Gold certificates aren't gold, but allocated gold is a lot closerSubmitted by starcraft on Wed, 04/13/2011 - 23:25
Q: Regarding allocated vs. unallocated gold, I agree you
are at risk with the bullion bank's performance in regard
to the latter, in the case of a typical U.S. bullion bank.
But why not select someone like Perth Mint in Australia,
where your gold is government-guaranteed?
A: You are a general creditor of Gold Corp., doing business
as Perth Mint. Its 2002 financial statement shows that it
has approximately 4.5 times more debt than equity, fairly
high leverage. Are you prepared to be a general creditor of
Gold Corp., given that kind of leverage?
The term "your gold" is not correct. You don't own the gold
represented by Perth Mint certificates. You own a PROMISE
to pay you gold, which was the basic point of my article.
Promises to "pay" gold are different from gold you own. If
you own a Perth Mint certificate, you do not own gold.
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