More Warnings About Physical Gold

Recent news this week again proves that bankers are among the largest charlatans in the universe.

First Jim Rickards reported that a Swiss bank refused to deliver roughly $40 million of gold bullion to a wealthy client for 30 days, and only finally physically delivered his gold when the client brought in his lawyers and threatened to take his story to Reuters and other syndicated financial news networks.

Later in the week, James Turk reported that he is aware of another individual who has been trying to take physical possession of approximately $550,000 of silver for two months now from a Swiss bank with zero luck. Turk further elaborated that the bank has been trying to pressure the client into accepting the cash equivalent market value of the silver, rather than deliver the physical silver to the client.

In both of these cases, I presume that neither of these Swiss banks ever held allocated gold and silver for their clients … or, if they did, had then leased out the gold/silver or sold the same gold/silver to multiple clients, and thus were forced to stonewall their clients until they could secure the physical metal. Why else would a bank take 30 days to deliver something that was supposed to be sitting in a vault in an allocated account?

Of course, none of this is really shocking, as the two above cases merely mirror the circumstances of the 2005 class-action lawsuit against Morgan Stanley (MS) in which it told its clients it was selling them silver in allocated accounts and storing it in its vaults. However, when one of their clients, Selwyn Silberblatt, demanded physical delivery, Morgan Stanley failed to deliver, prompting the class-action lawsuit that MS eventually settled for $4.4 million.

Time after time, bankers have been caught committing likely fraud regarding the sales of gold and silver. This likely fraud extends to more than physical sales. In the futures markets, bankers have been discovered to be selling 100 ounces of paper gold for every one ounce of physical gold that actually exists in the market. With PM ETFs, it is highly likely that multiple claims exist on whatever physical gold and silver back the GLD and SLV … if any physical gold and silver even back them at all.

In addition, it’s not just banks you have to worry about these days. The incidence of counterfeit gold coins and silver coins is on the rise, along with the recent steep rise in gold and silver prices. The Financial Times recently reported [subscription required] that a wave of hard-to-detect counterfeit gold coins is now coming out of China.

Say goodbye to the days of gold-plated tungsten, and say hello to a more complex counterfeit gold alloy consisting of 51% gold mixed with osmium, iridium, ruthenium, copper, nickel, iron, and rhodium. Tungsten is a hard, brittle grey metal that has the same density as gold but none of gold’s characteristic softness. The new fake gold apparently not only has a density similar to the real thing, but also has a near-identical softness and color — qualities that suggest that metalsmiths with an extensive knowledge of metallurgy are producing the new fakes. In fact, Haywood Cheung, president of the Chinese Gold & Silver Exchange Society, Hong Kong’s century-old bullion exchange, said goldsmiths and jewelers in Hong Kong had recently been duped into buying between 200 and 2,000 ounces of the new fake gold.

In conclusion, if you want to ensure that you actually possess real physical gold and real physical silver, take two steps:

1.Never entrust a bank to hold your physical gold and silver, or you may end up sitting on a vault full of nothing but air.

2.When you buy from an independent dealer, perform your due diligence to avoid purchasing fakes.

About the author:

J.S. Kim is the Managing Director & Chief Investment Strategist of SmartKnowledgeU™, a financial and research consulting company that offers hard-hitting investment guidance to help investors prosper during the ongoing and continuing global financial meltdown.  Since the launch of the SmartKnowledgeU Crisis Investment Opportunities newsletter on June 15, 2007, as of May 12, 2010, it has respectively outperformed the Australian ASX 200, the UK FTSE 100 & the US S&P 500 by 304.41%, 300.89%, and 296.87%.  For more information, please visit http://smartknowledgeu.com

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