Fiat gold?

Posted | 30/10/2013 / Views | 1777
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We write often of the perils of the current Fiat currency situation (money ‘created’ and backed by nothing but a promise).  The appeal of physical gold and silver is they are the exact opposite, they are real money, limited in new supply and with no counter party risk.  What we are seeing unfold this year is very real questions arise on ‘paper’ gold such as ETF’s and LBMA/Comex price setting futures.  In April/May we saw a disconnect of ‘paper’ and physical prices through high premiums to get the real deal.  We are seeing that again now in both India and China as they scramble to get real metal drained from ETFs and LBMA.  We are also a couple of weeks into a re-entry of negative GOFO rates or backwardation, another very telling sign of the availability or faith in getting access to physical gold and silver.  On any half decent rise in gold and silver prices we now have a situation or trigger where paper claims to metal could fail and a very real disconnect in price sees those who hold their metal experience much higher price growth.