THE ARABS ARE TRUCKING OFF THE GOLD

On 13 May 2009 Emirates Business 247 reported that the Dubai Multi Commodities Centre has finished a state of the art vault which will become the new home for the Dubai Gold Securities’ ETF. Additionally, ”It’s a natural home for the central banks in the region to store their gold in Dubai rather than in London where they have typically held their gold. Particularly when DMCC has a state-of-the-art facility to store such precious metals,” said Jeffrey Rhodes the CEO of INTL Commodities DMCC, a Dubai-based gold dealer.”

As revealed by China’s recent announcement of an increase in gold reserves from 600 to 1,054 tons it appears that the Western central banks are overstating their physical gold reserves while the Eastern central banks are understating them. Now the Middle East is demanding physical possession of their gold. It will be interesting to see whether a failure to deliver occurs at a major exchange such as the COMEX or LBMA.

CONCLUSION

At all times and in all circumstances gold and silver are money. Even though the great credit contraction has begun there is a microscopically small amount of physical gold and silver bullion compared to the financial assets which have not yet evaporated. The GLD and SLV ETFs purportedly hold large amounts of physical bullion but their respective prospectus are riddled with risk. For decades Western central banks have bled gold through minor wounds.

But now Eastern and Middle Eastern central banks, ETFs and gold dealers are reducing their risk by taking physical delivery of bullion. In effect, they are digging into and ripping wide-open the wound and causing gold to spurt out like a failing dam. Gold is cash and to be bought when one does not know what else to buy. Like the Eastern and Middle Eastern central banks, individuals should only buy gold or silver bullion for physical delivery or use a trusted third party vaulting service that has the physical bullion in possession along with appropriate corporate governance like GoldMoney or your gold might learn how to vanish

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