Financial Times lets GoldMoney's Turk mock paper gold


View of the Day: Gold Dances to Its Own Tune

Financial Times, London
Thursday, November 5, 2009

Gold's recent surge to record highs has not been accompanied by the usual market actions explaining its advance -- instead, different factors are at work, says James Turk, chairman of GoldMoney.

He notes that the US dollar remains trapped within the same range it has occupied for several weeks. Nor, he says, has gold been tracking other commodities, as evidenced by the CRB Index, which remains below last month's high. Oil and even silver have not been able to better their highs from October -- at least not yet.

"For now, gold is marching to a different drummer," says Mr Turk. "We are seeing a scramble for physical metal, and that demand is driving gold higher. Buyers are opting for physical gold, not paper gold."

He points out that when gold was trading at $870 an ounce back in early April, the SPDR Gold Trust -- the world's largest gold exchange-traded fund -- recorded ownership of 1,127 tonnes of the metal. Since then, SPDR's holding has shrunk by 20 tonnes, but gold has climbed by more than $200. "It is a clear example that buyers want physical gold and not paper gold. They are opting for the real thing, not a substitute.

"Why? Because risk aversion has returned to centre stage as worries about bank solvency have resurfaced. It is possible we have been in the eye of the hurricane. Physical gold does not have counterparty risk, which makes it the safest haven of all."

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