Physical Precious Metals – The Ultimate Safe Haven

By Peter Costa

The rush for gold has not even begun according to billionaire Thomas Kaplan a New- York born commodities mogul. In fact he is so convinced of this that he has put $2 billion of his own money into physical gold through his company Tigris Financial. With this move Mr. Kaplan has now joined the likes of world market gurus such as John Paulson, George Soros, David Einhorn and Warren Buffet to name a few who have started to amass large quantities of physical precious metals. The key to their investment strategy is physical possession of precious metals that they store on their own and is something all precious metal investors need to take note of.

As the gold rush continues to unfold investors are being swayed into the paper asset of precious metals rather than the physical asset. Just like the old days when traveling merchants would hand their gold over to banks and would receive a promissory note in return, exchange traded funds are promising the same. Instead of a receiving physical metals these various ETFs promise to hold your gold and when your contract is up you are able to receive physical delivery of precious metals or you can sell the contract for cash. This strategy is becoming increasingly popular and such fund as GLD, SPDR, COMEX and SLV are experiencing incredible demand. The problem with this strategy is similar to the problem that arose centuries ago and is doomed to repeat itself. The main driving force behind the popularity of this paper asset is none other than registered financial advisers pushing these securities on their diminishing clientele base. Since there has been a complete loss of confidence in stocks and mutual funds these registered financial advisers are scrambling to find alternative paper assets so they can continue to keep clients money under management.

Centuries ago when a bank would create a promissory note for the traveling merchant and realized that nobody was cashing in the note for the gold being held, the bank would begin creating more promissory notes then they had gold. Once word got out in the land that this bank had more notes circling around than they had gold they were flooded with depositors wanting physical possession of their gold. Once this happened the bank would immediately become bankrupt and would have no choice but to close their doors for business due to lack of gold holdings. This event alone would devastate economies and more importantly the merchants who worked hard for their wealth. For centuries this cycle continued and mass amounts of wealth were vaporized due to greedy banks.

As much as we have had technological advances the same issues still remain today that plagued societies centuries ago. The exchange traded fund strategy is nothing but a more advanced version of what banks did centuries ago to vaporize wealth and will soon do the same thing to millions of hard working individuals. While the current state of humanity is greed based, I find it extremely difficult to believe that these various funds are actually holding the exact amount of precious metals that are trading. As banks have practiced fractional reserve banking for the last century loaning out $9 for every $1 they receive I feel the exact same strategy is being utilized for these various funds. I feel strongly that they are holding a mere fraction of what is trading through their fund and that if the whistle is blown on their operation there will be a 1 to 100 ratio meaning, if everyone requested physical delivery of their contracts 1 out 100 would receive their metals. Furthermore with this kind of a faulty fractional reserve operation these various funds are suppressing the true value of precious metals by creating a fictitious market place. Millions upon millions are trading these contracts on what they feel is physical precious metals none the wiser to the reality of the situation that they are trading a useless piece of paper just as useless as the greenback and all fiat currencies.

Smart money are already cognizant to the illusion of these various exchange traded funds and have begun ditching the paper asset of precious metals for physical possession. In the coming times as this fractional reserve practice is revealed with various ETFs, the illusionary price of precious metals will evaporate, setting in stone a new heightened floor for all precious metals. Only the owners of physical precious metals will be the recipients of this growth story leaving behind the owners of paper assets in shock and awe as their wealth evaporates. In 2009 legendary hedge fund manager David Einhorn who was the largest holder of the GLD fund with over 4.2 million shares, sold his entire stake in favor of physical gold. This strategy is being favored by world renowned investors such as John Paulson, George Soros, Warren Buffet, Thomas Kaplan, Jim Rogers who combined have purchased over $100 billion in physical precious metals. On May.22, 2010 Thomas Kaplan made front page news with the Wall Street Journal on his decision to purchase over $2 billion in physical gold that he stores on his own. “I’ve reached a point where I feel the only asset I have confidence in is gold” stated Mr. Kaplan in an interview at Tigris’s midtown Manhattan headquarters. The smart money knows what is coming and are focusing primarily on the acquisition of physical precious metals in preparation for the coming times.

It is not by chance that billionaires and smart money alike are rolling over their wealth into physical precious metals rather than the paper asset. Exchange traded funds, the green back, and all fiat currencies for that matter….will end like any fatally flawed system: With an unhappy ending. We are in a time of great change and as history has shown us we are about to learn a great lesson in owning paper assets over physical assets. If you have the paper asset of gold do yourself a favor and sell it now before the option no longer exists. Physical precious metals are the easiest asset to acquire and sites like www.RegalGoldCoins.com have made the transition seamless. As more and more paper asset based financial advisers are put out of business heed the warnings and position your wealth appropriately.

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