Monday, April 18, 2011

Let's Get Physical

Here is an interesting story about the University of Texas Investment Management Co. taking physical delivery of gold.  This endowment fund is the second largest following Harvard University.  Obviously from reading the article, I get the sense that some very smart people are concerned that there may be difficulty in getting physical gold delivered due to the fact that futures contracts that are traded represent so much more gold than actually exists.

This is consistent with information that Eric Sprott shared back in January about having difficulty getting physical delivery of silver for his hedge fund.  It would seem that there just might be a pattern developing here, and it is one that investors in the precious metals would be wise to heed.

No Substitute for Physical

If you really want to own real assets, then there just is no substitute for physical possession.  Any paper derivative is simply not worth the paper that it is printed on.  That is the big problem with the fiat currencies today and what is driving the price of precious metals to all time highs.  Confidence in the paper system has declined.  Investors are demanding to hold something tangible in their hands.

That is not to say that money can't be made using paper.  Trading in the gold and silver ETFs or mining shares is a great way to move into and out of positions quickly and make some additional cash by trading.  However, at the end of the day, you have to realize that you really don't own anything of substance.  Just ask the shareholders of any of the recently bankrupt companies what they got out of any bailouts.  Then decide for yourself--paper or physical.

Until next time--KEEP IT REAL!

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