Wikinvest Wire

Give me the physical, not the paper

Friday, January 09, 2009

Ambrose Evans Pritchard over at the Telegraph has filed this report (hat tip Domus) on the recent surge in demand for gold bars by wealthy individuals.

No, the rich aren't asking their stockbroker to buy shares of one of the many gold ETFs or some commodity futures contract. They want gold bars - the physical, not the paper.

Gary Dugan, the chief investment officer for the US bank, said there has been a remarkable change in sentiment. "People are genuinely worried about what the world is going to look like in 2009. It is amazing how many clients want physical gold, not ETFs," he said, referring to exchange trade funds listed in London, New York, and other bourses.

"They are so worried they want a portable asset in their house. I never thought I would be getting calls from clients saying they want a box of krugerrands," he said.

Merrill predicted that gold would soon blast through its all time-high of $1,030 an ounce, and would hit $1,150 by June.
Mr. Dugan also seems to believe the deflation propaganda that is permeating the financial news these days, so take his views on gold with a grain of salt.

Despite the fact that prices for many consumer goods have been falling for many years, he notes, "It's very difficult to get the deflation psychology out of the human brain once prices start falling. People stop buying things because they think it will be cheaper if they wait."

Maybe in Germany they do, but elsewhere in the world, people have stopped buying stuff they don't need with money they don't have because it was a bad idea in the first place, something they are now just realizing, and the developments of the last five months have them scared to death.


Anonymous said...

The deflation argument is asinine. Not just b/c electronics have had consistent and substantial price deflation for the past 30 years (under Moore's law, electronic components essentially get twice as good every 2 years - so that's about a 40% deflation rate a year, for 30 years now, yet people still buy electronics!).

But mainly because deflation is a form of savings (which is what the government is really afraid of - that they cannot use the inflation tax to screw the public). For example: holding cash when prices are going down 4% per year is equivalent to holding an 8% bond when prices are going up 4% per year. Anytime you can aggregate wealth by saving, you have this supposed "problem".

The government's constant lieing, propagandizing, snooping, spying, etc. is becoming entirely unbearable. We need a revolution, but not the "more of the same" being developed by that Obama fraud.

Tim said...

I got this for Christmas - The Revolution: A Manifesto by Ron Paul - anyone read it?

Mathlete said...

We had deflation in 2008 and I think it will continue in 2009. But for a few economists (mostly from the Austrian school), almost everything written on the subject is truly asinine. Deflation is the cure to the disease, or at the very least, the necessary aftermath.

Dan said...

I read the book.

I felt that if he had campaigned ( or if the media had given him better coverage, or that his telepresence matched the writing of this book ) like this book reads, he would've done much better than he did.

It's a quick, easy read.

Anonymous said...

actually Anon is wrong on electronics.
the prices rarely deflate rather the
capabilities improve.

the price of a desktop machine, very stable
but the capability improves.

same with TV's the price remains the same
the size increases.

Ted S. said...

Apparently anon2 hasn't looked at the data or bought more than one computer. CPI prices for electronics have been falling for many years. They actually had to redo their hedonic adjustments a few years back because prices were quickly heading to zero.

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