This Has Never Happened in the Gold Market Before (Ever)
For the first time ever, the number of paper gold contracts exceeds the amount of physical gold available by 252 times. This is a remarkable figure. This means there are 252 claims on every ounce of gold.
If every person decided to take delivery of the gold they “own” on paper, then only 1 person out of 252 would get his gold — the other 251 people would walk away empty handed.
Stephen Jones comments:
So now we see that investors have purchased gold contracts (on paper) totaling 252 times as much gold as is available. If even 2% of them actually took possession of the gold that they have purchased on paper, the entire stock of the COMEX would be wiped out. They are gambling that hardly anyone will actually take possession but will continue to play the paper game.
Conversely, all the speculators who have sold those futures paper contracts to investors would have to default, because they would be unable to deliver the gold that they sold. Both sellers and buyers would then be in trouble.
Of course, the only reason investors keep paper assets is because they are speculators who are using gold contracts to try to make money on the rise and fall of the spot price of gold. Their purpose is not to store wealth in preparation for a future collapse in the value of money. Once someone takes possession of gold, they exchange their money for gold and can no longer use that money to invest. Such an exchange means that the person believes that gold is a better store of value than cash. Whatever cash is used to purchase gold is cash that can no longer be invested in the paper market, because the cash has found a long-term home.
This is the basic difference between an investor and a holder of gold. Most of us are not investors, and we lack the ability to move money quickly and easily. What we need is a long-term home for our assets, such as physical gold. Investors are positioned to jump quickly from paper contracts to physical holdings, and in this case they are betting that others will not claim the remaining gold in the COMEX before they do.
In normal times, their risk is low, but it takes only a single shock to change the situation. Then the herd mentality takes over, and the first ones to lay claim to the gold are the winners. The rest will discover that they own a lot of expensive paper.
One easy way to buy real gold and silver is through Silver Saver, which is a company that lets you buy physical metals incrementally over time. Set up a weekly purchase of $20 or a monthly purchase of $50 — basically whatever purchasing schedule you want.
Over time, you build up a small “nest egg” of gold and silver that you can then take delivery of at a future date.
I’ve been using Silver Saver to save in gold and silver for a few years now. In fact, I just took delivery of some metal last week, so I can vouch for the company’s reliability.