Gold Mania? Not Quite (There are good, fundamental reasons for the surge in the Yellow Metal)

Wall Street Journal ^ | 10/08/2010 | Brett Arends

[WebFocus]

The conventional wisdom on Wall Street is that the gold bubble is about to pop.

After all, people will tell you, the little guy is now totally on this bandwagon. Ordinary Mom and Pop investors from Bakersfield to Boston have dumped their stocks and poured their money into gold coins and bullion funds. It's a mania–just like Nasdaq '99, real estate '04, gold '10. Look at all the TV commercials. Look at these new gold coin vending machines. Everybody knows that when the ordinary public get into a boom, the smart money gets out. Right?

I decided to check out the facts on this urban legend. And they may surprise you.

How much have ordinary Americans actually invested in gold this year?

According to Financial Research Corp., a Boston firm which tracks the data, investors poured $7.4 billion into gold bullion through exchange-traded funds from the start of the year through the end of July. Nearly all of that went into State Street's SPDR Gold Trust.

But a lot of that money came from big institutions like pension funds, hedge funds and mutual funds. According to State Street, these account for at least 45% of the investment in GLD these days.

So individual members of the public probably accounted for only about half the new investment, or $3.7 billion.

[Huck]

But a lot of that money came from big institutions like pension funds, hedge funds and mutual funds. According to State Street, these account for at least 45% of the investment in GLD these days.

So individual members of the public probably accounted for only about half the new investment, or $3.7 billion.

Lemme see if I got it. Institutions account for 45% of the total, and that's "a lot of [the] money" that is invested in gold. Individuals account for "only about half"--which last time I checked is more than 45%---that's not a big amount?

Well, is half a big amount or not?

[bkepley]

Well great..conventional wisdom is the bubble’s going to burst I’ll keep my gold for now.

[runninglips]

The people that do not have possession of physical gold may be in for a surprise......a simple request from the govt will confiscate their holdings. Hoarding is such an evil thing, the lowly citizen cannot be allowed to own gold, it belongs to everybody.

[WebFocus]

RE: The people that do not have possession of physical gold may be in for a surprise......a simple request from the govt will confiscate their holdings

---

I own a lot of Gold (supposedly) via my ETF Gold iShares ( AMEX Symbol : GLD ).

If I took possession of the amount of gold backed by the money I invested, I would be very reluctant to keep them at home.

Are you saying that even these iShares ownership will be illegal ?

[phockthis]

If you can’t hold it, you don’t own it...

If the sh-t hits the fan, do you REALLY think that someone will bring you “Your” gold...

Do some reserch and you will soon realize that there is an estimated 50-100 ozs of “Paper Gold” for every oz of “Real Gold”.

[Silentgypsy]

What’s the expression? BOHICA

[JAKraig]

Do some reserch and you will soon realize that there is an estimated 50-100 ozs of “Paper Gold” for every oz of “Real Gold”.

_______________________________________________________

I knew this problem existed with silver but I did not know there was a similar problem with gold.

The nice thing about gold is that it doesn't take much to hold a hundred grand, just 75 coins. It takes a few hundred pounds of silver to do the same thing. I think I could easily hide 75 coins, at least much easier than 300 pounds of silver.

All that being said I still really like silver, especially old American silver coins.

[phockthis]

Here is another reason to think about silver, or atleast 1oz gold coins.
But as always, due your own research.

http://beforeitsnews.com/story/0/499/Tungsten_Filled_Gold_Bars_-_GLD_ETF_WARNING.html

[redhead]

I am a very small gold owner. I bought when the price was down around $250, but even at that, I am glad I don't have very much. I'm glad my "fortune" is not tied up in something as volatile as gold in this economy. If things were safer "out there" and the market in less danger, I'd be kicking myself for not buying more.

As it is, I love having it, but it's a sort of relief to know that if the bottom falls out of the price tomorrow, it will have to fall very, very far before I will lose any "worth" with it. For me, that's a relief. I do worry about friends who have larger holdings, however.

[CodeToad]

"Are you saying that even these iShares ownership will be illegal ?"

It has happened before:

[runninglips]

Not illegal, FDR demanded that people turn in their gold. Some didn’t, most did, but if yours is held by another, it is only a simple request to have the govt give you a set amount of dollars for yours, and have the gold handed over. I simply do not trust them. You are right though, it is hard to have a safe place to keep over a certain amount.

[runninglips]

Gold is permanent at $1K an ounce. It is just that the dollar is worth much less. I think it will go to $3K myself, but I don’t have the money to ride this train. Silver is my ticket, bought in at $12 and expect it to go to $40.