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The common man's sovereign wealth fund
Tuesday, December 11, 2007
The streetTRACKS Gold Shares ETF (NYSE:GLD) "tonnes in the trust" rose by more than 12 tonnes yesterday as the price of gold gained another $17 per ounce in London.
The trust now has 615 tonnes in allocated storage, now well clear of China and the ECB, an organization that is believed to have sold some of their reserves recently.
Netherlands - look out, you're next and then it's on to Japan.
This is turning into kind of a "common man's" sovereign wealth fund, in some ways similar to the giant funds run by China and some Middle Eastern oil exporting nations.
Just like these big countries that are looking for something to do with their huge piles of quickly depreciating U.S. dollars, it seems that many individuals are also accumulating way too much paper money and they too are looking for something to do with it all.
This is not a bad place to put it.
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2 comments:
Tim,
Was listening to NPR recently and they had a story on the IMF and how they weren't meeting their income needs and were looking at layoffs and cutbacks. One of the alternatives brought up was the possibility of the IMF selling its gold deposits to make up the shortfall. Have you heard any rumblings about this?
Disclosure - long gold stocks
I wrote this to subscribers to the investment website over the weekend:
There was more talk from the IMF (International Monetary Fund) last week about selling 400 tonnes of their 3,217 tonne gold reserves in an effort to "square the books" amid ongoing budget deficits. New IMF President Dominique Strauss-Kahnf has proposed job cuts of 15 percent to reduce expenditures but, with the concurrence of many other banking leaders (including none other than Alan Greenspan), he has also proposed the sale of gold to bolster the revenue side.
The idea is to raise more than $10 billion from the sale and then use the proceeds to set up an endowment fund that would purchase interest bearing securities to generate somewhere in the neighborhood of $500 million per year. Naturally, some might suspect that this is part of a continuing plan to suppress the gold price.
I, for one, think that most economists truly believe that gold is irrelevant today and, as crazy as it might sound, they just don't feel as though they need the stuff sitting around collecting dust when they can get a five percent return on the proceeds from its sale. If they were a little sharper, they might sell off just enough gold every year to cover their budget gap realizing that the price of the metal is sure to go higher, but, apparently that does not occur to them as a reasonable alternative.
It is important to note that the gold sale would have to be approved by the U.S. Congress which, in the past, has resisted such proposals due to a well organized mining lobby in western states.
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