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.

Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (22357)	11/23/2004 9:32:34 PM
From: ild	Read Replies (1) \| Respond to of 110194

From today's Fleck Putting Thoughts to "Paper" Gold Turning to the precious metals, gold and silver flopped around on both sides of unchanged, before closing down fractionally. Speaking of gold, there's been a bunch of chatter that the new gold ETF doesn't really own gold, that all it owns is "paper" gold, say people who have dived into the minutiae of the ETF prospectus. Here are my thoughts on the matter: This is sponsored by the World Gold Council in an attempt to help promote the buying of gold. The exact details of when they will own gold vs. "paper" gold do not interest me. For all intents and purposes, as far as I am concerned, owning "paper" gold (i.e., gold futures) at this moment in time is as good as owning physical gold (i.e., gold bullion). Presently, I do not own physical gold. I am content to own gold futures. There quite possibly will be a moment in time where it will be necessary to own bullion itself and take delivery. Though I haven't chosen to do so yet, I would not argue with anyone who did. The reason I bring this up is that I've gotten a ton of email on this subject. Folks just have to decide: Do they want to own bullion, coins, futures, gold stocks, or a mix of these? Draining Demand from Gold-Stock Land? As for the latter, there's been a lot of conjecture that the ETF will steal demand away from gold stocks. I suspect it will siphon off some buyers, especially of gold companies that may not have spectacular management or land packages (with Coeur d'Alene being the quintessential example, though it's also in the silver business). However, as many folks have noted, there is a difference in tax rates between the ETF, which is taxed as a collectible at around 28%, versus the long-term-gain treatment enjoyed by owners of common stocks. So, there is that to think about as well. Bottom line: There are many different variables, and everyone has to decide for themselves which is the best choice or the best mix. I cannot answer that question for anyone but myself. What I can say, though, is that whatever demand the gold ETF may steal away from the gold stocks, it may also give back in terms of higher prices. Lastly, I think that the idea of gold-stock demand being diminished on the back of the ETF has been pretty well discounted. Therefore, I am content to own my Newmont Mining and my gold futures, and of course, I continue to own Pan American Silver. Additionally, I suspect that once the Barclays gold ETF is rolled out (not to be confused with the already-launched World Gold Council ETF), we will see a silver ETF. I think that will be a wonderful investment to consider for those who believe that silver is going to do better than gold.