"The price has bounced all over the charts lately, from the mid-$800s per ounce down to $750 and below. The thing is, the 'paper' price from gold has just plain disconnected from the price - and the availability - for the real stuff.
"Have you tried to buy real gold lately? Many dealers are just out of bullion and coins like the U.S. Gold Eagle and Krugerrand. The U.S. Mint has customers on allocation. The only way to get real gold is to pay a premium over the 'paper' price, and I don't mean the former $20 markup per ounce.
"As far as I can find out from a spokesperson, the SPDR Gold Shares does have physical gold to back up every ounce on the books. The only other way to find out is to go tour the vault and count each gold bar.
"The other gold and precious metals miners in the Outstanding Investments portfolio are all way down. It's a combination of low metal prices and the market meltdown. I know that it's frustrating to watch these gold miners decline. It's painful. What ever happened to the 'dollar down, gold up' thesis? I'm just going to wait it out. Unless I absolutely needed the money right now - and if I did not come up with the money, there would be a severed horse head in my bed - I would not sell the gold shares.
"I'd like to think that the current share prices are absolute bargains. I'd like to think that we would all kick ourselves in five years for not buying up all the shares we can get hold of right now. But then again, this market is confounding. There always seems to be another down day. So my advice is to hang in with what you've got. And buy shares only with your speculation money, not any funds that you cannot afford to tie up for a long time.
"And speaking of long times, I believe that the current banking 'bailouts' (pardon me, 'rescues') are going to be inflationary. The general macroeconomic trend right now is deflation. And the U.S. and most other central banks of the world are fighting that with inflation of the money supplies. This can only be bad news for the dollar. And it should be good for gold."
So, you could wait it out empty-handed...or you could take advantage of gold's uncharacteristically low price and stock up. And at just a penny per ounce, this will hardly make a dent in your bank account.
P.S. to get The Daily Reckoning direct to your inbox sign up to our free e-mail newsletter or if you prefer to use RSS, subscribe to the Daily Reckoning RSS feed.
Related Articles:
- Gold Ratios: Bearish for Gold Prices, Bullish for Gold Shares
- How to Trade Gold Shares
- Is Gold Still a Buy?
- The Price of Gold Has Not Retreated Permamently
- Gold Coins for $870-$890 An Ounce
About the Author
Byron King currently serves as an attorney in Pittsburgh, Pennsylvania. He received his Juris Doctor from the University of Pittsburgh School of Law in 1981 and is a cum laude graduate of Harvard University. Byron is also co-editor of Outstanding Investments.
Comment by rick e on 24 October 2008:
Hello
On the ASX are these two trading paper stocks for gold?
If not what are they?
Code
GG 710.250 712.250 711.350 -14.850 -2.040 728.250
GOLD 106.800 107.490 106.800 -0.100 -0.090 105.100