Today we appear to be in a bit of a rough patch as both gold and stock prices have gone down. This is not necessarily groundbreaking news or cause for alarm, despite some analysts describing it as such. The decline is in response to the growing political concerns in Europe. In France, President Sarkozy has been thrown out of office by voters and replaced by Socialist Francois Hollande, who had promised a lot of government spending as part of his campaign. Hollande’s ambitions put France in an uncertain future, and as the Euro has gone down, the dollar has gone up. Anyone who purchased gold specifically as a hedge against the European crisis may find himself surprised to discover that has appeared unreliable as the crisis has intensified.

However, despite this apparent setback, gold is actually in a good place and should do well. Consider the fact that the dollar is still in a bad state; the only reason it has improved now is because the Euro is currently worse. Once the situation in France stabilizes and Hollande takes office next week, the Euro will improve while the dollar will continue to do poorly. If gold had jumped record amounts in a single day, I could understand some concern, but it is still riding the high peak of the past year. In an article for CNBC, John Carney diagnoses gold as declining every time that a government responds to economic crises. He uses 2008 as an example, citing that the price of gold dropped down to $800/oz. when the crash occurred in September. What he doesn’t mention is that today, despite being a “low” day for gold prices, the current value of gold is $1600/oz.! When the value of an item is, on the whole, twice what it was three and a half years ago, I think it’s safe to say that that market is doing very well! Furthermore, gold may have had an unstable period in late 2008 when the crash occurred, but soon went back up and actually ended the year higher than where it began! Clearly, whatever the day-to-day situation may be, it is fundamentally a good time for gold. And holding onto gold as a hedge against economic collapse has been a proven strategy for many, regardless of the occasional drop in percentage points.

A recent blog by columnist Richard Russell compared the situation to the recent news story of an anonymous man purchasing Edvard Munch’s painting The Scream and points out that the painting will always be valuable whether under the wildest inflation or the worst deflation. He also proposes the following: “If I asked you to leave something for your great grandkids in a package to be opened one hundred years from now, would you leave them a wad of hundred dollar bills or one hundred gold coins? If you had any brains you would pick the gold coins. I’d venture that Warren Buffet would also pick the coins.” You can argue that using gold as a hedge is not foolproof, but everyone is aware that as long as inflations and crises occur, a hedge is needed. And gold is the best hedge we have.

Those looking to get into silver bars will quickly learn of two company names: Engelhard and Johnson Matthey. We proudly carry items from both companies. Now, a new hot item is about to come back on the market, and you can be sure it will be available here at Bullion Trading LLC. Johnson Matthey is resuming production of its iconic one troy ounce silver bar. One of the most historic companies in the precious metals trade, Johnson Matthey has been around as a refinery since 1817 and been active as a company of many hats, but has always specialized in gold and silver bullion, and are among the best known in the world.

 Each of these silver bars will be one troy ounce and made of 99.9% solid silver, with a size of about 28mm x 50mm (1 1/8 inches x 2 inches). The front will be stamped with a purity mark stating “Fine Silver .999.” Each bar will also contain its own unique serial number stamped on the bottom. Finally, the back will be stamped with the Johnson Matthey logo. A troy ounce is equal to about 0.07 pounds, so, as you can imagine, being so light makes them extra convenient to carry around, store, or trade. In other words, they’re very liquid! These bars will be produced as part of a partnership between Johnson Matthey and Sunshine Minting, another major supplier of precious metals that is known for offering custom printings to their customers. Not only can you be assured that each bar will have purity in its content, but that it will be finely crafted and an attractive symbol of wealth. Johnson Matthey is currently in the process of setting up distribution channels across the United States and Canada.

So why are these bars coming back on the market now? As mentioned before, while bullion coins have a certain collectible charm to them with nationalistic implications, a bar is simply precious metal. It is an item that drops all the fancy pretense and is designed solely to be traded. From the oil crisis of the 1970’s to the mid-1980’s, investor interest in precious metals was at a peak that saw the mass production of silver bars by both JM and Engelhard, only to be discontinued during the Reagan years. Now that the country’s economic future is again uncertain, JM is wise to come back in style and market silver bullion in a way that is accessible to anyone. It is always wise to safeguard your wealth, and someone with only a small amount of money to spare can invest in precious metals as much as someone who can make a large purchase. Given JM’s historic standing and the previous history of these bars, as well as the ongoing anxiety in our economy, these items should make quite an impact. As a very large customer of Johnson Matthey, we will be among the first to receive these new bars in our inventory. Come to Bullion Trading to learn more about these bars, as well as other similar items for your investments.

The time to be bullish for gold might be starting once again. Goldman Sachs has just released a statement, urging all active traders to begin buying gold. Their central argument is the current rise in real interest rates and that the economy is expected to rise throughout 2012 due to being an election year. With federal easing, gold may go back up as high as $1,840 and so the time to buy is now! MacQuarie Private Wealth goes even further and predicts a rise of as high as $2250, citing the same reasons! Alas, only in the gold market would an improvement in the economy be regarded as something to fear.
In this market, pessimistic sentiment towards gold has always been regarded as a pre-eminent bullish sign. Furthermore, the price of gold has just in general been growing the last few years, but ever since the US federal government first announced its QE in late-2008, the growth has been much more steady, reaching record highs in the last year.
One thing that this undeniable either way is that we are living in historic times for this market. With prices this high, various economies in crises, and the global future remaining murky, the path that gold takes the next few years is an uncharted one and one many of us are waiting to observe in anticipation. Bullion Trading does not make any of its own predictions for this market, nor do we pressure anyone to purchase gold if they strongly feel it is a bad investment at the time. What we do is encourage all prospective customers to do the necessary market research, whether it come from Goldman Sachs, Macquarie, or any other party, and have an educated idea of how the market works and what to expect. We carry many different items depending on your investment plans and hope for returns. If there is indeed a bull market on the horizon, we are here to help and guide you through to a wise purchase.

            Let’s talk a little bit about the SPDR Gold Trust, also known as GLD, which is one of the most popular and active funds used by investors for gold trading.  GLD is popular for having low fees and $68 billion in assets.  Yet now there is talk surrounding GLD and possible scam accusations from individual investors.  And so, now the fund’s prospectus is under close scrutiny, with certain language and choice of words being investigated.

            The prospectus makes a number of statements that will surely raise a few eyebrows, starting with the claim that any bullion found in the vaults that do not “meet the standards of the vault it is stored in” will be written off as a loss to the investor.  So is GLD storing bars of counterfeit gold, fully aware of this deception, with the intention of not officially “discovering” the forgery until after the time of purchase?  If so, it begs the larger question of whether or not GLD actually owns any physical gold to begin with or if it is all simply “paper gold” that they are selling to customers.  The prospectus also states that GLD does not oversee the actions of their sub-custodians, and if those sub-custodians were to commit theft from the fund, any legal action against them would be very limited.  Imagine if there was a bank that offered to store your finances but could not be held liable if those finances were then tampered with by either their employees or some other middleman you don‘t even know.  Not only would you not trust such a bank, but they would be a contradiction to the very definition that we hold banks to be.

            But the smoking gun is a short passage in the prospectus that flat-out forbids trustees from being able to visit the vault and see the physical gold they have purchased.  The reasoning behind this is that the fund wishes to avoid having visitors or have to expose their precious assets to strangers, which is a fair concern, but the poor choice of wording is definite cause for alarm and raises a number of red flags.  There is a famous quote by the late political commentator Christopher Hitchens: “That which is asserted without evidence can also be dismissed without evidence.”  To apply that statement to this example: if a merchant asserts they have sold you gold but cannot produce the item, then there is no difference between them and someone who never had gold to begin with.

            This is not to say that we are making any direct accusation at GLD; in fact, as a fellow participant in the bullion trade, we understand the large number of risks involved and why merchants will want to use wording that protects themselves at all times.  We also acknowledge that for a $68 billion operation to be a scam would be a rather extreme conspiracy.  But the bottom-line is that we advise all investors out there to always exercise caution and be willing to overanalyze every bit of fine print on any prospectus.  Again, this is why it’s always important to do the necessary research before the time of sale, whether you are the buyer or seller.

            One nice advantage about Bullion Trading is that our rules of conduct are almost the polar opposite of GLD’s; we require the customer to be physically present at the time of their purchase and encourage them to inspect the gold themselves, which they can then carry on them when they leave.  And while we do not parade the gold in our vault out to strangers for obvious reasons, we make it no secret what our business is, and we are certainly happy to discuss our gold with anyone who comes in.  This is why, once again, a trusted bullion dealer is a great place for a new investor to start before moving on to any major trust fund.  As for GLD, their situation should give us all pause.  If nothing else comes out of this news story, at least it will motivate investors to start reading the prospectus a little more closely.