November 2, 2012 Leave a comment
By The Hard Assets Alliance Team
It’s not too often that you see a major shift within the gold market.
The last such recalibration in sentiment for gold investors was the introduction of the first gold-backed ETF in 2004, and the subsequent explosion in exchange-traded products (ETPs) for bullion and precious-metals equities.
Today, another tidal change is under way, as the flow of funds into structured bullion products ebbs. I think this shift – as you’ll read about in a moment – signals two things. First, it confirms that growing numbers of investors are increasingly nervous about the reckless monetary and fiscal paths being pursued on a global scale. Identifying this trend early on will let investors position themselves accordingly.
Second, it tells me that acting now – securing the gold you want and need – is critical to withstanding the likely fallout ahead from the mountain of unpayable government debt and promised benefits. If we’re correct about the dismal future of all major currencies – the dollar’s inexorable decay in purchasing power and the “race to the bottom” between it and other currencies – then failing to act will greatly degrade your future standard of living.
What is this new trend? It’s simple, yet powerful…
Investors are shifting from paper to physical
We began to watch this trend after it was reported last year that billionaire hedge fund manager John Paulson dumped his shares in the ETF GLD, opting instead to purchase physical metal. Since then, the shift out of paper proxies for gold and into the metal itself has picked up steam, and it’s now clear that a new investor trend is under way.
Here’s the evidence. The following chart shows the total purchases since 2001 of gold coins and bars versus the net additions to gold ETPs.