Demand For Physical Possession Of Gold Is Driving The Price Of Gold

Long-time gold market analyst James Turk was recently on CNBC Europe discussing how and why the scramble by investors and Central Banks for taking possession of physical gold (vs. owning derivative forms of gold like ETFs and leveraged gold investment accounts offered by the likes of Kitco and Monex) is now driving the price higher. 

A perfect example of this, Turk points out, is that the demand for ETFs like GLD has gone sideways for several months (measured by GLD's reported inventory of bars) while the price of gold has gone from under $900 to new all-time of $1050.  He also mentions the tightness in the physical market.  In that regard, I have mentioned that, although the tightness is not apparent at this point in time in the bullion coin market, we have several accountings of delivery problems, including my own,  reported by investors on the Comex and the LBMA (London Bullion Market Association), the two largest gold and silver bullion bar markets.

Turk also explains why gold preserves the purchasing power of your wealth against the devaluation of the U.S. dollar and he discusses why an investor can avoid counterparty risk when they own gold outright [without using debt].  I would add that even keeping your cash in a bank exposes you to the counterparty risks of your bank being closed down AND the possible defaulting of the FDIC.  The possibility of the latter would have been completely dismissed even a year ago.  Anyone who thinks now that it's not a possibility is whisling in the dark.

This video of Turk on CNBC  Europe is a little over four minutes and worth every second of watching it:

James Turk On Gold