gold bars and gold coins could be securely attached within a compartment inside a chest of drawers or even stored inside a piano. A large cache of Gold Sovereigns was actually found inside an old piano in England in 2017.
8. Aquarium: For those with the option, storing a gold bar / gold coin cache inside an aquarium or fish tank is worth considering, among aquatic plants and fish tank paraphernalia.
9. Large Plant Pots: Large indoor plant pots on a veranda, patio or balcony provide another covet place for hiding gold. with the gold within the pots under the actual plants. These pots are always difficult to move, and would not normally be on the radar of a burglar.
Attics and Basements
Attics and basements provide further practical options for covert storage, and the inconvenience and difficulty of accessing such locations could act as a secondary deterrent to thieves.
10. Water Tank: In an attic, one possible place to hide your gold bars and coins is in a covered water tank.
11. Insulation: Another option is to secure your gold under ceiling insulation, preferably on ceiling joists that can support the weight of the gold.
12. Basement: Within the basement of a house, the choices for hiding gold are varied and include alcoves behind walls and under a basement floor.
13. Basement Junk: A gold cache can strategically be placed in one of the many large junk items or boxes that invariably end up being stored in basements - as long as you make a record of which item or box you have stored your gold in.
Garden Shed / Workshop
14. Paint Tin: Gold coins or gold bars can be hidden in an old paint tin in a garden shed or workshop, a tin that is securely sealed and looks to have not been opened in a long time. The sheer difficulty for intruders to search numerous old paint tins in a shed or workshop makes it highly improbable that anyone would spend time doing so during a break-in or robbery.
On Your Land or Property
Apartments will in most cases lack a garden, a location which can offer the adventurous multiple cunning places in which to covertly store their gold.
15. Buried in Garden: If your property has a garden, you can dig down into the ground on your land, wrap your gold securely, and bury it deep enough in the hole under soil.
16. Fishpond: Those with a large enough fish pond could also consider storing their gold cache at the bottom of the fish pond preferably among pond plants or reeds.
17. Under and In Trees: Under a tree in your garden or in the hollow of an old tree trunk on your property provide further concealment opportunities for gold. Indeed, in 2014, a US$10 million cache of 19th century gold coins was discovered under a tree on a property in Northern California.
18. RVs and Caravans: Those with RVs or caravans or rarely used boats that are stored on their properties could consider the possibility of storing their gold in these vehicles. However, this is presuming the entire property is secure and inaccessible to intruders, and runs the risk that the RV or boat or caravan might itself be the target of a robbery.
Hidden Rooms, Home Safes, Display Cases
19. Hidden Room: For those lucky enough to have a panic room (or other hidden room) in their house or apartment, this would obviously be a ready-made location to store their gold, as it is both secure and concealed. But would this be the first place a team of sophisticated intruders would try to locate and access if they had suspicions that such a room existed?
20. Home Safe: A home safe will offer a secure location in which to store gold bars and coins. Home safes rang from the small models such as those found in hotel rooms with digital keypads, to larger safes with combination locks, to large models that are fireproof and waterproof. The main consideration with a home safe is whether the safe itself is hidden and concealed within a house or apartment, or whether it is installed in a location which is easier to access but which could be discovered by burglars.
21: Display Cases: A final home option for those with the means and security, would be to store your gold bars and gold coins in museum style high-security and alarmed display cases within your house or apartment. While this will impress friends and visitors, you would need to be confident that your property is fairly impenetrable.
22. On Public Land: A less used and unusual tactic would be to hide your gold bars or gold coins in a secure and remote location which is on public land, for example in a forest, mountainous area, or coastal location. These locations have the benefit of being completely off the radar, but could by chance be inadvertently discovered by passers by, or disturbed by wildlife. A public location also runs the risk that it could be developed in the future, for example for road or path construction, so your gold could end up being buried under asphalt.
Safety Deposit Boxes
23. Safe Deposit Boxes: Renting and using a safety deposit box is a common way to store valuables including gold bars, gold coins, and other precious metals.
While safety deposit box companies and banks will pitch the fact that only the key holder has access to and knowledge of the box contents, this is a two-edged sword in some jurisdictions because of the following.
If police or other law enforcement officials raid a safety deposit box company in the pursuit of criminal assets, and seize all the contents of all the boxes, then your legitimate valuables could be confiscated and be extremely difficult to get back. For example, a number of safety deposit box companies in central London were raided by Metropolitan police in 2008, events in which everything in every box was seized. In typical government style, gold, jewels and other high value assets were the most of interest to law enforcement. This type of operation undermines the entire premise of deposit box confidentiality and is a disaster for those storing legitimate assets in these locations.
Safety deposit box companies can also be the target of professional thieves. Again, London provides a prime example, when in 2015 the vault of a safety deposit company in the famous Hatton Garden jewelry district was robbed by a gang of professional thieves over an Easter weekend and million of pounds worth of assets were taken from a large number of safety deposit boxes in the vault.
Safety deposit boxes within bank properties also pose another concern, in that since the box location is within a bank premises, the location could become inaccessible in the event banks remained closed during a financial crisis (think Cyprus in 2013), or fall under dictatorial government directives that the contents of safety deposit boxes would be in accessible due to capital controls (think Greece in 2015).
A final point to note is that safety deposit box companies can eventually open your box if you fail to pay the storage charges, and sell whatever is needed to pay the outstanding storage fees.
Stored with Family or Attorney / Solicitor
24. Family Member A less obvious option would be to ask a trusted family member to take care of the storage arrangements for some or all of your gold bars and / or gold coins. Storing portions of your gold in various locations could be considered a 'location diversification strategy.'
This arrangement would obviously be based on trust and you would need to ensure that wherever they stored the gold at their property was itself a secure and sensible place.
25. Attorney / Lawyer / Solicitor: In a similar vein, you could instruct your attorney / lawyer / solicitor to take care of storage arrangements for some or all of your gold. This arrangement would have to be based on a formal contractual arrangement or understanding and could involve a legal trust in some instances. It would probably also involve another layer of costs. Again, you would need to determine that the storage location used by the lawyer or attorney was practical, smart and secure.
External Secure Vault
26. Secure Vault Storage: Beyond home storage options, a popular choice for many is to store their gold in the vault of an external precious metals storage provider. When using such a service, a number of considerations are critical, such as the jurisdiction of the provider, its reputation within the industry, the cost of the storage service, whether the storage is allocated, and the flexibility and access offered to customers to keep track of, view, audit and withdraw their gold.
BullionStar's Secure Singapore Vault
BullionStar in Singapore operates a secure precious metals vault which is integrated into BullionStar's bullion shop and showroom in central Singapore. The storage vault itself is a high security old style steel bar concrete vault with a modern vault door.
Singapore is one of the safest and most secure countries in the world for storing gold bars and gold coins. With virtually no crime, a strong rule of law, and inviolable property rights, the Singapore jurisdiction is a natural gold storage location. Furthermore, the Government of Singapore actively supports and promotes the country as a gold trading and storage hub. There are no reporting requirements on buying, selling or storing gold or other precious metals in Singapore. There are also no sales taxes, no GST, or no taxes whatsoever on buying or selling gold in Singapore.
All customer gold stored in BullionStar’s vault in Singapore is stored on an allocated basis. Customers have full unencumbered legal ownership of their gold. All gold stored in the vault is fully insured for all insurable risks as evidenced by the Insurance Certificate.
All customer bullion product handling is meticulously documented, and all bullion is handled under camera surveillance. All customer bullion is photographed and photos of each customer’s bullion are uploaded to his /her online account.
Customers have full online control to view their gold holdings, view photographs of their gold bars and gold coins, see a transaction history, view the vault insurance certificate, generate a personalized vault certificate, and request withdrawals of gold bullion from the vault.
BullionStar employs a series of audit approaches which provide full confidence to vault customers. Via the 'Live audit report', customers can view photos of their own bullion.
BullionStar employs 5 levels of auditing to bullion products stored in the vault:
The ‘Live audit report’ allows customers to verify their stored bullion online and it view it visually via photographs.
Vault customers can also inspect their own bullion via a personal on-site customer audit at BullionStar's Singapore shop and showroom.
Physical audits of all customer owned bullion are conducted twice a year by LBMA approved independent auditor Bureau Veritas.
A physical stock inventory report is conducted each year as part of BullionStar's financial audit.
BullionStar futhermore conducts its own internal inventory audits.
Finally, BullionStar vault storage customers can withdraw their gold bars or gold coins at any time and have their gold delivered to them, or alternatively collect it in person at the BullionStar shop and showroom in Singapore.
Throughout human history, gold has constantly emerged as an unparalleled form of savings, investment and wealth preservation. Due to its unique characteristics and features, gold has inherent value and cannot be debased. When holding physical gold, there is no counterparty risk or default risk. Wealth in the form of gold can also be held and stored anonymously.
From its ability to retain its purchasing power over time, to its safe haven status in times of financial turmoil and uncertainty, to gold's ability to diversify investment risk, there are many and varied reasons to own physical gold in the form of investment grade gold bars and gold coins.
1. Tangible with Inherent Value
Physical gold is real and tangible. It is indestructible, impossible to create artificially, and difficult to counterfeit. Mining physical gold is arduous and costly. Physical gold therefore has inherent value and worth. In contrast, paper money doesn't have any inherent value.
2. No Counterparty Risk
Physical gold has no counterparty risk. When you hold and own gold bars and gold coins outright, there is no counterparty. In contrast, paper gold (gold futures, gold certificates, gold-backed ETFs) all involve counterparty risk.
Gold deposits are relatively scarce across the world and difficult to mine and extract. New supply of physical gold is therefore limited and explains why gold is a precious metal. Gold's scarcity reinforces it's inherent value.
4. Cannot be Debased
Because of its physical characteristics and features, gold cannot be debased, and gold supply is immune to political meddling. Compare this to fiat money supplies which are constantly being debased and destroyed via deficit government spending, central bank quantitative easing and financial system bailouts. On a survivorship scale, gold has far outlived all fiat currencies by thousands of years.
5. A 6000 Year History
Gold has played a central role in society for thousands of years from the early civilizations of ancient Egypt, right up to the contemporary era. Gold has facilitated international trade throughout history, has been directly responsible for the economic expansion and prosperity of numerous civilizations throughout history, and has even been, due to gold exploration and mining, the direct catalyst for the growth of some of today’s best-known cities such as San Francisco, Johannesburg, and Sydney.
6. Store of Value
Gold is a preeminent store of value. Physical gold, in the form of gold bars or gold coins, retains its purchasing power over long periods of time despite general increases in the price of goods and services.
In contrast, fiat currencies such as the US Dollar are not stores of value and their purchasing power consistently becomes eroded by inflation or the general increase in the price level. Fiat currencies have a long history of either becoming totally worthless and going out of circulation, or else becoming completely debased, such as the US dollar, while remaining in circulation.
Since the creation of the US Federal Reserve in 1913, the US dollar has lost over 98% of its value relative to gold, i.e. the US dollar has lost over 98% of its purchasing power relative to gold.
7. Long- Term Inflation Hedge
Physical gold’s ability to retain its purchasing power over time is sometimes referred to as the “Golden Constant”. This reflects the fact that gold’s purchasing power is constant over long periods of time. This ‘constant’ exists because the gold price adjusts to changes in inflation and future inflation expectations. Therefore, physical gold is a long-term hedge against inflation.
8. A 2500 Year Track Record as Money
Because of its ability to retain value and act as a store of value, physical gold has been used as money for over 2500 years. Gold coins were first issued in the Lydian civilization in what is now modern Turkey. Subsequently gold was used as a stable form of money in Persia, ancient Greece, ancient Rome, the Spanish and Portuguese Empires, the British Empire, and right through to the various international gold standards of the 20th century.
It was only in August 1971 that the US famously suspended the convertibility of the US dollar into gold, a move which triggered the debt fueled expansion that is still having repercussions within today’s monetary system.
To put gold’s monetary importance into perspective, for 97% of the last 2500 years, gold has been chosen by numerous sophisticated civilizations as the form of money par excellence and an anchor of stability, precisely because of its ability to retain its value.
9. Safe Haven
Physical gold acts as a safe haven asset in times of conflict, war and geopolitical turmoil. During the financial market stresses and heightened uncertainties caused by wars, conflicts and turmoil, the counterparty risk of most financial assets spikes. But since physical gold does not have any counterparty risk, investors rush to gold during these periods so as to preserve their wealth. This is analogous to sheltering in a safe harbor. Gold can thus be seen as a form of financial insurance against catastrophe.
10. Portable Anonymous Wealth
Gold bars and gold coins combine high value with high portability. In times of conflict and war, gold bars and gold coins are ideal for transporting wealth and savings across borders and within conflict zones in an anonymous fashion.
11. Universal Acceptance
Gold is universally accepted as money across the world, with the highly liquid global market always providing ample sales opportunities for gold bars and gold coins. This means that whichever city you are in across the world, you can always sell or trade your gold bars and gold coins.
12. Emergency Money
Military personnel are often issued with gold coins that they carry with them in conflicts zones as a form of emergency universal money. For example, the British Ministry of Defense often issues RAF pilots and SAS soldiers with Gold Sovereign coins to carry on their persons during combat missions and activities, such as in the Middle East.
13. Outside the Banking System
In the current era of global financial repression, physical gold is one of the few assets outside the financial system. Gold is not issued by any monetary authority or central bank or government. Because its not issued by any government or central bank, gold is independent of the banking system. Fully owned physical gold, if stored in a non-bank vault or held in one’s possession, is outside the banking system.
14. No Default Risk
Unlike a government bond, there is also no default risk with gold because it is not issued by any authority that could default. Gold bars and gold coins are no one else’s liability. Physical gold cannot go bankrupt or become insolvent. Therefore, there is no need to have to trust any other party when holding physical gold.
15. Portfolio Diversification
Adding an investment in gold to an existing portfolio of other investment assets such as stocks and bonds, reduces the volatility (risk) of the investment portfolio and can increase portfolio returns. This is because the gold price has a low to negative correlation with the prices of most other financial assets, because gold is less influenced by business cycles and macro-economic cycles than most other assets.
Numerous empirical studies by financial academics, as well as industry bodies, such as the World Gold Council, have validated gold’s role as a strategic portfolio diversifier. Optimal allocations to gold in multi-asset portfolios have found to be in the 5% to 10% range.
16. Currency Hedge
There is generally an inverse relationship between the gold price and the US dollar, in that the gold price generally moves in opposite directions to the US dollar. Therefore, holding gold can act as a currency hedge of the US dollar, and help manage the currency risk of portfolios denominated in US dollars.
17. Gold's Metallic Properties
Gold has many and varied metallic properties. These properties provide gold with many technological and commercial applications and uses, which in turn contribute as additional demand drivers in addition to the investment and monetary demand for gold.
Gold is highly ductile (can be drawn into very thin wire). It is also highly malleable (can be hammered and flattened into very thin film). Gold is a very good conductor of electricity and heat. Gold does not corrode or tarnish. It is chemically unreactive and non-toxic to the human body. Gold has a high luster and shine, and an attractive yellow glow.
These properties explain gold’s use in electrical and electronic wiring and circuits (e.g. computers and internet switches), its use in the medical and dental fields, gold’s use in solar panels, space travel, and gold’s traditional uses in jewelry, decoration, and ornamentation. With new technological uses being found for gold all the time, gold's demand pattern is diversified and underpinned by its commercial importance.
18. Physical gold - A tiny fraction of Paper Gold
The London wholesale gold market and the US-based COMEX gold futures market generate huge trading volumes of paper gold that dwarf the size of the physical gold market. However, these markets only trade derivatives on gold (futures and unallocated positions), representing fractionally-backed and unbacked claims on gold that could never be convertible into physical gold by claim holders.
In a scenario under which these paper gold markets became unsustainable, the prices of paper gold and physical gold would diverge, with the paper gold markets ceasing to trade and collapsing, and only physical gold retaining any real value. Physical gold is therefore an insurance against the collapse of the world's vast paper gold markets.
19. By Definition - Not an ETF
Physical gold Provides all the benefits that gold-backed Exchange Traded Funds (ETFs) do not. ETFs provide exposure to the gold price, not to gold. Holding physical gold is by definition direct exposure to gold. With most gold-backed ETFs, you cannot convert the units into gold and take delivery of the gold, and in many cases, the locations of the vaults are not even known. If holding physical allocated gold bars or gold coins in a vault, such as with BullionStar in Singapore, you can always take delivery.
Gold ETFs have many counterparty risks since there are many moving parts in an ETF such as a trustee, a custodian, and a sponsor / issuer. Physical gold has no counterparty risks. When you hold a gold-backed ETF, the quantity of gold backing the ETF declines over time due to management fees being offset against the gold holdings. When you hold physical gold, you always remain with 100% of the actual gold you first purchased. There is no erosion of holdings.
20. Anonymous Storage
Gold can be stored anonymously, either in your possession within your house or property, or in a vault in a jurisdiction, such as Singapore, that has no reporting requirements. Since gold has a high value to weight ratio, storing gold does not take up much space.
21. Independent of Internet
Owning physical gold is not reliant on having internet access and access to electronic wallets and cryptocurrency exchanges. Furthermore, gold cannot be stolen by hacking an electronic address or by transferring or deleting a number in a computer.
22. Real Gold is Measured by Weight
Physical gold is measured in weight, not through a number set by a politician or central banker. When you buy a 1 Kilo gold bar, or a 10 Tola gold bar, or a 1 troy ounce gold coin, or a 5 Tael gold bar, you will always have that gold bar or gold coin, irrespective of the fluctuations of fiat currencies.
While thinking of the value of physical gold in terms of a fiat currency might be convenient, a better way is to think of a gold holding in terms of weight.
23. Coins and Bars - Build a Collection
Buying investment gold bars and bullion gold coins allows you to build a diverse collection of bars and coins that are at the same time a fascinating pastime and a form of investment and saving.
Bullion gold coins from the world’s major mints are beautifully illustrated and often have a connection to history. Investment gold bars from the world's major gold refineries are distinctively different from each other and you can vary a collection by cast or minted bars, and a selection of weights.
24. Physical Gold Feels like Real Wealth
Physical gold feels like real wealth. When you hold ten 1 ounce gold coins in your hand, you intrinsically know that you are holding real wealth, gold that is scarce and that has been costly to produce.
25. Gold as Loan Collateral
Gold can be used as loan collateral. Since gold is highly liquid and valuable, it can be lent and used as a form of financing, and as a way of generating interest. The wholesale gold lending market between central banks and bullion banks is highly active. Likewise, retail gold holders can also in various ways lend their gold to receive financing or interest, with new innovations to do this arising all the time.
26. Central Banks hold Gold
Although the world’s central banks like to downplay the importance of gold because it competes with their fiat currencies, most central banks continue to hold substantial amounts of physical gold bars and gold coins in vaults around the world. They hold this gold as a reserve asset on their balance sheets, and they value this gold at market prices.
Like private gold investors, central banks hold physical gold because it is highly liquid, it lacks counterparty risk, and because gold is a safe haven or ‘war chest’ asset that acts as a financial insurance in times of crisis. Central banks also hold gold for the unpublished reason that if and when gold re-emerges at the centre of a new monetary system, these very same central banks will not be caught out having no gold.
27. Gold for Gifting
Gold coins and small gold bars make great gifts and presents, and gold is a traditional form of gifting in many societies around the world. Gifting a gold coin or small gold bar to mark a birth, or anniversary, or a wedding or other special occasion, is an ideal present that will be highly appreciated by the recipient.
28. Gold for Inheritance
Gold bars and gold coins are a great form of inheritance for your children and family members. Because gold is real, tangible, valuable, and has a highly liquid trading market, it is an ideal asset for inter-generational wealth transfers. Because physical gold is fabricated in convenient weight denominations, such as troy ounces and kilograms, it can be distributed equitably among recipients, and specified equitably in wills and trusts.
The following topics were covered in Mr. Persson's speech:
1) Money System of Today
How does our monetary system work - or doesn't work? Do fiat currencies like the US Dollar have any real intrinsic value?
Mr. Persson describes the purposes and characteristics of money and explains why fiat currencies are not true money per definition. Mr. Persson educates about how money is created and how most money of today only exists in electronic form.
2) Gold Manipulation - Gold Price
Is the price of gold dictated and artificially suppressed? What happens if the current system for gold price discovery fails? Is a gold price of USD 65,000/oz in 5 years realistic?
Mr. Persson discusses how the price of gold is set/discovered on the gold marketplace and how it is vulnerable to manipulation.
Why is Singapore the best country in the world for asset preservation and wealth protection?
Mr. Persson presents the advantages of Singapore as a safe jurisdiction for buying and storing bullion. No taxes on bullion in Singapore, no reporting requirements, strong property ownership rights and safety are some of the properties that makes Singapore uniquely positioned as the best country in the world for asset and wealth protection and preservation.
India’s Government Makes Banknotes Worthless by Decree Overnight
As I write this in the morning of 9th November 2016, there are huge lines forming outside gold shops in India — and gold traded heavily until late into the night yesterday. Depending on who you ask, the retail price of gold has gone up between 15% and 20% within the last 10 hours.
At some places, it was sold for as much as US$ 2,294 per ounce. That is, if you can actually find physical gold — gold inventories at stores are rapidly depleting. All of this happened well before the international price started to move up because of the election results coming out of the US.
Last night (8th November 2016), India’s government banned the use of Rs 500 (~$7.50) and Rs 1,000 ($15) banknotes. This pretty much made most currency-in-use illegal. Banks and ATMs are closed today. The government believes that doing this will help eradicate corruption and push counterfeit money out of circulation. According to the Indian government, the counterfeit money tends to come from Pakistan and helps finance terrorism.
My first instinct when I heard the news was that people would be on the streets this morning. There would be riots and the Indian Prime Minister, Narendra Modi, would be unceremoniously thrown out. Despite being a huge critic of him, I thought he at least had the spine to take bold action, however erroneous it might have been.
I am sometimes too optimistic about India and expect too much goodness from Indians. And I was wrong.
In the morning no opposition against the government was in sight. But there was some animosity detectable between people. Forgetful that they had lined up until late into the night yesterday trying to get cash out of ATMs before midnight, had fought at gas-stations to get their gas tanks filled, and had suddenly been trapped with unusable currency, people exchanged congratulations on what Modi had done.
What Modi had done — contrary to what I initially thought — wasn’t a bold move. It was a populist move, designed to please the 98% who do not save. While they are really driven by envy, these 98% are putting on a brave face, celebrating the alleged defeat of corruption. To them the fights of yesterday — at gas stations and elsewhere — and the loss of trust in their fellow citizens is merely collateral damage.
Fresh Avenues for Corruption Immediately Open Up
Those who find themselves stuck with high denomination bills today, must accept as little as Rs 700 in usable currency for every Rs 1000 of banned currency.
At least theoretically, people can still use the otherwise banned bills at hospitals, gas stations, pharmaceutical shops, and train stations. As one would expect in India, these places have been converted into corrupt currency-exchange shops as of today. Some well-connected people are prepaying for their medical treatment.
But for most legitimate uses, none of these organizations are accepting the otherwise banned instruments. Why should they, when they can force customers to pay in the still-legal currency and then buy the banned instruments for Rs 700 for every Rs 1000 in face value, making a neat 43% extra profit without doing anything?
In India, a country not driven by morals or reason, almost everyone will exploit an opportunity to make an extra buck, however unethical it might be. Those who look deeper, understand that corruption in public life comes from ingrained corruption in India’s society and culture. If one had to make an effort to remove corruption this is where one should start.
1,000 rupee banknotes – worth 700 rupees each today, available from the newest entrants into the money-changer business. Unfortunately, their business model is fraudulent; it sure seems a strange way to “fight corruption”. Photo credit: Reuters
Today, there is utter chaos in the market, with only the spontaneously erupted black market available to bypass the ban — most people simply don’t have anything else but the banned currency bills. Some are booking train tickets for future rides and are subsequently canceling them — they can use the banned currency to buy the tickets and can then get legal currency back after ticket-cancellation charges. This is costing people a lot of time, but it is the only way they can stay afloat and buy food. Others are taking different measures, equally desperate.
By any sane person’s reckoning, corruption has skyrocketed for the moment. So has gold. Those who run businesses have lost whatever remnant of trust in the government they still had. In recent months several businessmen have confessed to me that they are closing down, because the state has become increasingly heavy-handed and bureaucratic. Contrary to what the World Bank and IMF are saying, India is suffering economically. Its institutions are crumbling. And India is on the path to becoming another banana republic.
Within a few days, assuming this issue is handled appropriately — which it won’t be — most people with a certain amount of banned currency will be able to deposit it at banks, although tied to withdrawal limits. The banking system will stay partly frozen. After the banks open tomorrow, I expect to see riot-like scenes outside bank branch offices for a few weeks.
Huge chaos in the Indian economy should be expected to continue — as India’s government is simply incapable of bringing liquidity back any time soon. Businessmen will waste their time dealing with this nonsensical event, instead of investing and creating wealth. India simply continues to do more and more of what makes it an uneconomical and wasteful place to invest in.
Will the Plan Succeed in Reducing Corruption?
But will this eventually lead to a reduction in corruption? Let us use the gold market as an example to understand how the Indian economy operates. Any import of gold is subject to a cumulative tax of about 11%. The retail price of gold should be around 111% of the international price. Ironically, it mostly sells for 105% of the international price. Putting it simply, any law-abiding businessman must lose this 6% differential, ensuring his bankruptcy.
In reality most of the gold entering India is brought in by smugglers. These smugglers are happy to pass on almost half of their profit to consumers, while at the same time paying bribes to the Indian army, customs officials, other bureaucrats and politicians. If one wants to run a gold business, one must use smuggled gold if one wants to be competitive.
Virtually all businesses in India have to be run this way. Without paying bribes, no business has a hope of succeeding in India. Corruption is in the blood of India and is not easy to get rid of, even if by sheer luck India finds good political leaders one day.
Corruption is so omnipresent in India that you don’t really have to look for it. It is always there. What Modi is doing is merely political theater to fool the gullible. His decision to ban cash currency is actually proof that he has utterly failed to achieve any meaningful change in India.
I have yet to meet a public servant in India who does not ask for a bribe. During Modi’s reign, not only corruption has gone up, the state has become extremely heavy-handed. As what is happening today shows that the government’s anti-corruption measures themselves are ironically leading to a huge increase in corruption.
Unsuccessful Google search in India… - Cartoon by Thommy
Conclusion - Part 1
Unfortunately, India’s degradation will not stop. Indians have become extremely nationalistic over the last two decades. They are now very easy to herd around. Under the color of nationalism they can be made to accept anything – of course, only as long as the victim is someone else. The currency issue of today affects maybe 2% of the entrepreneurial population of India, so the remaining 98% can claim higher moral ground for themselves. The reality is that without these 2%, India could rapidly become a carbon copy of Idi Amin’s Uganda.
What India needs is not a focus on the removal of corruption, but the removal of regulations and restrictions on wealth-creation. For now the state is doing exactly the opposite, as it has in the past. Most importantly, this poison of totalitarianism comes from the extremely irrational society of India - in which corruption is entrenched.
Part 1 above covered what happened in the first two days after India’s government made Rs 500 (~$7.50) and Rs 1,000 (~$15) banknotes illegal. They can now only be converted to Rs 100 (~$1.50) or lower denomination notes, at bank branches or post offices. Banks were closed the first day after the decision.
What follows is the crux of what has happened over the subsequent four days.
Today India is on the verge of a major social-political crisis, unless either the government backs off from the decision of banning the currency or some real magic happens. There is chaos in the streets and daily life is slowly but surely coming to a full halt.
What Modi did was not only heavy-handed, hugely arrogant, and of no value, it has been very badly implemented to boot — as everything in India always is — and carries the real potential of escalating and snowballing into something horrific. They could have seen that this was not going to end well by simply using primary school math.
Modi, Nationalism, and the Public School-Indoctrinated Middle Class
India today is like a cult under the influence of Narendra Modi — in which unlike in the past, not the poorest or uneducated citizens, but mostly members of the so-called educated middle class participate. Over the last two decades, people have been exposed to mass education, TV and nationalistic propaganda without being taught an iota of critical thinking skills.
In a society in which the concept of reason does not exist, this has made these people receptive to any kind of propaganda with a nationalistic or Hindutva bent. (Hindutva = fanatical Hinduism, which is rapidly metastasizing).
To aggrandize his position, Modi ordered a lot of military-hardware that India cannot afford, escalated tensions with Pakistan, and conducted what was very likely a fake surgical strike inside Pakistan. This united Indians under the flag.
Now, the demonetization of the Rs 500 and Rs 1000 banknotes was tagged with nationalism, anti-corruption, and anti-terrorism. Simple-minded, slogan-susceptible persons were hardwired to accept an erroneous causality. Those who did not go along were made to be afraid of being called pro-terrorist elements.
Those in the middle class have taken what they deem to be the higher moral ground, for they have mostly avoided suffering from the demonetization. Lacking moral instincts — which is unfortunately the case with much of Indian society, given its deep-rooted irrationality and superstitions — they cannot see or feel the pain of those who are suffering, even if that suffering stares into their faces.
But events are in motion that will likely very soon lead to these salaried members of the middle class starting to feel the pain as well. Their instinctive trust in Modi is likely within weeks of coming crashing down, not because of reasoned argument, but because they will be facing similar problems as the ones the common man is now facing.
Conversion to the New Currency
I went to convert my banned banknotes into new ones. The largest amount one can have converted is Rs 4,000 ($60), until further notice. There was a huge rush of people at the bank. Arguments were erupting, as people refused to stand in queues and the banks gave no explanation of what needed to be done. Fights were breaking out.
Amid the chaos I finally learned that there were three queues I had to go through in a sequence. I had to get a form from one counter, which I had to fill in with my name and address, my ID card details, the serial numbers of all the bills I wanted to exchange, and my cell-phone number.
At the second counter, I then had to present the completed form along with a photocopy of my ID card. I had to sign on the photocopy which an official then stamped. With my banknotes, the form and the photocopy of my ID card, I then went to the next queue to get my currency converted at a third counter. The whole process took about two hours. For most people in the busier parts of the cities, it took much longer.
Day 1 of the banks opening. Poor, desperate people, whom the government treats like slaves or perhaps insects. Somehow these people have been brainwashed into thinking they live in a free country. My granddad kept photographs of British royalty on the walls of his office until his final days, for he had realized that the British had treated him much better.
Anyone who thinks that a country which wastes two hours of every citizen’s life to convert his own $60 can ever hope to be an economic power is drinking too much Kool-Aid and cannot do primary level math. Forget any possibility of removing unaccounted for money or reducing corruption, what Modi is doing is a recipe for the destruction of whatever legitimate economy there is.
That same afternoon, I went to the post office with a friend who wanted to get his money converted. After waiting a long time there, we found out that the post office had run out of cash. Since then most ATMs have had limited amounts of cash available and banks keep running out of cash as well.
The queues have continued to grow. People start lining up late into the night waiting for banks to open and still have to go back home with no cash. What started with two hours of queuing is becoming an endless slog now.
An endless queue to convert Rs 4,000 (USD 60). Will they actually go home with their new cash?
The Problems Go Much Deeper
Half of India’s citizens do not have a bank account and around 25% do not even have an ID card. These are the country’s poorest people, who have no way of converting their money – even if they learn how to do it, which is already a nigh insurmountable hurdle. Also, those who are old, disabled or sick have no choice but to suffer, for without personally visiting a bank branch office, one cannot convert one’s banknotes.
97% of the Indian economy is cash-based. With 88% of all outstanding currency no longer usable, the economy is coming to a standstill. The daily-wage laborer, who leads a hand-to-mouth existence in a country with GDP per capita of a mere $1,600, no longer has work, as his employer has no cash to pay his wages. His life is in utter chaos. He is not as smart as Modi - despite the fact that Modi has no real life experience except as a bully and perhaps in his early days as a tea-seller at a train-station. He has no clue where his life is headed from here.
These people are going hungry, and some have begun to raid food shops. People are dying for lack of treatment at hospitals. Old people are dying in the endless queues. Some are killing themselves, as they are unable to comprehend the situation and simply don’t know what to do. There are now hundreds of such stories in the media.
Small businesses are in shambles, and many will probably never recover. The Hindu wedding season has just started and people are left with unusable banknotes. Their personal and family lives are now an utter disaster.
Desperate people raiding a supermarket
Lacking moral and rational anchors, and hence compassion, members of the salaried middle class are unperturbed. Their salaries get taxed and most of the bribes they are getting end up in gold or property investments. In their minds, poor people and small businesses don’t matter. In the hypocritical culture of India, as long as the middle class is not suffering - for the time being — they prefer to take what they believe to be the higher moral ground.
Why This Problem Will Get Much Worse
Let us do a few simple numbers… What has been made illegal comprises 88% of the monetary value of all currency notes in circulation. In an economy based primarily on cash, the liquidity of cash is the lifeline of the economy. This requires that 88% of the new currency be rapidly dispersed into the market.
The Indian government has absolutely no history of being able to entertain a project of this type or magnitude ever and after the British left, India’s institutions have continued to deteriorate, so hope is not an option. If they fail to issue enough new bills, the very limited supply of Rs 100 notes will disappear within a few days.
As any rational person has a tendency to store good money while using bad money in transactions, people will hide all newly released currency as well as Rs 100 banknotes until full liquidity is restored. The rich and the well-connected have already done what was needed.
A reminder of Gresham’s law for Modi: “Bad money drives out good money.”
Those who have no need to convert their money as all their cash is already in the banking system (as is the case with the salaried middle class), which they think is making them look like a heroes in the eyes of Modi and is giving them a sense of moral superiority – they are nothing but turkeys being groomed.
Banks are giving out a mere Rs 20,000 ($300) a week at best. Their lives will suffer and for all intents and purposes, their accounts are frozen. This is Cyprus ten times over – they just haven’t realized it yet.
Whichever way one looks at the above numbers, India’s economy is going to start suffocating, within weeks, if not within days. And a serious political and social crisis will take place, which will eventually acquire a life of its own. That is when the as of yet unperturbed salaried middle class wakes up with pain.
As in any irrational system, it is not reason and morality that will have convinced them to scuttle their hypocrisy and limited vision, but the violence and pain that they themselves will suffer.
Politicians and bureaucrats of course cannot be seen queuing at the banks. Many bank branches apparently had their cash secretly replaced by the now-illegal bills before the first day of reopening. While no more than two bills of Rs 2000 each should have been collected, those better connected apparently haven’t had a problem with this and have been shown showing off packets of the new currency they have. All this cash will do nothing but end up under mattresses, as it has in the past.
As I walk around, corruption is everywhere and has grown exponentially, not only in financial terms but worst of all, in terms of the humiliation and degradation Indians are suffering. And I don’t know how a humiliated, soulless person can be anything but corrupt.
In village after village people have stopped working, even if they had work, as they can now join the queues at the banks to convert other people’s banknotes for a commission. For many young people, this is a wise entrepreneurial decision, as they are making many times the money they would have otherwise made for now.
But they are being trained to make money from non-productive activities — not from wealth-creation, but from unnecessary problems created by the government. Are they being groomed for a corruption-free society? One has to be naive to respond affirmatively.
Fear of the tax authorities means that the level of bribes being offered has gone up. Random people can now impersonate tax officers and collect bribes. People are in the grip of a fear psychosis. Many are emptying their bank deposit boxes, which means that crime will inevitably increase in coming days.
People are constantly worrying about what Modi’s next knee-jerk act might be and how to protect themselves against it. A police state is knocking at the doors.
A receptive environment has been created in which all kinds of rumors are taking wing. Today, salt is selling for Rs 400 ($6) per kilogram, as rumors have been making the rounds that it is about to disappear. This of course creates a situation in which it will actually disappear. The same is happening with sugar. The largely irrational masses are eagerly devouring a great many random rumors.
Lesson for Modi: Never, ever destabilize a society that works through conventions rather than reason, for it has no way to return to a normal state of affairs without a huge amount of pain and violence. Simply look at neighboring countries in order to understand this.
Chronic fear is slowly overtaking the mood of Indians, particularly those who run businesses. They have not only completely lost their trust in the government, but the tax department has been raiding people’s premises to scare those who are trying to salvage what they have.
They have stopped worrying about creating value. Everyone is talking about what to do with the banned banknotes, for even if they are fully accounted for, people fear that the increasingly rapacious tax authorities will make trouble anyway.
Uncertainty has gripped the populace. Not everyone is capable of grasping the situation and dealing with it.
People are now converting whatever they can into gold, silver, and mostly for the first time into the US dollar and other foreign currencies as well, all of which are trading at huge premiums. Money is also moving out of the country. Gold has shot up to as much as $2,800 per ounce, if you can find it.
Lesson for Modi: The reason people trust Switzerland is because it has hundreds of years of history of protecting private property. Singapore has done an equally good job, but it still lags behind Switzerland, because trust requires a very, very long history of institutional honesty and integrity. India is back to level zero for now. When future generations look back, they will see the current demonetization as the worst event in the history of post-colonial India.
Finally, the new bills have actually worsened the counterfeiting problem they were supposed to solve. People do not have any experience with what the new banknotes look like. Within a mere three days, counterfeits are already in circulation. Contrary to the government’s claims, the new bills are not any more sophisticated than the old ones and are made of simple paper.
Why Has the Government Miscalculated?
The most productive job Modi ever had was running a tea-shop at a railway station, which he then gave up to become a bully. He is a complete stranger to complex thought. He is simplistic in his thinking and does not understand the second-order consequences of his actions.
First he increased Hindu fanaticism, then he participated in collectivizing people using nationalism, then he created problems with Kashmir through his heavy-handedness.
A simplistic mind is also arrogant. Such a mind — unable to conceive the possibility of unintended consequences — thinks all that has to be done is to issue orders and everything will fall in place. Alas, this may work when shooting innocent people in Kashmir and in other destructive ventures, but when it comes to institutionalizing social progress, a more complex and intelligent approach is needed.
All of India’s institutions have continued to deteriorate since the British have left. They are rotting away and are in shambles. India had some breathing space over the past three decades because of the free gifts of the internet and cheap telephony which it got from the West.
This has merely made Indian governments more rapacious and so-called educated Indians more arrogant. They collectively lack the capacity to improve India’s institutions after having destroyed them. Demonetization may well be the straw that will break the camel’s back by accelerating the deterioration of India’s institutions toward the point of breakdown, perhaps in weeks if not already in coming days.
Conclusion – What Can One Do?
As Indian, be a speculator – even if the government does not like it and will blame you for all ills. Try to keep as much of your money in cash, in Rs 100 notes. Rs 2,000 notes have no value when you go shopping for groceries. Keep a supply of water and dried food sufficient for a few months’ needs.
Cash is disappearing and even before that the economy was stumbling. It might take just one more small domino — more strain on liquidity — to bring about systemic problems in the economy that could bring crucial transactions, businesses and supply lines to a halt.
If systemic violence spreads, everything will be complicated further. Think of Zimbabwe. It pays to be prepared, particularly when we are ruled by zombies.
Image captions by PT. Photos and videos by courtesy of Jayant Bhandari.
Jayant Bhandari grew up in India. He advises institutional investors on investing in the junior mining industry. He writes on political, economic and cultural issues for several publications. He is a contributing editor of the Liberty magazine. He runs a yearly seminar in Vancouver titled Capitalism & Morality.
The following speech, by BullionStar CEO Torgny Persson, was given to an audience during a Precious Metals Seminar held at BullionStar's shop and showroom premises in Singapore on 19 October 2016.
What have I got here?
It’s 87 grams of gold.
As many of you know, we have our own bullion vault integrated in BullionStar's bullion centre here in Singapore. What if I told you that every day we sell 6 kgs (6000 grams of gold), meaning that we sell about 1500 kgs gold per year to customers storing with us, but that we actually only keep 87 grams of gold in storage as reserves.
You would call it fraud and have me arrested, right? I’m obviously running a Ponzi scheme with very small fractionalised reserves backing up huge trading of unallocated paper gold.
Now, for clarity, that's not how we conduct business. When you buy and store bullion with BullionStar, your bullion is fully allocated and you can withdraw your metals at any time by just walking into BullionStar's bullion centre. You don’t even have to notify us beforehand.
What I just explained to you is something else - it’s bullion banking per definition - more precisely it’s unallocated gold trading by bullion banks.
As most of you know, the London Bullion Market Association (LBMA) has held its annual Precious Metals Conference in Singapore over the last two days. The LBMA is at the core of the world’s bullion trading system, a system which generates extremely large trading volumes every trading day. To understand the gold market, one has to understand the LBMA system as it is of great significance to both the price of gold and also to the physical movements of gold around the world. I will therefore provide you with an introduction to bullion banking and this LBMA system, and talk about how bullion banking operates.
Bullion Banking - Unallocated Gold
Almost all gold traded in the LBMA system today is in the form of unallocated gold which is accounted for in unallocated accounts. The definition of an unallocated gold account, as we can read on the LMBA’s website, is that the holder of such an account with a LBMA bullion bank does not have any ownership interest in any specific gold bars.
Instead, the account holder is merely an unsecured creditor of the bullion bank and holds a claim on the bullion bank for an amount of gold. At the same time, the bullion bank has a liability to this customer for this same amount of gold. Therefore unallocated gold is essentially paper gold. It is gold that doesn’t exist in the physical realm.
The creation of unallocated gold is in fact very similar to how fiat currency is created in the fractional reserve banking system. The fractional reserve banking system provides a good gateway into understanding bullion banking.
How is Fiat Money Created Today?
Let’s quickly recap on how fiat money is created in the fractional reserve banking system.
Money is created out of thin air. When a bank extends a loan, the money is created out of thin air.
Let’s take an example:
1) Robert plan to buy a house for $1 million.
2) Robert goes to a bank and the bank takes a look at Robert and deems him credible. With today’s low lending standards, it is rather easy for Robert to secure a loan. The bank deposits $1 million into Robert's account.
3) Where does this $1 million come from? The answer is 'nowhere'. It doesn't come from anywhere. The money is created out of thin air when loaned out to Robert.
This is easy to understand but hard to believe for some people. But it is true that this money is created out of thin air and lent into existence. About 92% of our money today is lent into existence in this fashion.
Banks keep a very small amounts of money in reserve to cover withdrawals, but they face liabilities which are far larger in size that their reserves.
The term "loan" as used in banking has been corrupted and twisted by banks. When a bank extends a loan, there is nothing loaned. To loan something you need to be in possession of it first, but when banks make loans, there is no countervailing transaction - The money is just created when the loan is extended.
How is Paper Gold Created?
Now, what about gold? How is gold created? You might say gold can’t be created, it has to be mined, right? Yes, you would be correct, physical gold cannot be created, but gold as an investment product definitely can be created and is created on a massive scale.
When a bullion bank customer goes to the bank and requests to buy gold, the standard procedure is for the bullion bank to create unallocated paper gold and credit this paper gold to the customer’s account. This ’gold’ is simply created out of thin air as a book-keeping entry in the bank’s accounting system.
Similarly, if actual physical gold is deposited into an unallocated account operated by a bullion bank, this deposit of gold is also in fact very similar to a deposit of fiat money. Just as a bank keeps deposited fiat money on its own balance sheet, a bullion bank keeps deposited physical bullion on its own balance sheet.
Bullion banks don’t generally safeguard or segregate gold deposited with them or held by them unless they are specifically instructed to do so if a customer opens an allocated gold account.
This means that depositors of gold into bullion banks' unallocated accounts are no longer the legal owners of the gold that they have deposited. Instead, they are just one of the general creditors to the bank, and they merely hold a claim for gold against the bank.
By depositing gold into an unallocated account at a bullion bank, you therefore lose ownership of your gold in return for a mere claim on gold.
Trading in unallocated gold by the bullion banks is thus based on book-keeping entries denominated in gold. The gold is fractionally reserved. Gold is created out of thin air as book-keeping entries in the banks' ledger systems, and even gold that is deposited into an unallocated account becomes the property of the bank.
LBMA Unallocated Gold Trading Volumes
From the LBMA’s published clearing statistics, which is one of the only transactional statistics that the LBMA does publish, we know that 600 tonnes of gold are "cleared" in the London Gold Market each and every trading day. Cleared means that it’s 600 tonnes of gold that's transferred between participants after netting out all trades between all trading participants.
According to a LBMA gold trading survey conducted in 2011 (the last such survey), the ratio between trading turnover and clearing on the London Gold Market was about 10 to 1. This means that the total amount of gold traded in the LBMA system each day is about the equivalent of 6,000 tonnes!
In other words, almost twice as much gold is traded in the LBMA system in a single trading day than is physically mined globally during an entire year.
But what is backing this 6,000 tonnes of unallocated gold traded each day, or 1.5 million tonnes of gold traded each year?
Let’s take a look at the reserve side of bullion banking in the LBMA system.
Bullion Bank Gold Reserves
The LBMA bullion banks' outstanding gold liabilities, and the unallocated trading system in the London Gold Market are ultimately backed by a quantity of 400 oz Good Delivery gold bars.
However, bullion banks don’t really want to hold physical gold. They will buy it if someone forces it on them but bullion banks have no real need for physical gold and are therefore incentivised to keep as little gold as possible in reserve, and lend out the gold they hold in reserve so as not to incur storage fees and handling costs. Banking reserves are looked upon as a dead asset so the banks minimise these reserves and try to make them into live assets by loaning them out.
When a bullion bank receives a gold bar by buying or borrowing it, it either sells, leases or allocates that bar elsewhere.
This sets a bullion bank apart from any other bullion entity because a bullion bank can hold deposits of gold on its balance sheet as assets even if it no longer has, or never had, the actual physical gold in its possession.
How much backing is there for all the unallocated gold traded in the LBMA-system?
We don’t exactly know as there are no reserve figures published but we can make an educated guess.
Vaulted Gold in London
How much gold is actually vaulted in London? The LBMA recently said on its website that there was approximately 6,500 tonnes of gold stored in London, about three-quarters of which was at the Bank of England. The Bank of England recently revealed that it was custodian for 4,734 tonnes of gold in its vaults.
This would leave 1,766 tonnes of gold privately stored in the LBMA vaulting system outside the Bank of England.
BullionStar research recently calculated (30 September 2016) that ETF gold holdings held in London accounted for 1,679 tonnes. This would mean that there are only 1,766 - 1,679 = 87 tonnes of gold in the LBMA system which is not allocated to ETFs!
Therefore, nearly all of the LBMA reserves are allocated to the ETFs with only 87 tonnes of gold left to back up the vast amorphous of unallocated gold trading amounting to 6,000 tonnes per day or 1.5 million tonnes per year!
Chart layout inspired by GoldChartsrus /Nick Laird. Data gathered by Goldchartsrus/BullionStar's Ronan Manly
Physical gold in the LBMA bullion banking system is therefore like physical cash in the monetary system. It is rarely seen!
LBMA is a banking system that by definition is based on fractional reserve banking.
HSBC, JP Morgan and ICBC Standard Bank are the only LBMA bank custodians with their own precious metals vaults in London. Most of the circa 42 LBMA bullion banks don’t even have their own gold vaults but still keep books denominated in gold ounces. A bullion bank without a gold vaults instead holds its gold reserves with a bullion bank that does have a gold vault.
For example, if Citibank keeps its reserves with a bank with a vault such as JP Morgan, then Citibank merely holds a gold claim for which JP Morgan has a gold liability. These unallocated gold reserves are therefore just pooled with the bullion banks that do have vaults.
The bullion banks without a vault never see or touch the metal they keep in reserves. If a bullion bank stores its gold reserves at another bullion bank’s vault, this means that the reserves are unallocated credits/claims which are standing behind the bank’s own liabilities. So even the reserves are fractionalised. So not only are bullion banks’ liabilities to their customers unallocated, even the reserves are unallocated inter-bank liabilities which are fractionalised.
Paper gold thus stands behind the liabilities of paper gold.
The LBMA system serves as a pool of reserves and uses coordinated reserve management where the different participating bullion banks can loan and lend to each other the few physical reserves that there are in the system so as to meet any demand for physical bullion.
Gold Bank Run
The bullion banks face massive liabilities in the form of unallocated gold credits. Bullion banks are thus, just like normal banks, susceptible to bank runs.
The difference between bullion banks and normal commercial banks is that whereas central banks are the ultimate lenders of last resort to commercial banks, most central banks no longer back-stop bullion banks as the lender of last resort because most central banks no longer sell or lease bullion that can be used to prop up bullion banks' reserves.
In case of the LBMA, the central bank is replaced by a private company called London Precious Metal Clearing Limited (LPMCL) which is run by 5 clearing bullion banks and whose clearing system AURUM nets out all gold claims and liabilities in the LBMA system. The clearing system functions as a pooled system in that only net balances are cleared and the bullion banks' gold reserves are essentially pooled and can be leased and double counted whenever necessary.
When they no longer have any physical gold to deliver, the ultimate rescue plan for bullion banks is to use cash settlement instead.
In the same way that banks increasingly promote cashless solutions as a means to reduce cash handling costs, earn credit card fees, reduce the risk of bank runs and lock in customers, LBMA system bullion banks promote gold-less gold transacting.
Just as the banking system inherently incentivises reckless debt behavior, the bullion banking system inherently incentivises the reckless creation of paper gold assets.
LBMA – The Paper Gold Protector
In creating artificial paper gold, bullion banking protects the fiat money system.
If even a small minority of the paper gold traded today was backed up by physical gold, the price of gold would have skyrocketed. A gold price significantly higher than today would point towards the inferiority of the fiat money system, and possibly the collapse or implosion of the current monetary system.
Bullion banks and gold industry organisations, such as the LBMA and the World Gold Council, which itself has developed and owns securitized gold products, can profit from gold trading volumes that are far higher than they would be if they were limited to the constraints imposed by the availability of physical gold to trade.
The bullion banks and the LBMA work hard to overcome the tangible limitations of physical gold mining. By promoting gold-less gold transacting, the LBMA unallocated system artificially increases the supply of gold, earning the banks higher fees from artificially large trading volumes.
To reiterate, the LBMA unallocated gold trading is a banking system based on fractional reserve banking which is all about exposure to the price of gold but not to gold itself.
The LBMA system is used to coordinate unallocated paper gold trading where ‘gold’ is created out of thin air, and the tiny physical reserves held are pooled and shared out among participants so as to minimise costly reserves and avoid gold bank runs.
When bullion banks need to allocate gold to the ETFs, such as to the SPDR Gold Trust (GLD) in London, they use credits from the same unallocated gold credit system as was previously used to offset other gold liabilities. Even though the ETF may own the gold outright, the gold is still being double counted within the system because its being allocated out of a bullion bank pooled systems of credits.
To summarize what the LBMA is all about, it is a paper gold protector for the bullion banks which allows the bullion banks to earn fees from an artificially high trade turnover while at the same time protecting the fiat currency system.
The Guarded Secret of no Gold
The fractionally-reserved bullion banking system is a fragile system. Many investors and savers holding paper gold believe that the gold they are holding is backed up by real physical gold. But if the bullion banking system implodes, which it will do if the high demand for real physical gold in Asia is sustained at anywhere near today’s levels, these holders of paper gold will at best end up holding paper claims which will be cash-settled, or at worst these paper gold holders will be empty-handed.
Demand for ETF’s and unallocated gold will likely not stress the system systemically since the pooled LBMA gold reserves are used for leasing and double counting. It is the demand for real physical gold, draining bank gold reserves, that stresses the system.
Many gold investors/savers buy various paper gold products as a means of protecting themselves against the fiat currency Ponzi scheme. It may therefore come as a surprise to some holders that these investments are no safer or even less safe than the fiat currency against from which they are seeking to protect themselves. Bullion banks give the impression that these investors into unallocated gold are actually holding gold, whereas in reality they are just unsecured creditors holding paper gold, gold that is created out of thin air, in a fractionally-reserved Ponzi scheme.
As long as everyone is happy to buy and sell ledger entries/book-keeping entries, this fragile system can continue to balance on a thin thread. The systemic problem arises when larger entities start to demand physical delivery, a trend which has been happening in the last few years, most notably in Asia and Russia. There is therefore an imminent risk of the bullion banking system collapsing in the next few years.
This is an accident waiting to happen, because when enough holders of paper gold ask for delivery, the default that will follow will trigger the biggest bank run for gold in history, which due to gold’s significance as a monetary proxy, will shake the entire monetary system.
When there is no longer any physical metal to deliver, the ensuing shortage will result in a disconnect between prices, in which paper gold will become worthless while the price of real physical gold will be revalued at a much higher level based on the market equilibrium for physical supply and demand of gold.
It was an event-filled and turbulent evening last night as the results for the 45th US presidential election rolled in, signalling that the majority of the American electorate had voted for Republican candidate Donald Trump. Trump received over 270 of the 538 electoral college votes needed to secure a majority. Trump will now be inaugurated as US President on Friday January 20, 2017.
Media and Polls eat Humble Pie
This, the 58th US presidential election, will no doubt go down in history as one of the most unusual, divisive and wrongly predicted US presidential elections of all time. The official surveys of the expected outcome were proven to be way off the mark, and in fact the entire US polling industry may have to reassess its methodologies and enter a period of self-reflection. The mainstream media machine, particularly but not exclusively in the US, was also shown up throughout this election campaign to be glaringly slanted and in favor of the Democratic candidate Hillary Clinton at the expense of Trump, and a large amount of shock, back-peddling and embarrassment seems to have hit that section of the media today, in a 2017 version of 'Dewey defeats Truman'.
The media and survey driven, but shockingly wrong, consensus of an assured Clinton victory, which was relentlessly pitched over the last few months, also seems to have been priced into the financial markets, which is arguably why the actual outcome of a Trump victory caused acute volatility and large moves across the markets last night and into today.
US stock market index futures all fell sharply during trading in US evening hours last night as the prospects of a trump victory began to crystallize. S&P 500 futures and Nasdaq 100 futures both went limit down in trading, each losing about 5%, and Dow equity index futures at one stage was 800 points lower. Asian market equities were also weaker, and the US Dollar weakening against most major currencies, and the Mexican Peso also plummeting.
The markets had a very Brexit feel to them, in a similar fashion to how the markets had reacted overnight between late Thursday June 23rd, the day the Brexit EU referendum was held in the UK, and early morning Friday June 24th, when it became clear that the referendum results pointed to a majority of voters wanted the UK to leave the European Union. In both these events, Brexit and a Trump win, financial market uncertainty has been a big factor.
Florida and Ohio
Results from the battleground states of Florida, Ohio, and to a lesser extent North Carolina were decisive to Trump’s election and to the market’s moves. Florida, with 29 electoral votes, and the 3rd highest population by state at just over 20 million people, was called to Trump late on Tuesday night before 11pm. Ohio, with 18 electoral seats and 7th largest state population of 11.6 million people went to Trump at about 10:20pm. North Carolina, with 15 electoral seats and a 10 million population, was called for Trump just after 11pm NYT. Within the space of an hour, Trump had won the 3 key states of Florida, Ohio and North Carolina, which between then have 62 electoral college seats. By just after 1:30am, Pennsylvania was called to Trump, and following that Wisconsin. A trump majority in Iowa also helped. The rapidity of these results coming in also had a resonance with the Brexit results back in June.
Previously, the states of Florida, Ohio, Iowa, Pennsylvania, Wisconsin, and Michigan, had all majority voted for Obama on both occasions when he had been elected. This is why these particular state results going to Trump were a) critical for Trump and b) caused the volatile market reactions due to the markets' perceptions that a Trump presidency will create more unknowns and greater uncertainty.
Precious metals prices, as would be expected, moved higher on the back of the market uncertainty and the Trump gains. Gold’s low in US Dollars was about $1270 at 8pm New York time (NYT), then it made a $50 ascent to a high of $1336 just after midnight NYT, an up move of 5.2%. See BullionStar gold chart for one day move. Silver in US Dollars moved up from $18.40 at about 8pm NYT to $19.02, an up-move of up 3.37%. Platinum also had a sizable up move, at one stage rising $20 from $1000 to $1020. These moves in precious metals prices were also reminiscent of similar moves on the morning of the Brexit results.
Trump and a Gold Standard
Beyond these short-term benefits to the gold price and the prices of other precious metals from a Trump victory, there are some other longer-term benefits to gold that a Donald trump presidency might create.
These longer term potential benefits to gold stem from Trump's affinity for the use of a gold standard as part of the US monetary system. A gold standard, to define the term generally, is a monetary system that employs gold as a monetary unit, and links the economy's currency to that monetary unit of gold. When used by a number of countries, each country's currency can then be expressed in terms of gold, i.e. the exchange rates between the currencies are defined in terms of gold.
Donald Trump is known to be sympathetic to the concept of a gold standard, and even attracted to the prospect of implementing a gold standard as a way of maintaining the stability and value of the US Dollar. The first of Trump's recent references to a gold standard came in a 2015 interview with WMUR-TV, New Hampshire, in a segment called ‘Conversation with the Candidate’, published on March 31, 2015, in which Trump commented on the gold standard in response to an audience question:
Question: “Can you envision a scenario that this country ever goes back to a gold standard?”
Trump: “In some ways, I like the gold standard and there is something very nice about it but you have to go back at the right time... We used to have a very solid country because it was based on a gold standard for it. We do not have that anymore. There is something very nice about the concept of that. It would be very hard to do at this point and one of the problems is we do not have the gold. Other places have the gold."
The transcript of this interview can be read in an archived page of the WTAE-TV Pittsburgh website. See ‘web extra’ section. WTAE is a sister channel of WMUR.
It's slightly odd that Trump thinks the US doesn't have the gold, or maybe he knows something about Fort Knox and the US Treasury gold reserves that has not been made public.
Following his March 2015 comments, Trump again addressed the gold standard in November 2015 in a short video interview with GQ magazine when he said:
“Bringing back the gold standard would be very hard to do, but boy would it be wonderful. We'd have a standard on which to base our money."
You can see the short GQ video interview with Trump on visiting this page.
Some of Trump's economic advisers also have notable views on gold, and the possible utilization of gold within the US currency system. In an interview with Forbes magazine in August this year, Dr. Judy Shelton, part of Trump's economic advisory team, was asked on her view of a gold backed monetary system:
Forbes Question: "You’ve written before about going back to some sort of gold-based monetary system. Is that something the U.S. could do unilaterally, or would we need to convene other nations and get them on board?"
Shelton: "In terms of gold being involved [in the system], some people may think of that as a throwback, but I see it as a sophisticated, forward-looking approach because gold is neutral and it’s universal.
It’s a well-accepted monetary surrogate that transcends borders and time. If you look at the foreign reserves of the most important countries, they keep them mostly in gold. I don’t want to read too much into it, but it proves that gold is not some barbarous relic.”
Shelton also referenced a Bretton Woods style conference:
"I’m not opposed to a new Bretton Woods conference, and if it takes place at Mar-a-Lago, I’m fine with that."
Bretton Woods being the 1944 conference in New Hampshire at which the attendee countries planned the introduction of a gold backed system of fixed exchange rates, where the value of the US Dollar was linked to gold and other participating currencies were linked to the Dollar. Mar-a-Lago is a hotel and club in palm Beach, Florida, owned by Trump.
John Paulson, the founder and head of the well-known and successful hedge fund company Paulson & Co Inc, is also an economic advisor to Trump. Paulson is known, among other things, for his fund's investments in gold, and for example, Paulson & Co is currently the 5th largest institutional investor the SPDR Gold Trust (GLD). The appointment of Paulson to a position on Trump's team could also arguably bolster Trump's position on gold in the monetary system.
As an aside, in the WMUR-TV interview in March 2015, Donald Trump also expressed a view on auditing the Federal Reserve, a view that it will be interesting to see if he still holds during his Presidency. In another answer to a question from the audience, Trump agreed that the Fed should be audited:
Question: Let's go back to our audience now coming from Bob. What is your question? ...[Bob]:"My question is about Federal Reserve. What if any changes would you make to Federal Reserve and do you think they should be audited on a regular basis?"
Trump: "Audited, absolutely. I really think you can have it or not have it. A lot of people like it and a lot of conservative people like it. They think there is an adjustment with interest rates and other things. I'm not a fan. I'm not a big fan. Audit, 100%."
Keynes, Greenspan and Bernanke
Any time the gold standard is mentioned, such as when Trump mentioned it on the occasions back in 2015, there are invariably sections of the financial media which wheel out the old misquote by the economist John Maynard Keynes, and state that Keynes said that gold is a barbarous relic. Even Shelton seems to have used the old misquote.
However, Keynes never said that gold was a barbarous relic. Keynes actually wrote the words “the gold standard is already a barbarous relic”, in chapter 4 of his 1924 book “A tract on Monetary Reform”, when specifically discussing whether Britain should return to a gold standard. Britain returned to a gold standard in 1925, against the advice of Keynes. The quote is at the bottom of page 172 of Keynes book “A tract on Monetary Reform”, (1923, this edition Published 1924), chapter 4, “Alternative aims in Monetary Policy”.
Arguably, Keynes was referring to the move after World War I by some countries to return to a gold standard (the inter-war gold standard), and even if he was talking about the classic gold standard (which ran from 1821 to 1914), Keynes just had a personal view that the gold standard was too constraining for what he saw as a "modern" economic system. But what Keynes was essentially advocating at that time, in other language, was a debasement of currency. Fast forward nearly 100 years and its obvious now that fiat currencies' purchasing power has been heavily debased vis-a-vis the gold standard period.
Contemporary endorsements and appreciations for a gold standard are not actually the far out radical ideas that some might claim them to be and are not exclusive to Trump and his advisors. The concept of a gold standard is actually discussed by serious and mainstream monetary economists and even to an extent endorsed by them. In June this year, in an interview with Bloomberg in the aftermath of the UK’s Brexit results, Alan Greenspan, former Fed chairman had this to say about the gold standard:
“Now if we went back on the gold standard and we adhered to the actual structure of the gold standard as it exists let’s say, prior to 1913, we’d be fine. Remember that the period 1870 to 1913 was one of the most aggressive periods economically that we’ve had in the U.S., and that was a golden period of the gold standard.”
And in March 2004 in a speech 'Money, Gold, and the Great Depression', even ex Federal Reserve chairman, Ben Bernanke, who always seemed to give a somewhat grudging partial endorsement to gold, had this to say:
"The gold standard appeared to be highly successful from about 1870 to the beginning of World War I in 1914. During the so-called "classical" gold standard period, international trade and capital flows expanded markedly, and central banks experienced relatively few problems ensuring that their currencies retained their legal value. The gold standard was suspended during World War I, however, because of disruptions to trade and international capital flows and because countries needed more financial flexibility to finance their war efforts.
With Trump soon at the helm and in the White House, it's not beyond the bounds of possibility that Trump and his advisors may explore the utilization of gold within the US monetary system over the next 4 years. And who knows, they might even bring Greenspan and Bernanke in as consultants, but perhaps only if Trump does not audit the Fed!
16 June 2021 is exactly five years from today. What will the gold price be on 16 June 2021?
Currencies are Worthless
As the world’s fiat paper currencies have lost 99% or more of their purchasing power over the last 100 years, its critical to understand that fiat paper currencies are not a suitable unit of account for accurately measuring prices.
In fact, gold is a far superior measuring stick of value than paper currencies.
A paper currency doesn’t measure anything. It merely has an arbitrary value placed upon it by the population using it. It’s not backed by anything and it can fail at any time. From historical experience, we know that the unbacked fiat paper currencies used today will ultimately destruct and become worthless. All unbacked fiat currencies throughout human history have failed.
A more accurate measurement would be to measure fiat currencies in gold. If we look at the US Dollar measured in gold, we can see that the US Dollar has utterly failed in retaining its value, as its value has plunged about 98% over a mere 50 years. It cannot therefore be seen as a store of value.
Extrapolating into a likely future, a future in which you will need a stack of USD 100 bills to buy a carton of milk and a couple of eggs, underlines that the US Dollar gold price is meaningless as an indicator of value. When discussing the price of gold, the key is to recognise that gold retains its purchasing power over time. If a 1 oz gold coin can buy an exclusive men’s suit today at USD 1,300 and the same 1 oz gold coin buys an exclusive men’s suit at USD 2,600 tomorrow, this only means that gold is still reflecting USD 1,300 intoday's purchasing power and hasn’t gained in value. It’s the US Dollar that has depreciated vis-à-vis gold. Similarly, if the gold price goes to USD 650 and it can still buy the same suit, then it’s merely the US Dollar that as appreciated vis-à-vis gold.
As a society, we should by now have transcended the idea of measuring value in fiat currencies. Currencies are not a reliable measuring stick. Just imagine if the centimeter, meter, yard or foot were to fluctuate in length.
100 cm 100 years ago has become 2 cm today. Think about it. This is what has happened with our currencies.
The Gold Price
The gold price is an interesting term because the gold price doesn’t reflect what’s happening on the physical gold market whatsoever.
In today’s marketplace, a lot of things are regarded as “gold”. On the London Gold Market alone, there’s 600 times more gold traded each day than there is gold mined globally on that same day.
All sorts of paper gold passes for “gold” on the financial markets. The vast majority, certainly more than 95%, and likely more than 99% of this paper gold is not backed by any physical gold.
“Gold” is created out of thin air as paper obligations. The demand for and supply of this paper gold has little to do with the physical gold market.
During the last couple of year, demand for real physical gold has been insatiable , however the price of gold has not reflected this huge demand. Physical gold has been flowing from the Western vaults to Asia. The Chinese in particular have been vacuuming the London vaults for gold. However, this substantial physical demand hasn't been reflected in higher gold prices because whereas Easterners have been buying physical gold, Westerners have been selling paper gold.
Whether physical demand is up or down 5 tons in China or India matters little when there’s 5,500 tons of paper gold traded each day in London as visualized in this infographic. London, and to a lesser extent COMEX in the US, are the price discovery markets for gold. However, paper gold on these markets is almost exclusively cash settled with less than 1% of the contracts/futures settled with delivery of physical gold.
The gold price is therefore not dependent on the market fundamentals of physical gold but this may very well change in the future.
With China picking up all physical gold available every time the price slides, widespread shortages are a likely outcome if the gold price ever were to decrease significantly again. Given that the historic vaulting capital of the world, London, has already been running out of stockpiled gold, there just wouldn't be enough physical gold to satisfy demand if the price were to ever plunge significantly again.
It's actually been a healthy development for the physical market’s demand/supply balance that the gold price has increased 22% in USD Year-to-Date 2016. However, we have to understand that the largest potential for a revaluation of the gold price paradoxically may be preceded by a decrease in gold prices.
When trend seeking Western investors sell their paper gold and the price slides, Easterners take the opportunity to buy physical gold at bargain prices, thereby stressing the physical market with shortages as a result. Such shortages may very well be what ultimately breaks the neck of the paper markets. Because when there is no longer any physical gold available at the price dictated by the paper markets, there will be a disconnect between the price of paper gold and the price of physical gold. Paper gold will go towards zero whereas the price of physical gold will skyrocket.
Such a revaluation of physical gold will bring the fiat paper currencies to their knees as their worthlessness as a store of value will become clear to all.
What will the price of gold be in 5 years’ time?
Gold is savings - Gold is wealth, and as such, the price denominated in something as inferior as the US Dollar isn't very important.
For the sake of reflection, we can play with the idea of what the price of gold would have to be if the US Dollar were to go on a fully-backed gold standard.
The US gold reserve officially stands at 8,133.5 tons although it has never been properly independently audited. At USD 1,300/oz, this would be equivalent to 340 billion dollars. The total US money supply is about 17,000 billion dollars. For each "gold backed" dollar today, there are therefore 49 unbacked dollars. The gold price would thus have to increase 50-fold to USD 65,000 if the US Dollar were to be fully gold-backed by 16 June 2021.
This COMEX Gold Futures Market infographic guides you through the largest gold futures market in the world, COMEX.
Did you for example know that only 1 in 2500 contracts on COMEX goes to physical delivery whereas the other 2499 contracts are cash-settled? This corresponds to a delivery percentage of 0.04% of all gold contracts.
The US government claims to hold a fair bit of gold in reserves but how much is it really holding?
In this infographic you will learn more about the COMEX gold futures market considering
This London Gold Market infographic guides you through the secretive OTC wholesale gold market in London. The London Gold Market is the largest gold market in the world and the volumes traded are staggering.
The London Market serves as a price discovery market for the worldwide gold spot price and is home to the London Bullion Market Association (LBMA).
London is also a hub for gold storage with 6,500 tonnes of gold stored in gold vaults around London.
In this infographic you will learn about the importance of the London Gold Market considering