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Physical Gold - the major new trend

Posted by on 1 November 2012

Much has been written about Gold’s dramatic rise in price over the past decade or so and it certainly appears that this trend is set to continue for some time yet.

However within this trend of increasing demand for Gold a new trend, and probably the most important development yet, is starting to take hold and this is the demand for investors to hold actual physical gold.

The significance of this development is that in the early part of Gold’s rising trend the market was to a very large degree driven by the paper market with the introduction of Exchange Traded Funds which tracked and were backed by gold. Investors flocked to these funds and as a result more and more of these types of funds were brought to the market. Such has been the proliferation of these funds that many in the market are starting to wonder if indeed these funds actually hold the amount of gold they profess to hold. There may not be anything in this concern and perhaps these funds do indeed have the amount of gold they say they do but the very idea of being ‘pooled’ with other investors is certainly losing its attractiveness.

According to the World Gold Council purchases of gold bars and coins have increased nearly 100% since 2009, whereas additions to Exchange Traded Funds are down by nearly three quarters in the same time period.

Investors are becoming increasingly concerned about developments in the financial markets and they know that throughout history gold has been a safe haven for their wealth, the more the value of paper currencies are eroded by such things as QE the more valuable their Gold becomes. Now accompanying  this increasing fear is the increasing desire to hold their gold in a secure vault in their own name or for some burying it under the floorboards at home is the way to go (not something I would particularly recommend but everyone to their own).

The matter of secure vaulting has also been much highlighted recently as many holders of physical gold have their gold stored in Bank vaults and Banks are notorious for leasing out the gold that they have in their vaults.  There have been many cases recently of significant gold investors requesting delivery of their gold, that is supposedly being held in a Bank’s vault, only to be presented with delay tactics from the Bank while the Bank struggles to obtain the Gold to deliver back to its client.  

In recognition of this increasing trend in the desire to actually own physical gold in your own name and in a secure commercial Non- Bank vault (no leasing to worry about or pooling of ownership) we at Edge Capital Markets have obtained access for our clients to a Gold purchasing service that was previously only available to wholesale clients, with the accompanying very attractive precious metal prices, of course actual delivery of the metals is available for those who want to provide their own storage at home (spade and extra floorboards not included).

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