Some investors may decide to buy gold stocks after the latest revelations from our government’s Federal Reserve. Thursday, Fed Chairman Ben Bernanke was the keynote speaker at a conference in Washington. Bernanke’s role was to give an update on the Fed’s branch of our government’s Troubled Asset Relief Program(TARP). The Bernanke-led US central bank has seen more action than Arnold Schwarzenegger, but it packs far less “bang for the buck” than any of the California governor’s box office draws.
Investors who are looking to buy gold stocks should carefully consider their options before making a purchase. There are a wide variety of exchange traded funds (ETFs) available, and many of the companies who issue these gold stocks may not own the amount of physical gold necessary to fully back those certificates.
A discrepancy between the number of gold shares a company has issued, and the amount of physical gold that is stored in that company’s name could potentially cause some drastic fluctuations in ETF values. If a gold shareholder finds out that his or her share is not really backed by gold, then it could be too late to liquidate those assets. Many market watchdogs have called for audits on these companies, because it is widely believed that large deficits exist between gold shares and the physical gold that is actually held. Many market analysts are encouraging investors to take physical delivery of their gold, since liquidity is guaranteed and fluctuations are much less volatile.
Many investors are considering a gold stock purchase because they believe that a government confiscation of gold would not affect them. This could not be further from the truth, however, because government officials would almost assuredly confiscate the mass amounts of gold that are held in depositories for gold ETF companies first. The confiscation of gold that is localized in depositories could cause all gold stocks to become null and void. Investors who want to obtain truly non-confiscatable gold items should consider pre-1933 US minted coins that have been certified by the Numismatic Guaranty Corporation (NGC) or the Professional Coin Grading Service (PCGS). These coins provide the best risk-to-reward ratio of any American coin on the market, and their privacy is a major benefit to investors who are wary of our government’s prying eyes…ears, and hands.
Steven Martin
Senior Gold Specialist - Buy-Gold.org
