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« A Raging Case of Bailout Fatigue | Main | Angela Merkel Loses Again »
Tuesday
Sep062011

Gold Prices: A tiny step towards true price discovery

Gold Coins.JPG

There are some days when we feel like traffic cops, waving our arms as we try to alert you to what we think is both interesting and important in today’s shark invested world of investment. However, we do recommend that you read as widely as possible in order to gain a broad view of the economic landscape and hopefully make investment decisions that are based on a sound footing.

Today is no exception as we bring to your attention this excerpt from King World News (KWN) one of the most informative sites around in our very humble opinion.

So here we go

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Today King World News interviewed London Whistleblower Andrew Maguire.  When asked about key developments in China regarding the Pan Asia Exchange Maguire stated, “Silver and this 11 kilo gold contract, international rolling spot contract, are the game-changers.  This is not going to be welcomed by the naked short LBMA bullion banks.  These are competing contracts, but the difference is they are 100% backed by physical metal.  That means that this metal will have to be purchased one to one as these contracts open, and not just listed as a paper entry (as the LBMA does in many cases).”

As an example, if you had a pension fund that went to the LBMA and said ‘We want ten tons of gold at $1,700,’ the LBMA banks do not purchase the  ten tons of gold at $1,700, instead they merely issue a ledger entry, a ledger receipt and a piece of paper is given to the pension fund, which leads the pension fund manager to believe they own ten tons of physical gold. 

Because the LBMA does not go out and purchase the physical gold, the price of gold does not experience upward pressure the way that it would under normal supply/demand fundamentals.  Meaning supply/demand is not affected as it should be.  Now typically this pension fund, like many others will not ask for their physical gold.  That’s the system, they (the LBMA bullion banks) know that no one is going to ask for this unallocated gold to be allocated into a physical account.  Furthermore they don’t expect this pension fund to ask for delivery....

“As soon as these pension funds know that they can have their ten tons of gold physically backed, based on the fact that they get receipts detailing bar numbers and it costs them nothing to do this other than to move their account, many will make that move.

To read the article in full please click here.

As we see it, when this facility is up and running it could catch on quickly, we have already witnessed the popularity and speed with which the gold ETF has shot to fame and this could move just as quickly. The eastern world will make use of it from the get go, however, the old school tie still rules in London. The close relations that exist in gentlemens clubs and watering holes between the pension fund managers and the chaps who run the institutions will continue for some to time to come, in a time honored fashion as they say. However, as the younger guns mature and take the reigns and set targets for their fund to achieve, the old boys network may well become less of an influence.

We don’t expect this game changer to have an immediate impact but its certainly going to make for an interesting final quarter if they get it up and running.


Regarding www.skoptionstrading.com. We currently have six trades open, one of which is up 5.15 timeswhat we paid for them , however, we do not update the charts until the trade is closed and the cash is back in our account.

For those subscribers who are too busy to trade their own accounts we are now able to offer an Autotrading program with our SK OptionTrader service, as we are pleased to announce that we have entered into a partnership with GlobalAutoTrading and also with eOptiontherefore auto trading is now available for SK OptionTrader signals


Our model portfolio is up 396.58% since inception

An annualized return of 119.04%%

Average return per trade of 42.21%

85 closed trades, 82 closed at a profit

Average trade open for 45.41 days


sk chart return on SK OptionTrader Model Port 22 aug 2011.JPG



The above progress chart shows our performance when profits are re-invested, however, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.



To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

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