Making Sure Gold Insurance Pays

Buying Gold that you actually own is key...

AS THE GOLD BULL MARKET progresses year after year, it has become easier for investors to 'get exposure' to gold, writes Greg Canavan of Sound Money, Sound Investments.

Gold Futures, Gold Certificates or exchange traded funds (Gold ETFs) have all grown in popularity. But as I constantly tell my members, having exposure to gold and owning the physical metal are two entirely different things.

Gold is an insurance policy against something going wrong in the world's monetary system. When you buy insurance you want to make sure the policy will pay out. Other methods of owning gold include counterparty risk, which Physical Gold ownership does not entail. Having counterparty risk diminishes the chances of your gold policy paying out.

I bring this up again because of a disturbing story that recently appeared in Canada's Globe and Mail newspaper. The article tells the story of 73 year old Amar Patel. Amar was in hospital suffering from cancer and wanted to cash in her silver certificate.

Despite the best efforts of her family, the bank made her make the trip from hospital to collect the silver, and they still did everything they could to dissuade her from taking delivery.

If a bank goes to this much trouble to stop someone getting what is rightfully theirs in the 'good' times, what do you think your chances are of collecting your precious metals when you really need to? Zero.

Governments and banks have been waging war against real money – gold and silver – or many, many years. Here's an anecdote I came across while researching the history of silver. It's from the brilliant book, A History of Money and Banking in the United States Before the Twentieth Century, by Murray Rothbard. Throughout the ages, some things just don't change.

"One customer complained during 1819 that in order to collect in specie (gold or silver) from the largely state-owned Bank of Darien, Georgia, he was forced to swear before a justice of the peace in the bank that each and every note he presented to the bank was his own and that he was not a money broker or an agent for anyone else; he was forced to swear to the oath in the presence of at least five bank directors and the bank's cashier; and he was forced to pay a fee of $1.36 on each note in order to acquire specie on demand.

"Two years later, when a noteholder demanded $30,000 in specie at the Planter's Bank of Georgia, he was told he would be paid in pennies only, while another customer was forced to accept pennies handed out to him at a rate of $60 a day."

There's a fair chance those banks did not have the gold or silver they pretended to have. And today, there's a fair chance the bullion banks do not own all the gold and Silver Bullion that should be standing behind paper futures contracts, certificates, or some ETFs.

The message is clear, don't take the risk. Make sure your insurance policy will pay out. Own gold and silver directly.

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