Thought provoking video interview here.
Could we see massive defaults in on futures contracts if a great number of traders decide to arbitrage the paper/retail spread? Sounds possible, but why hasn’t it been done already? Or is it being done, but restrained by a bottleneck at the mints?
There has been a great premium for small physical gold and silver over the futures market for some months now, well in excess of average seignorage. Small players are devouring coins as fast as they are minted.
I have been inclined to take this as a contrary indicator. While adding to my physical on dips, I have been shorting GLD on rallies with puts since March, when surveys showed 98% bullishness on precious metals. Also, the coin and small bar market is very small relative to the world gold market, according to the World Gold Council.
I suspect that the odds of default are still small, in large part because we are in deflation, not inflation, as most gold buyers believe, and many are likely to spook upon that recognition. Also, with everyone going broke, who can afford to bid aggressively on anything anymore?
That said, if larger players start putting away 400 oz bars en masse, watch out. We are now in the final stages of this paper currency system, so not owning gold or waiting for a better price to buy more is a game of musical chairs.
Hi Mike,
I’m sending this again, because it looked like it did not get through on your site. I’ve talked with some brokers in Switzerland, and to be honest, I was not impressed with their understanding of the times. One group did seem to be on top of what is happening, and they dealt with precious metals. I was wondering if you have found there to be a number of good places who deal with physical gold or if the options are extremely limited. It seems that all hope ultimately lies in Switzerland, but even knowing that is not sufficient. I’ve read that some Swiss banks are in trouble too. The safe haven zone in this world is tiny indeed.
Hi Bjorn. I emailed you.
Mike,
Sorry for the trouble, but your email did not make it to me.
Funny — I sent it to the email you provided to log in to comment. Anyway:
I really do not have the answer here. All I can tell you is that you want the stuff in your name, with assurance that it is yours for the taking if the institution fails, though you may have to be there in person to take it.
My own experience is that the gnomes are just now waking up to the magnitude of the situation. They have a great deal of respect for US institutions, and many are still fairly prudent as far as modern bankers go, so it is hard for them to see just how horrendously their counterparts have messed up. Also, Swiss real estate is very rich, still floating atop a bubble from super-low fixed mortgage rates a few years ago. It is my understanding that old-fashioned local lending is the bread and butter of many of these banks, and while these loans are not sub-prime, defaults will probably soar like everywhere else.
The best solution of course is to have a plan to not be in a politically unstable place as it falls apart, but to join your dough somewhere safer, and to hold much of it in your own possession. Not feasible for everyone, no, but if you have enough to be thinking along these lines, there are very strong reasons to take the leap.