Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Enigma who wrote (53072)	5/22/2000 5:56:00 AM
From: The Vet	Read Replies (1) \| Respond to of 116764

<< you can take a Bank of Nova Scotia Gold Certificate and present it at the gold window and get physical gold at any time >> I am sure that is correct but do you know for a fact that they have not extended the "fractional reserve" system used for fiat to their gold certificates. We all know that if everyone fronted up to the bank and asked for their money on deposit in cash they would not get it. On the same premise if all the holders of Gold Certificates asked for their physical gold; would they all get gold? Or would only the first few in line be able to get their gold. I suspect that those at the end of the line would simply get either fiat or some alternative form promise backed by nothing more than the good standing of the bank. If the customer offered such a replacement insisted on real metal then the bank would then be forced to buy in replacement gold or call in gold loans in order to meet their obligations. The question is, would they be able to do this in the event of a "gold run". There is no way for us to test this except to ask the bank directly much gold they have and to balance that against the certificates issued. If they do not have sufficient real gold under their own direct control are they likely to admit it? We all know that a lot of paper gold can not be a true proxy backed ounce for ounce by physical metal. Just a quick glance at the London trading figures by any thinking person tells you that most of the trading done there must be in paper gold and it cannot possibly be all directly backed by real metal. Mining companies sell gold that has not yet been mined as part of their hedging programs. Would you wait in line at your bank, gold certificate in hand, waiting for ABX to dig up your gold in a couple of years??? Once the gold backing becomes indirect via options, leases, hedging and exotic derivatives the probability of "double counting" increases. Gold is traded in the form of paper certificates by all countries every day while the actual metal remains in New York or London in a bank vault and may not be moved physically at all. If certificates for two ounces were issued for each real ounce actually there, who would be any the wiser?

To: Enigma who wrote (53072)	5/22/2000 6:48:00 AM
From: long-gone	Respond to of 116764

<<Yes that may be true of certain instruments - but you can take a Bank of Nova Scotia Gold Certificate and present it at the gold window and get physical gold at any time.>> But do they also loan gold? If an institution is involved in both in issuing of gold certificates & making of gold loans, their overall position must be(at least) somewhat suspect. Then, should a given gold certificate be allowed to be loaned, used as security for a loan, & also sold? How many layers of derivative exposure should our regulators allow within the system? Where do we hit the point of "systemic risk"?