July 29, 2014

Panicky Greeks Paying Over $1,700 Per Ounce For Physical Gold

gold sovereignThe fear running through the Greek populace is that the nation’s government may default on some of its debts.

Since 1965, the Greek government has imposed restrictions on trading British Sovereign gold coins (gold content .2354 oz).  Despite those restrictions, the Bank of Greece reports that it is selling an average of more than 700 coins per day to worried Greeks.

In the first four months of 2010, the Greek central bank sold more than 50,000 sovereigns at its main downtown Athens office.  Bank officials estimate that at least 100,000 other coins changed hands on the black market.  The Bank of Greece has received as much as $409 per coin, which works out to a price of more than $1,700 per ounce of gold!  Prices paid on the black market are reckoned to be even higher.  A popular spot for street vendors to sell their coins is near the Athens Stock Exchange.  There the traders wait for citizens to bring payments received from unloading their paper assets like stocks and bonds.

The US government and some state governments such as California are in financial straits as bad as or even worse than Greece.  How long will it take before American buyers will have to wait in lines to pay outrageous premiums for what are now bullion-priced gold and silver coins?  More than one analyst thinks those days will come within a few months or sooner.

Where does the US government and its trading partners get their hands on enough physical gold to help suppress gold prices?  Reg Howe, an analyst who writes at www.goldensextant.com, once sued the Federal Reserve, other central banks and official agencies, and major bullion banks.  He scrutinizes the twice yearly report on derivatives issued by the Bank for International Settlements.  The December 31, 2009 report was released two weeks ago.

Howe thinks he can trace one means by which physical gold is being leaked onto the market without any apparent source.  A central bank can lend gold to a major bank.  Under IMF rules, the central bank is able to continue to report loaned gold as still being in its vaults.  The bank then can sell its gold to the GLD exchange traded fund in return for shares of GLD.  This way, the bank theoretically has about netted its gold position.  Then GLD can lease the gold, which is authorized under GLD’s operating documents, which means that GLD can still claim to have all of its gold liabilities covered.  It would be the lessee of the gold that would sell it onto the physical market, thereby putting some downward pressure on prices.  In theory, the central bank, the bank, and GLD all have their positions covered.  However, if the lessee is unable to repay the gold someday, and rising gold prices increase the risk just such an occurrence, then there could potentially be a domino effect of multiple parties suddenly finding out they are in default of their liabilities to produce the physical gold they have reported as being an asset.

As each day passes, the risk is growing that owning any form of “paper gold” could turn out to be as worthless as the paper currencies used to purchase it.  While you still can, you should protect yourself by converting such “assets” into real physical gold.

Patrick A. Heller owns Liberty Coin Service in Lansing, Michigan and writes “Liberty’s Outlook,” a monthly newsletter covering rare coins and precious metals. Past issues can be found online at http://www.libertycoinservice.com/ Pat Heller is also the gold market commentator for Numismatic News. Past columns online at http://numismaster.com/ under “News & Articles”. His periodic radio interviews can be heard on WILS 1320 AM in Lansing, www.talkLansing.net, and on www.yourcontrarian.com.

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Comments

  1. Bob Jonston says:

    It is gold seller fear mongers like yourself that drive up the price of gold. Not any real threat or global economic problem. The real problems are behind us and the economy is on track to recover. Hold on to your gold, and you’ll lose big time!

  2. Willem de Leeuw says:

    ‘A popular spot for street vendors to sell their coins is near the Athens Stock Exchange. There the traders wait for citizens to bring payments received from unloading their paper assets like stocks and bonds.’

    People don’t need to physically go to the Exchange to sell these days – is this a story from 100 years ago or just some made up BS?

  3. Dr Ian Johnston says:

    Are you crazy? Western economies are debasing the value of their currencies by printing money in a desperate attempt to stimulate their economies and inflate their debts away – we might have the threat of deflation now but massive inflation will ensue in time.

    You cannot print Gold. Hold onto your cash and watch its buying power burn.

  4. Jay says:

    Bob: What are you talking about? Real problems behind us? Are US sovereign debt risks not a threat to recovery?

    Willem: How do you take delivery of physical gold through a computer?

    I actually think I lost brain cells typing this response. Oh well, more gold for the people who get the risks of fiat.

  5. Brendan says:

    Gold = Intrinsic Money

    Federal Reserve Notes = Fiat Money

    The Greeks may be paying a premium for physical gold, but if the premium is paid in worthless paper, does it really matter the price? Given the choice between holding Gold(Intrinsic Money) Vs Federal Reserve Notes and Euros (POWER AND AGREEMENT), it seems pretty obvious what to do. Dump a large amount of paper, then fight to keep the gold you hold. It’s been seized before, the 2010 and 2012 elections are the only short term way to prevent gold from being seized again. Puppets who voted against the full audit of the private corporation called the federal reserve bank should be voted out of office.

  6. Herve says:

    I love people like Mr.Bob Jonston; they are giving me a chance to purchase gold/silver slowly enough without taking loans. The bottom line is this: Even though the precious metal break-through is taking its time, it will happen. To be honest, I prefer this slow climb, with predictable dips. It makes the accumulation so much easier.

    Thanks to you sir, and to all the ones like you.

  7. Mike says:

    Bob Jonston, what a load. wipe your chin mate. the market is being held up but the money printed. watch the Dow every Friday at the end of the print run. No excuse or ignorance mate.

  8. LJ says:

    Bob Jonston: Hang on to your ASS, and you’ll see gold hit big time, and you’ll be the big looser! The problem isn’t that GOLD is rising in price, it is the FIAT currencies of the world are all moving towards their true value — $0.00…just about as fast as they can…but wait until silver catches up, it’ll make GOLD look like a lost dream come true!! Get a grip Bob, gold and silver are REAL money…stop being a shill and catch up with what is really happening in the world!

  9. usanaman says:

    LJ – U got it right…Silver will is the secret.

  10. Dipshirt says:

    Dang, thanks for the heads up Bob – I’m going to throw my gold in the toilet. It would be unethical to sell such a worthless asset to some unsuspecting sucker.

  11. James says:

    Holy cow Bob Johnston still hard to believe guys like you walk amongst us lol You poor dumb fool )-:

  12. wtshf says:

    Psst..Let me tell you a secret. Bob Johnston is a fake. He’s just going around telling people the economy is recovering. Just like what Uncle Sam is doing in the mainstream media. You can say he’s Uncle’s Sam goon. So now you know Bob is just doing what he was paid to do. Next time, just ignore such comments. For the rest of us, let’s keep buying gold and silver while we still can. Don’t wait until all hell breaks loose.

  13. convert paper assets while they have value

  14. julie says:

    The fact that someone would attempt to deceive us with the “economy is good’ tale, I find utterly disrespectful
    it actually makes the case for any opposing thought-
    To hear such rubbish is both irritating and convincing- Tomorrow I begin to purchase Gold and silver-
    Lol-
    I hate a stupid con- Grow up to to jail take seminars something
    learn your trade.

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