The Corner

More Gold

Crazy stuff: 

Investors in gold are demanding “unprecedented” physical levels of

bullion bars and coins and moving them into their own vaults as fears

about the health of the global financial system deepen.

Industry executives and bankers at the London Bullion Market Association

annual meeting said the extent of the move into physical gold was unseen

and driven by the very rich.

“There is an enormous pick-up in investment demand. I have never seen a

market like this in my 33-year career,” said Jeremy Charles, chairman of

the LBMA. “The gold refineries cannot produce enough bars.”

The move comes as fears grow among investors over the losses at

investment vehicles previously considered almost risk-free, such as

money funds.

“Vault staff are also doing overtime,” another banker at the LBMA

meeting said, adding that investors in some countries were paying

premiums of up to $25 an ounce above the London spot price to secure

scarce gold bars.

 Spot gold prices in London yesterday traded at about $900 an ounce, more

than 25 per cent above the level before Lehman Brothers’ collapse.

Although some traders said the rush into physical gold could boost

prices, others cautioned that prices were depressing jewellery demand,

capping any price gain. Industry executives said gold refineries and

government mints were working at full throttle to keep up with investor

demand, but acknowledged they were suffering from shortages,

particularly on coins.

UPDATE:E-mail:

Rich,

Sell the news.  As of this writing (11:15 EDT), gold is down almost $50/oz. on the day and is some $200 — nearly 20%!! – below its mid-July highs.  The Dow during the same period is down about 3%-4%.  As a former gold broker, I can tell you no one is “buggier” than gold bugs.  

UPDATE TO THE UPDATE:

E-mail:

Dear Mr. Lowry,I started buying gold in 2001, and it’s the investment that has ensured my family’s financial security over the last seven years. It famously spiked to over $800 at the height of 70′s/early 80′s stagflation, went down for twenty years during the stock boom, and in the last seven years has almost tripled from its low.Gold is clearly a useful investment during periods of inflation, negative real interest rates, and/or during a currency collapse. Right now with debt deflation and a possible recession it’s unclear what real interest rates are, and during the immediate moment of crisis cash seems to be the winning investment. If the aftermath of the bailout rekindles inflation, or skittishness over the debt-heavy dollar, gold could be expected to re-emerge. But to dismiss gold with an off-hand “sell the news,” and a reference to its performance over the last six months is hardly sufficient. An old Swiss adage advised that you put a small percentage in gold, and then hope you never profit from it. That might be the better advice to your readers.

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