Wednesday, October 6, 2010

The Gold Bubble: Super Rich Buying Gold By the Ton; Bankers Advice Against It

UBS says that the very rich are buying a lot of physical gold: "They don't only buy ETFs or futures; they buy physical gold," said Josef Stadler, who runs the Swiss bank's services for rich clients (those with assets of at least $50 million).

UBS itself recommends that its richest clients hold 7-10% of their assets in precious metals like gold, Stadler addss that "We had a clear example of a couple buying over a ton of gold ... and carrying it to another place,"

Reuters asks: Is gold the ULTIMATE BUBBLE?
George Soros described gold as the "ultimate bubble" because it is costly to dig up and has no real value except its market price.

Credit Suisse: "They're asking, 'If it's a bubble, how far can I ride that bubble,'" he said. "I cannot say we've seen a spike in gold interest, but there's an interest in the phenomenon of it."

Interestingly, Reuters has a 2nd article in which they describe that bankers saying no to gold. They say gold's glittering price tag is or should give their wealthy clients pause.

U.S. Trust President Keith Banks says: "We're not really recommending gold right now, just because it's at a level where there are things driving it beyond the types of things (where) that we can add a lot of value,"
Bubble caused by Gold ETFs.

The same Reuters article says that banks said gold prices may reflect the surge in demand for gold ETFs, listed shares that purchase physical gold, and broader worries about government spending leading to rapid price inflation.

This is from the GLD site:

They claim to hold 41M ounce worth $55B worth of gold, that's about 4% of all outstanding gold in the world.

Keep in mind that the market for gold is relatively small a around $1.5T gloablly, very small compared to Forex or derivatives.

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