Systematic Fraud Or Gross Negligence in Silver ETFs!

Thanks to a link on ZeroHedge, I read this report by Project Mayhem Research Inc. According to the report, the iShares SLV and London-based ETFS physical silver funds both have inaccurate records regarding the levels of physical silver inventory. The report states that there is significant duplication of silver  and the actual amounts are lower than reported. This indicates a high statistical likelihood of “systematic fraud or gross neligence” in the accounting of both silver ETFs. Since silver ETFs are now accepted forms of delivery on the COMEX (futures trading exchange) proper accounting is the only way establish proper silver price discovery. No wonder prices of silver are so low! There’s fraud everywhere!

Silveretfs 1 PDF

If you’re buying silver or gold as an insurance policy against financial disaster, it makes sense to hold the actual commodity in its physical form rather than a piece of paper. If you’re buying such humongous quantities that you  must buy paper, buy the Perth Mint Silver Certificates instead.

For the rest of you regular folk, just buy silver coins like peace silver dollars or silver bars.  And if you like to collect pretty shiny objects, silver coins are the way to go! Collecting American silver coins is a great way to introduce your kids to the value of money and savings!

When Is A Silver Dollar Worth $2.3 Million?

Last week, an 1804 Adams-Carter Silver dollar sold at auction for a whopping $2.3 million.  That’s a pretty good amount for  1 ounce of silver worth about $12! There are only 15 such coins known to exist and they’re quite popular.


The buyer was New Jersey dealer John Albanese, who said that the price was “basically a half-million down from last year because of the recession. It was a good opportunity. These don’t come around all the time.” The coin, the finest Class III 1804 dollar outside museums and available to collectors, had been expected to fetch $2 million.

The varieties of 1804 silver dollars are known as Class I, Class II, and Class III. The Class I pieces are sometimes called Originals, although that name is inaccurate, since they were struck in 1834 rather than 1804. The Class II and Class III pieces are sometimes called Restrikes, also an inaccurate name since there were technically no Originals.


A single obverse die and two reverse dies were created for all of the 1804 dollars, and it is virtually certain that the dies were all made at the same time, certainly no later than 1834. The dies were also produced by the same engraver. The two reverse dies have been designated as Reverse X and Reverse Y, following past literature on the subject.

Assuming these were minted in 1834 and are thus 175 years ago, that means the coin appreciated 8.731% a year. Not a bad rate of return!  Hopefully, someday my collection of Morgan Silver Dollars and Peace Silver Dollars will be worth something too.

Peter Schiff: Dollar Is The Next Bubble To Collapse

Here’s an excellent video starring Peter Schiff.  He predicts that the US Dollar will be the next bubble to burst. As a corrollary, I think gold will be the next bubble. The dollar collapse seems unlikely, you say? Well he did predict the collapse of the housing market 4 years ago and was met with wide-spread ridicule.

Like I’ve been saying for ages, make sure you buy some gold coinsSilver coins aren’t bad either.

Perth Mint Suspends Orders For Gold Bullion

As a follow-up to my previous 2 posts on gold, here’s a news article about the Australian Perth Mint suspending orders for gold bullion until January. Apparently having it’s workers slog 7 days a week isn’t enough to meet demand!

FEARS of the unknown long-term effects from the global financial crisis have sparked a new gold rush.

With retail and wholesale clients around the world stocking up on the precious metal, the Perth Mint has been forced to suspend orders.

As the World Gold Council reported that the dollar demand for gold reached a quarterly record of $US32 billion ($50.73 billion) in the third quarter, industry insiders said the race to secure physical gold had reached an intensity that had never been witnessed before.

Perth Mint sales and marketing director Ron Currie said the unprecedented demand had forced the Mint to cease orders until January, with staff working seven days a week, 24-hour days, over three shifts to meet orders.

He said Europe was leading the demand, with Russia, Ukraine, Middle East and US all buying — making up 80 per cent of its sales. One European client purchased 30,000 ounces for $33 million.

“We have never seen this before and are working right at capacity. And we are seeing it from clients in the shop buying one ounce, right up to 30,000 ounces from overseas clients,” Mr Currie said.

Robert Jaggard, manager of bullion and rare coins dealer Jaggards, said business had picked up strongly and he expected it to increase further.

“All around the world there has been a heavy run on physical gold and there is a shortage of supply,” he said.

Mr Jaggard, who has been dealing in gold for 40 years and is an agent for the Perth Mint, said some clients were buying up to $1million worth of gold, paying a premium above the spot price.

Late yesterday afternoon, spot gold in Sydney was trading at $US747.30 an ounce, up $US8.15 on Thursday’s local close.

“Professional business people who have previously bought small amounts now want more gold because they are suffering in other markets,” Mr Jaggard said.

At a conference this week in Munich, delegates were lined up 30-deep to purchase physical gold. And reports out of the Middle East suggested that there had been unprecedented gold buying in Saudi Arabia during the first half of November, with an estimated $US3.5 billion purchased in recent weeks.

The World Gold Council, releasing its global demand trends yesterday, said identifiable investment demand, which incorporates demand for gold through exchange-traded funds and bars and coins, was the biggest contributor to overall demand during the quarter. It was up to $US10.7 billion, double last year’s levels.

The figures showed retail investment demand rose 121 per cent to 232 tonnes in the third quarter, with strong bar and coin buying reported in Swiss, German and US markets.

The quarter also witnessed widespread reports of gold shortages among bullion dealers across the globe, as investors searched for a haven. Overall, quarter three saw Europe reach an all-time record 51 tonnes of bar and coin buying. France became a net investor in gold for the first time since the early 1980s.

World Gold Council chief executive James Burton said gold’s universal role as a store of value had shone through during the quarter, helping attract investors and consumers to all forms of gold ownership.

“The rise in demand for gold bars and coins has been impressive,” he said.

Demand in India, the largest market for gold, recovered during the third quarter, encouraged by lower gold prices, a good monsoon and the onset of the festive season. At 250 tonnes, total consumer demand was 31 per cent higher than the same period last year. In value terms, demand hit the record quarterly sum of $US5 billion.

Here’s the link.

So there’s a surge in demand, but no spike in prices that’s usually associated with shortages!

Buying Cheap Gold Coins

Gold and silver are global commodities with spot prices being the same all over the world (assuming you live in an open society). The only differences are the premiums that dealers charge buyers. One of the surprising things has been the large increase in premiums on gold and silver coins. Even though the prices for both metals have dropped from their highs, the cost of buying gold or silver coins hasn’t dropped proportionately. In fact, there’s been reported shortages of these coins by the US Mint and the Australian Perth Mint, not to mention individual retailers. This seems to defy common wisdom; prices drop when demand decreases. Even though spot prices have increased, the demand seems to have increased and thus gold and silver coins aren’t as cheap as they should be.

Right now the premium on silver coins is a whopping 60%+. For gold it’s a lot lower but still higher than it’s historic 2.5-3%. I just got an email today from a newsletter service that I subscribe to that’s pretty interesting.

If You Want Cheap Gold Coins, Canada Has Them
By Tom Dyson

I don’t trust my bank. And I don’t trust the dollar.

As far as my savings are concerned, I’d rather keep them in gold. And I don’t mean gold futures or gold certificates or gold mining shares. I’m talking about physical gold bullion in a safety deposit box.

My family thinks I’m taking a big risk. But as I see it, they’re the ones taking the risk. I’m the one storing my money in the world’s safest asset… the asset that’s been used as money for 5,000 years… and the only money that’s no one else’s liability.

Besides, what have I got to lose? My bank pays less than 3% on its savings accounts.

I’d advise you to own at least a couple of ounces of gold, too… if nothing else, for insurance purposes.

Coins are the best way for individuals to buy gold. They come in small denominations, they’re portable, and you can exchange them for cash anywhere in the world at gold’s international spot price.

Here’s the thing: Right now, gold coins are hard to find. Even if you can find them, they’re more expensive than usual.

In normal markets, you can buy silver coins below the spot price and gold at a 1% or 2% premium to the spot price. I’ve spoken to at least six gold coin dealers in the last week. Three of them were out of stock. Of the dealers still in stock, the cheapest gold coins I found were selling for a 5% premium to the gold price.

In other words, with gold at $800, you’d have to spend at least $840 on a one-ounce coin. The scarcity of silver coins is even worse. One dealer told me he was paying $16 for one-ounce silver coins, purchased in bulk. Right now, the spot price of silver is $9 an ounce. So the premium’s almost 80%.

The financial crisis is the reason for this mispricing. Demand for coins, one-ounce bars, and other “retail” denominations of gold has outpaced the ability of fabricators to make them.

There is no shortage of physical gold. If you wanted to buy a kilo or a 100-ounce bar, you’d have no problem.

The shortage is just a short-term supply problem at the retail level. Gold producers will take advantage of the premium and ramp up production. So in a few months, the big mark-ups will disappear.

That said, if you want to buy small quantities of gold right now, go to Canada.

The Bank of Nova Scotia is one of the world’s largest precious-metals dealers. If you go to the Hollis Street branch in Halifax, Nova Scotia, or the King Street West branch in Toronto, they’ll sell you Canadian Maple Leaf coins at a 3.7% premium to spot and one-ounce wafers at a 2.6% premium to spot.

Good investing,


P.S. Gold doesn’t show up in airport security metal detectors. I’ve tested this with gold coins before. But if you’re traveling across the border with more than $10,000 worth of gold or currency, you must declare it at the border. They’ll run your name and make sure you’re not a money launderer. That’s it.

Of course, if you don’t feel like going all the way to Canada just to buy a few gold and silver coins you can always buy them cheaply here:
American & Canadian Silver Coins

American, Canadian French, & Swiss  Gold Coins

Gold Jumps: Has It Become Correlated To The Stock Market?

I’ve been an avid collector of gold and silver coins and have been following the prices for a years.

Gold is supposed to have a negative correlation with the stock market. This year has proved otherwise. Of course, as we’ve seen repeatedly in the past, all asset classes correlate to the downside.

Gold which peaked at $1030/oz earlier this year, has been trading in the $700 range for a few months. There has been a flight to safety, which for most people means buying US Treasuries. Indeed, the flight has been so large that it has pushed the yields down to absurdly low levels. The yield on the 3-month Treasury was almost zero at 0.4% and the 10 year is 3.52%. (The yield on the S&P500 was 3.55% this week, higher than the 10 year Treasuries rate for the first time since 1958).

The way that demand affects interest rates is that as people clamor for T-bills, they push up the prices for these bonds. Since the bonds pay out a fixed interest rate, the effective yield (also called yield-to-maturity or YTM) drops. So it’s the demand for stability in the current globally volatile economic environment that is pushing up bond prices and pushing down yields to almost nothing.

On the flip side, prices for a product fall as the demand drops off. So we’d expect the decrease in demand for gold as the cause of it’s low price. However, there have been several news reports stating that demand for gold is 50% higher than it was last year.

Demand For Gold Hits A Record Even As Institutions Head For Exits (November 19th, 2008)

The US Government Mint had to suspended retail selling gold coins and silver eagles earlier this year, and the Perth Mint just announced suspending production of gold coins.

So even though there is an increased demand for Gold, the prices haven’t been increasing proportionately. There have been several articles speculating on the reason for this.

According to:

The Disconnect Between Supply and Demand in Gold & Silver Markets (August 18th, 2008)

Obviously, enough people are willing to pay for gold and silver, at the previous $978 and $19.50 per troy ounce price, because the U.S. Mint could not source enough metal at those price, and had to suspend coin production.

This proves that people are more than willing to fork over, in whatever currency they are using, the previous prices for gold and silver, in such quantities, that a shortage was already existing, before the price collapse, especially in the silver market.  It is true that people in poorer countries like India, might have back on their consumption.

But, while they were cutting back, demand and consumption of gold in North America, including Canada and the USA, was soaring.  For example, before it suspended production of bullion coins, due to shortages, the U.S. Mint’s statistics show that it was printing 2.5 times as many gold coins, and almost 4 times as many silver bullion coins, this year, compared to last year.  Gold and silver bullion, in bar form, was also flying off North American retail shelves.

Bottom line: Enough people were buying, when the price was high, to exhaust the supply. Basic economics says that, in a free market, this means the price must rise.

Seems like somethings fishy in Denmark! The author further adds that

We have a disconnect between reality markets and fantasy markets.  The COMEX and London Metals Exchange are fantasy markets controlled by the big bullion banks.  They must be engaged in market manipulation, because nothing can explain a big price collapse, in the midst of widespread shortages and robust demand.  A group of big financial institutions, deeply enmeshed in the global trading system, and heavily involved in the gold and silver market, must be deliberately inducing temporary panic, for their own purposes.  These malevolent characters will eventually be able to buy back their short positions at low prices, and, possibly, also, even collect a significant long position.

I definitely think the prices are being manipulated, even though I’m not entirely sure why. One thing I do know is that you cannot manipulate prices indefinitely. Especially in the face of rising demand. Here’s an interesting snippet from the Standard.

(The Standard, Nov 14) Hong Kong: The mainland is seriously considering a plan to diversify more of its massive foreign-exchange reserves into gold, a person familiar with the situation told The Standard.

China’s fears about the long-term viability of parking most of its reserves in US government bonds were triggered by Treasury Secretary Henry Paulson’s US$700 billion (HK$5.46 trillion) bailout plan, which may make the US budget deficit balloon to well over US$1 trillion this fiscal year.

The United States holds 8,133.5 tonnes of gold reserves valued at US$188.23 billion. China holds gold reserves of just 600 tonnes, worth only US$13.89 billion.

Beijing’s reserves could easily go up to 3,000 to 4,000 tonnes, Tanrich Futures senior vice president Colleen Chow Yin-shan said.

That article was published last week when gold was trading under $720/oz. Since then, its jumped to almost $800/oz, with most of the move occurring yesterday.

Gold Prices for November 21, 2008

The bright green line is yesterday’s movement. Gold moved from under $750 to nearly $800. Looks like gold has become strongly correlated to the stock market after all!

I think the price of gold will continue to rise over the long term. It’s just a matter of how long it takes.

Gold Breaks $700

Last Friday, gold dropped to $680/ounce before rebounding to $740/ounce. Like every other asset, gold has been hammered this year. However, this may be partially due to a strengthening of the dollar. In terms of other currencies, it’s still close to its all time highs.

I think this is a good time to buy some gold if you don’t already own some. (and if you do, then it’s a good time to add more!). People often ask what’s the best way to invest in gold.

I tell them to buy a little bit of everything. Here’s an excerpt of an email I got recently.

“I believe the gold juniors offer the best value for your paper dollar going forward,” says Ed Bugos of the violently beaten-down junior mining sector. The Canadian Venture Index, the bellwether of juniors, is down a nauseating 70% from its 2007 high.

Ed sent over a lists of what gold bugs should NOT do:

* Don’t be overly short the stock market at this stage of the collapse.
* Don’t slow down your gold buying just because the market is down. Buy a lot of gold – coins and bars. Buy as much as you can before it breaks through $1,000. Then hide it.
* Don’t buy the GLD streetTRACKS, unless you’re just trading.
* Don’t buy gold from your bank.
* Don’t put all your eggs in one basket. Diversify your wealth between tangible assets, like gold, silver and platinum, or even real estate, and continue selectively accumulating bargains in the equity sphere. Diversify geographically.
* Don’t invest more than 20% of your wealth in junior miners. It is not a safe-haven panacea. The rewards are potentially high, but the risks are, too.
* Don’t keep all your wealth in gold, because the government will one day probably come for it.

I own a lot of gold and silver coins and also the Market Vectors Gold Miners ETF (GDX). Check out this link to see my favorite gold coins.

The World’s Most Expensive Gold Coin

China just released a 10 Kilo Gold Coin to commemorate the 2008 Olympics that are currently being held in Beijing. 10 kilos of .9999 Fine gold is a staggering 321 ounces, more than 22 pounds and its more than a half foot in diameter! Not only is it the largest gold coin, it’s the rarest as well: Only 29 have been struck for the entire world and all have been sold.

This spectacular museum piece is housed in an exotic African Blackwood presentation case, which is crowned with a 35 pound carved stone dragon. The coin is legal tender with a face value of 100,000 Yuan and is Proof struck, which means it has an ultra-high relief, frosted design set against a flawless mirror background.

A company in the US is currently selling it for a whopping $1 million! That’s right One Million Dollars!! Considering that it contains 321 ounces, and each ounce sells for $960, that means its worth about $308,000. Charging $1 million for it is a bit too steep a premium, but considering that there are only 29 in existence, I can see the lure of owning something rare appealing to many people. Especially those people with a lot of money and not enough places to spend it! If I had a million bucks to spend on gold, I’d buy the 100 Kilo Canadian Maple Leaf instead. And this coin cotains .99999 pure gold!

But since I don’t have a million dollars lying around, I’d rather keep on buying my 200 year old Napoleon 1st French gold coins for under $500 each! I don’t know if the Chinese will be minting any more of these Olympic gold coins, but I’m positive Napoleon 1st is definitely done minting his collection! I already have several of these, and they’re really quite spetacular.

New Coin Purchase

[Picture of 1 Oz Silver Eagle]
I recently mentioned that I made $500 dollars last month from online advertising. Rather than use that money to expand or improve my lifestyle (also knows as “buying crap”), I decided to invest it in something that has intrinsic value.

The US Dollar has losing value over the past 2 years. Just today the Dollar index dropped to its lowest recorded value of 77 and I think its going to keep on dropping. Typically precious metals like Gold, Silver and Platinum do well in times of a weak currecny.

Why do I think the Dollar will continue to weaken?
Because the economy sucks and is being manipulated in wierd ways. To quote someone quoting the late Dr. Richebacher, a smart and wealthy economist,

“All this emphasis on statistics and calculations.,” he went on, rapping his silver-handled cane on the table for emphasis, “without a proper theory, it is all nonsense. And your economists seem to have no theory at all.they just think they can manipulate the system in order to get whatever outcome they want. They think economic growth comes from consumer spending and that they can control consumer spending by adjusting lending rates. It is unbelievable that anyone takes this seriously. It is capital formation that really matters. A rich society is one with a great stock of capital. One that builds capital and puts it to work to create more capital. A rich society is not one where people consume. Just the opposite. It is not what is consumed that creates wealth; it is what is NOT consumed. Yet, all the Anglo-Saxons focus on motivating consumers to consume. And now they are consuming more than they make. I tell you, in 70 years of studying economics, I have never seen such nonsense.”

[Picture of 1 Oz Silver Peace Dollar]

And in order to “save the economy” the FED is going to cut the interest rates, which will increase inflation and weaken the dollar. Even the Governor of the Bank of England, Gov. King said yesterday that “If central banks cut interest rates in the current environment, they run the moral risk of rekindling speculative risk-seeking, i.e. supporting the very behavior that caused the current market crisis, namely the underestimation of risk.”

A country’s currency is an indicator of its economy. If the country has a good balance sheet, positive flow of funds, a good business plan, strong leadership the currency will be strong. Right now the US has none of those qualities.

Anyway, I spent the $500 on some silver coins. Regular readers already know I like buying gold and silver coins. I bought about a dozen each of the perth mint silver tigers, 1920s Peace silver dollars & 2007 silver eagles. They’re beautiful coins, make good gifts and hopefully will continue to appreciate as the Dollar keeps losing value.
[Picture of 1 Oz Perth Mint Silver Tiger]

New Million Dollar Coin

In part as a marketing exercise, The Royal Canadian Mint has produced a $1 million face value coin containing 100kg of .99999 pure gold.

With gold currently trading at $660 per ounce and each kilogram containing 31.1 ounces, the actual cost of the gold in the coin is worth just over $2.5 million USD!

It seems to be part of a marketing exercise to promote its .99999 pure gold Maple Leaf bullion coin. Current Maple Leaf gold coins are .9999 pure. In contrast, South African Krugerrands, while containing a full ounce of fine gold, are only .9167 percent pure with the balance made up with copper, so they actually weigh more than an ounce.