Serpo
12th August 2011, 05:36 PM
An August 9 interview
By Kevin Michael Grace
John Brimelow is a Connecticut gold market consultant who publishes the JBGJ daily gold commentaries. He was interviewed by Kevin Michael Grace August 9.
Q: You were at the GATA conference in London. What did you take away from that?
A: The most dramatic presentation was made by James Rickards, who has surfaced as a very interesting and well-connected pontificator. Rickards was actually part of the negotiating team at LTCM, the hedge fund that sailed into the rocks in 1998. LTCM was always rumored to have a very substantial gold position, and its rescue seems quite clear to be an early forerunner of the enormous influence of Goldman Sachs, since the major beneficiary of the LTCM rescue was Goldman Sachs. Rickards really woke up the conference by saying that he thought the American government was very liable to impose an excess profits tax on gold miners and a windfall profits tax on holders of gold bullion. He also said that the Americans at some point would move to confiscate all the foreign-government-owned gold that’s actually stored in the United States. He said if he were the Germans, he’d be sending the ships over right away. Most people tend to assume they couldn’t possibly do a Roosevelt and confiscate the gold again. His point is that they can effectively confiscate it through taxes, which is unfortunately true. These ideas come out of the clear blue sky, so I wonder what he’s heard.
Q: Jim Kunstler mentioned a gold tax on Monday. He suggested that there are an awful lot of Americans with guns who would not take kindly to this.
A: I think actually getting them to turn in the gold would be very difficult, but this is not a free country when it comes to the markets. Practically every transaction is reported to the government. Selling a significant quantity of gold, for instance to a gold dealer, is liable to generate a reportable event. I find now that my local bank has just been taken over by Wells Fargo, and simply depositing a cheque is a tremendous rigmarole: not drawing money out, just depositing the cheque. The State has a tremendous grip on economic activity by Americans. Now of course there will always be a black market, but if you’ve got significant amounts of gold or silver that’s not so easy to deal with.
Q: There was an attack in the Economist on “gold bugs” in June and another that month in Harper’s. It struck me that people who hold gold are coming to be treated by the mainstream media as “wreckers” were in the Soviet Union.
A: They’re thought to be a political community. That’s a hostile conventional thought that they have to be eliminated, that’s true.
Q: A friend of mine asked me the best way to buy gold. I didn’t have a good answer for him.
A: The finest gold vehicle for many reasons has been Central Fund of Canada.
[Listed on the TSX and AMEX.] It is a very scrupulously run gold and silver holding instrument, which tends to stay very close to the underlying price of the metals. There are some issues about the big American ETFs: GLD [SPDR Gold Trust] and SLV [iShares Silver Trust ETF]. An alternative way is called GoldMoney.com, which holds bullion offshore. Of course, there’s the trusty old Canadian Maple Leaf.
Q: What about investing in vintage gold coins. Are these hard to access?
A: No, there are dealers all over the place. Numismatic gold coins are a pretty tricky issue. Bullion coins are perfectly legitimate and don’t generally trade for tremendous premiums. It’s a far more sensible way of obtaining gold exposure. The premiums are highest on the small units like quarters of an ounce, but the one-ounce coins aren’t unreasonably expensive.
Q: Are many people actually hoarding physical gold?
A: Not in the sense of a percentage of the population, but I think a surprising amount of people do have fair amounts of metal, both gold and silver.
James Rickards’ point is that the US government can effectively confiscate gold through taxes, which is unfortunately true
—John Brimelow
Q: Is it held in safes?
A: It’s held in all kinds of forms. I know of a fellow who had 40,000 ounces of silver in his basement. The real purists don’t like holding it in safe deposit boxes, and if they did, they would want to hold it in a foreign account. Now the Americans are trying very hard to eliminate the access of their citizens to foreign bank accounts.
Q: I’ve noticed in the last couple of weeks a disturbing trend of referring to those in favour of fiscal restraint, of the Tea Partiers, as “terrorists.”
A: It’s really quite impressive isn’t it? The problem is that the culture of the Left is now dominated by groups which have had no tradition of free speech, actually quite the reverse. It’s a very ominous development. In America, calling anything an act of terrorism is of course a specific call to have it shut down forcibly. It’s a blatant method of intimidation. I guess the only comfort is that this implies that [the Left] thinks there could be a tremendous move in gold.
Q: You may have seen that the Democratic pollster Pat Caddell was talking about a “pre-revolutionary” climate in the US.
A: I think that if it becomes apparent and probable that Obama is going to be defeated, we’re going to see some very strange developments.
Q: Are you surprised that gold shot up so quickly in the last week?
A: I suppose I am. It’s a very rare occasion where Western anxieties really have overwhelmed the usual feasible considerations. I like to follow what the Eastern physical markets are doing as opposed to that camp, and they’re normally quiet in August. Late August the market picks up, and the tradition for several years now has been that the market is strong is the fourth quarter. The people who thought that the financial anxieties would be paramount this summer were correct. It has really been a powerful performance. The interesting thing is that the Eastern markets appear to concur. Normally when you see a move of this magnitude, they fall to very deep discounts, notably in the first quarter of 2009. That’s not happened this time. In the case of Vietnam, the markets have actually gone to a major premium. Even in India, which is getting towards the end of the monsoon, the prices have fought with the world price remarkably well. It’s a tough time to be a bear.
Q: Is the Indian wedding season coming up?
A: Yeah. The big bang season in India, you start to feel the effects in late August, and it runs through to the middle of February. This year we have a real wild card because for the first time ever China exerted a significant amount of force on the world gold market. Mining supply has been absolutely exploding there, and consequently the deficit between Chinese consumption and Chinese mine production has been quite small. Last year for the first time China imported several hundred tonnes of gold. One theory is that it’s to do with their apprehensions of inflation, which is quite plausible. We could still see gold hitting a new high before the end of the year simply on the basis of the Far Eastern demand.
Q: How high?
A: I imagine we might see $2,000.
http://resourceclips.com/2011/08/12/brimelow-on-how-to-buy-gold/
By Kevin Michael Grace
John Brimelow is a Connecticut gold market consultant who publishes the JBGJ daily gold commentaries. He was interviewed by Kevin Michael Grace August 9.
Q: You were at the GATA conference in London. What did you take away from that?
A: The most dramatic presentation was made by James Rickards, who has surfaced as a very interesting and well-connected pontificator. Rickards was actually part of the negotiating team at LTCM, the hedge fund that sailed into the rocks in 1998. LTCM was always rumored to have a very substantial gold position, and its rescue seems quite clear to be an early forerunner of the enormous influence of Goldman Sachs, since the major beneficiary of the LTCM rescue was Goldman Sachs. Rickards really woke up the conference by saying that he thought the American government was very liable to impose an excess profits tax on gold miners and a windfall profits tax on holders of gold bullion. He also said that the Americans at some point would move to confiscate all the foreign-government-owned gold that’s actually stored in the United States. He said if he were the Germans, he’d be sending the ships over right away. Most people tend to assume they couldn’t possibly do a Roosevelt and confiscate the gold again. His point is that they can effectively confiscate it through taxes, which is unfortunately true. These ideas come out of the clear blue sky, so I wonder what he’s heard.
Q: Jim Kunstler mentioned a gold tax on Monday. He suggested that there are an awful lot of Americans with guns who would not take kindly to this.
A: I think actually getting them to turn in the gold would be very difficult, but this is not a free country when it comes to the markets. Practically every transaction is reported to the government. Selling a significant quantity of gold, for instance to a gold dealer, is liable to generate a reportable event. I find now that my local bank has just been taken over by Wells Fargo, and simply depositing a cheque is a tremendous rigmarole: not drawing money out, just depositing the cheque. The State has a tremendous grip on economic activity by Americans. Now of course there will always be a black market, but if you’ve got significant amounts of gold or silver that’s not so easy to deal with.
Q: There was an attack in the Economist on “gold bugs” in June and another that month in Harper’s. It struck me that people who hold gold are coming to be treated by the mainstream media as “wreckers” were in the Soviet Union.
A: They’re thought to be a political community. That’s a hostile conventional thought that they have to be eliminated, that’s true.
Q: A friend of mine asked me the best way to buy gold. I didn’t have a good answer for him.
A: The finest gold vehicle for many reasons has been Central Fund of Canada.
[Listed on the TSX and AMEX.] It is a very scrupulously run gold and silver holding instrument, which tends to stay very close to the underlying price of the metals. There are some issues about the big American ETFs: GLD [SPDR Gold Trust] and SLV [iShares Silver Trust ETF]. An alternative way is called GoldMoney.com, which holds bullion offshore. Of course, there’s the trusty old Canadian Maple Leaf.
Q: What about investing in vintage gold coins. Are these hard to access?
A: No, there are dealers all over the place. Numismatic gold coins are a pretty tricky issue. Bullion coins are perfectly legitimate and don’t generally trade for tremendous premiums. It’s a far more sensible way of obtaining gold exposure. The premiums are highest on the small units like quarters of an ounce, but the one-ounce coins aren’t unreasonably expensive.
Q: Are many people actually hoarding physical gold?
A: Not in the sense of a percentage of the population, but I think a surprising amount of people do have fair amounts of metal, both gold and silver.
James Rickards’ point is that the US government can effectively confiscate gold through taxes, which is unfortunately true
—John Brimelow
Q: Is it held in safes?
A: It’s held in all kinds of forms. I know of a fellow who had 40,000 ounces of silver in his basement. The real purists don’t like holding it in safe deposit boxes, and if they did, they would want to hold it in a foreign account. Now the Americans are trying very hard to eliminate the access of their citizens to foreign bank accounts.
Q: I’ve noticed in the last couple of weeks a disturbing trend of referring to those in favour of fiscal restraint, of the Tea Partiers, as “terrorists.”
A: It’s really quite impressive isn’t it? The problem is that the culture of the Left is now dominated by groups which have had no tradition of free speech, actually quite the reverse. It’s a very ominous development. In America, calling anything an act of terrorism is of course a specific call to have it shut down forcibly. It’s a blatant method of intimidation. I guess the only comfort is that this implies that [the Left] thinks there could be a tremendous move in gold.
Q: You may have seen that the Democratic pollster Pat Caddell was talking about a “pre-revolutionary” climate in the US.
A: I think that if it becomes apparent and probable that Obama is going to be defeated, we’re going to see some very strange developments.
Q: Are you surprised that gold shot up so quickly in the last week?
A: I suppose I am. It’s a very rare occasion where Western anxieties really have overwhelmed the usual feasible considerations. I like to follow what the Eastern physical markets are doing as opposed to that camp, and they’re normally quiet in August. Late August the market picks up, and the tradition for several years now has been that the market is strong is the fourth quarter. The people who thought that the financial anxieties would be paramount this summer were correct. It has really been a powerful performance. The interesting thing is that the Eastern markets appear to concur. Normally when you see a move of this magnitude, they fall to very deep discounts, notably in the first quarter of 2009. That’s not happened this time. In the case of Vietnam, the markets have actually gone to a major premium. Even in India, which is getting towards the end of the monsoon, the prices have fought with the world price remarkably well. It’s a tough time to be a bear.
Q: Is the Indian wedding season coming up?
A: Yeah. The big bang season in India, you start to feel the effects in late August, and it runs through to the middle of February. This year we have a real wild card because for the first time ever China exerted a significant amount of force on the world gold market. Mining supply has been absolutely exploding there, and consequently the deficit between Chinese consumption and Chinese mine production has been quite small. Last year for the first time China imported several hundred tonnes of gold. One theory is that it’s to do with their apprehensions of inflation, which is quite plausible. We could still see gold hitting a new high before the end of the year simply on the basis of the Far Eastern demand.
Q: How high?
A: I imagine we might see $2,000.
http://resourceclips.com/2011/08/12/brimelow-on-how-to-buy-gold/