Tuesday, October 23, 2012

Gold and Silver Physical Demand Increasing - ETFs

In the mid-2000s, gold and silver were going up consistently. This of course signaled opportunity to the large bullion banks. How to get an ignorant public and fund manger sector to invest in these products. After all, gold was a fringe investment, no one wanted it.

So they conjured up the ETF schemes. This where Joe Sixpack could now take advantage of rising gold and silver prices but not actually have to store physical metal anywhere. He could also be 'in' and 'out' without moving large chunks of gold and silver bars from one owner to another.

These instruments caught on like wild-fire and were heartily snapped up. The volumes were terrifying. But questions began to be asked as to whether the metal was actually backing these funds. Depending on what side of the precious metals community you are from, this is moot.

Anyway, the party seems to have stopped,

The ETF funds, like EFT GLD, appear to be on the wane. Investors appear to be beginning to dump ETFs for the real 'McCoy'; physical gold and silver. Maybe, there is diversification going on. That is, splitting ones holdings in ETFs and physical.

This is a trend likely to continue and one very worth watching. Trust is obviously leaving the system and people want certainty and know they can get it with the real physical asset.

Gold in New Zealand dollars: $2113.88 per oz
Previous all-time high: $2311.02 per oz (15 Nov, 2011)

Silver in New Zealand dollars: $39.66 per oz
Previous all-time high: $59.19 per oz (30 Apr, 2011)
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