Super Rich Are Stockpiling Gold

goldSo are the mega-wealthy creating another asset bubble, or do they know something that the peasants who invest in stocks, bonds and real estate don’t? From Reuters:

The world’s wealthiest people have responded to economic worries by buying gold by the bar — and sometimes by the ton — and by moving assets out of the financial system, bankers catering to the very rich said on Monday.

Fears of a double-dip downturn have boosted the appetite for physical bullion as well as for mining company shares and exchange-traded funds, UBS executive Josef Stadler told the Reuters Global Private Banking Summit.

“They don’t only buy ETFs or futures; they buy physical gold,” said Stadler, who runs the Swiss bank’s services for clients with assets of at least $50 million to invest.

UBS is recommending top-tier clients hold 7-10 percent of their assets in precious metals like gold, which is on course for its tenth consecutive yearly gain and traded at around $1,314.50 an ounce on Monday, near the record level reached last week.

“We had a clear example of a couple buying over a ton of gold … and carrying it to another place,” Stadler said. At today’s prices, that shipment would be worth about $42 million…

[continues at Reuters]

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  • Anonymous

    It is true that gold has been the default backup plan during previous currency crises.But then again, during the vast majority of that time the primary mode of transport was the human foot and oats were considered to be fuel. And the population split was usually something like 97% rural / 3% urban, which has been nearly reversed, on a worldwide basis, with almost half living in each milieux as of 2008. http://www.prb.org/Educators/TeachersGuides/HumanPopulation/Urbanization.aspxI’d venture to say significantly higher proportion of urbanites in the U.S.Yes siree, I can’t help but feel there are some seveeeere limits to the analogies between this currency crisis and all the previous ones. And if the argument is that gold is a fairly determinate commodity, the efforts of John Dee notwithstanding, well, doesn’t the same hold true of oil? The currently marketed biofuels lack anything resembling an adequate infrastructure. So far as I’m aware, they all still cost as much or more energy to produce as they provide.What frickin’ good is a lump of sterile rock going to do anyone when there’re tractors to be fueled and children to be fed?

  • Liam_McGonagle

    It is true that gold has been the default backup plan during previous currency crises.But then again, during the vast majority of that time the primary mode of transport was the human foot and oats were considered to be fuel. And the population split was usually something like 97% rural / 3% urban, which has been nearly reversed, on a worldwide basis, with almost half living in each milieux as of 2008. http://www.prb.org/Educators/TeachersGuides/HumanPopulation/Urbanization.aspxI’d venture to say significantly higher proportion of urbanites in the U.S.Yes siree, I can’t help but feel there are some seveeeere limits to the analogies between this currency crisis and all the previous ones. And if the argument is that gold is a fairly determinate commodity, the efforts of John Dee notwithstanding, well, doesn’t the same hold true of oil? The currently marketed biofuels lack anything resembling an adequate infrastructure. So far as I’m aware, they all still cost as much or more energy to produce as they provide.What frickin’ good is a lump of sterile rock going to do anyone when there’re tractors to be fueled and children to be fed?

    • Billy

      Fuel the tractors with the children and then you don’t have to worry about feeding them?

  • Billy

    Fuel the tractors with the children and then you don’t have to worry about feeding them?

  • Liam_McGonagle

    LOL. No fair plagiarizing from the “Pledge to America”. http://pledge.gop.gov/

  • http://www.google.com/profiles/loki.verloren loki

    if the big money is pulling out of currency, stocks and bonds, you can guarantee like a bunch of the lemmings the rest of the market will start doing the same thing. in my opinion this is the beginning of a great panic, because as the money moves into gold, and out of everything else, the value of everything else will go down and people’s life savings will be destroyed with all their debt-based holdings of securities.

    • Liam_McGonagle

      Yes, it’ll be interesting to see how this plays out. But I wonder if the ultimate situation may not be complicated by:

      1. The fact that since the Great Depression there have been trading volume triggers imposed on markets which automatically and mandatorally stop all trading when daily volumes reach certain limits. Because of this, any substantial panic would have to take place incrementally over years. With, I think, with many violent, nasty, brutish trading stops that would probably trigger actual street revolution before a complete trading liquidation could be effected.

      2. The lack of immediate need for these funds. Sure, capital needs to get into the hands of the productive REAL economy ASAP. But there’s no particular incentive for the people who OWN all these investments to scoop it all up at just this moment. According to Domhoff, as of 2008, approx. 88% of all investments were held by the wealthiest 10% of U.S. society.

      http://sociology.ucsc.edu/whorulesamerica/power/wealth.html
      [Table 2]

      In short, they literally own the market. These securities can help them move the supply curve up or down to justify their desired margins. And even Caligula couldn’t find a way to spend their surplus wealth within a single human lifetime. So there doesn’t seem any reason to liquidate their investments completely. Especially considering the fact that . . .

      3. Continued ownership of these investments provides significant non-economic control over society. True, voting rights are concentrated within a select class of stock. But their political significance goes well beyond the mere proscribed power written within the individual stock or bond charters. The leverage provided to the uber wealthy by the unspoken threat to pull the rug under the other 90% of society at any time supports the Patronage Society Dynamic. The uber wealthy need you to feel dependant upon them in order to exercise their influence.

      So I agree that you’ve definitely got a point. I just wonder if the totality of the situation may not be more complicated.

  • http://www.google.com/profiles/loki.verloren loki

    if the big money is pulling out of currency, stocks and bonds, you can guarantee like a bunch of the lemmings the rest of the market will start doing the same thing. in my opinion this is the beginning of a great panic, because as the money moves into gold, and out of everything else, the value of everything else will go down and people’s life savings will be destroyed with all their debt-based holdings of securities.

  • Synapse

    They’ll stock pile gold, then whine when the gold market crashes, again. Gotta get rid of that extra wealth somehow.

    • Liam_McGonagle

      Perhaps a property tax on securities holdings? Graduated, like the income tax, so as to avoid impacting small holders (like retirees and benefit plan participants) and holders of non-liquid investments (like small / medium business owerns who are not publicly taded)?

      If the uber wealthy and the big banks had to pay the people in reasonably determinate and more reliable M1, the following could be achieved all at the same time:

      1. Drain the money supply of its essentially counterfeit M3.
      2. Put good, reliable M1 & M2 back into circulation in the real economy through other tax reductions or government program enhancements
      3. Fund much needed infrastructure upgrades. These here roads do be looking a bit shabby these days, and I don’t want another Minneapolis bridge collapse scenario, not to mention electricity grids, extension of high speed internet service, education ,etc., etc., etc.
      4. Allow time to beef up SEC oversight effectiveness to prevent the scandalous inflation of M3 from ever occuring again.
      5. Collapse the big banks and strip corps of their outsized political influence. Shit, not even the Tea Baggers claim to be fed up with big corp influence. Although they strangely haven’t supported any practical long-term measures to address it . . .

  • Synapse

    They’ll stock pile gold, then whine when the gold market crashes, again. Gotta get rid of that extra wealth somehow.

  • rtb61

    Gold much like currency, is still a illusory investment. The real investment is in arable land and community. The land feeds and the community supports and protects. Gold is the illusion that pays for the police state, up until the police decide they are the power and take the gold and arrest the previous holders for sedition charges.
    Community has a steep price for the rich of course, it can not be bought it can only be earned through direct personal effort not just by you but by all the members of your shared community.
    In times of true hardship either the community or the police state wins, either way, the rich get rejected and their gold gets nationalised.

  • Anonymous

    Gold much like currency, is still a illusory investment. The real investment is in arable land and community. The land feeds and the community supports and protects. Gold is the illusion that pays for the police state, up until the police decide they are the power and take the gold and arrest the previous holders for sedition charges.
    Community has a steep price for the rich of course, it can not be bought it can only be earned through direct personal effort not just by you but by all the members of your shared community.
    In times of true hardship either the community or the police state wins, either way, the rich get rejected and their gold gets nationalised.

  • Liam_McGonagle

    Yes, it’ll be interesting to see how this plays out. But I wonder if the ultimate situation may not be complicated by:

    1. The fact that since the Great Depression there have been trading volume triggers imposed on markets which automatically and mandatorally stop all trading when daily volumes reach certain limits. Because of this, any substantial panic would have to take place incrementally over years. With, I think, with many violent, nasty, brutish trading stops that would probably trigger actual street revolution before a complete trading liquidation could be effected.

    2. The lack of immediate need for these funds. Sure, capital needs to get into the hands of the productive REAL economy ASAP. But there’s no particular incentive for the people who OWN all these investments to scoop it all up at just this moment. According to Domhoff, as of 2008, approx. 88% of all investments were held by the wealthiest 10% of U.S. society.

    http://sociology.ucsc.edu/whorulesamerica/power/wealth.html
    [Table 2]

    In short, they literally own the market. These securities can help them move the supply curve up or down to justify their desired margins. And even Caligula couldn’t find a way to spend their surplus wealth within a single human lifetime. So there doesn’t seem any reason to liquidate their investments completely. Especially considering the fact that . . .

    3. Continued ownership of these investments provides significant non-economic control over society. True, voting rights are concentrated within a select class of stock. But their political significance goes well beyond the mere proscribed power written within the individual stock or bond charters. The leverage provided to the uber wealthy by the unspoken threat to pull the rug under the other 90% of society at any time supports the Patronage Society Dynamic. The uber wealthy need you to feel dependant upon them in order to exercise their influence.

    So I agree that you’ve definitely got a point. I just wonder if the totality of the situation may not be more complicated.

  • Liam_McGonagle

    Perhaps a property tax on securities holdings? Graduated, like the income tax, so as to avoid impacting small holders (like retirees and benefit plan participants) and holders of non-liquid investments (like small / medium business owerns who are not publicly taded)?

    If the uber wealthy and the big banks had to pay the people in reasonably determinate and more reliable M1, the following could be achieved all at the same time:

    1. Drain the money supply of its essentially counterfeit M3.
    2. Put good, reliable M1 & M2 back into circulation in the real economy through other tax reductions or government program enhancements
    3. Fund much needed infrastructure upgrades. These here roads do be looking a bit shabby these days, and I don’t want another Minneapolis bridge collapse scenario, not to mention electricity grids, extension of high speed internet service, education ,etc., etc., etc.
    4. Allow time to beef up SEC oversight effectiveness to prevent the scandalous inflation of M3 from ever occuring again.
    5. Collapse the big banks and strip corps of their outsized political influence. Shit, not even the Tea Baggers claim to be fed up with big corp influence. Although they strangely haven’t supported any practical long-term measures to address it . . .

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