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chocolatemoney
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Joined: October 8th, 2008, 6:50 am

Physical vs Paper Gold

March 26th, 2013, 10:16 am

Hi,Plenty of discussions revolve around the risk/possibility that the price of physical gold may spread away from the price of paper gold (ETFs, futures, ..).http://addisonwigginsapogeeadvisory.ago ... p.pdfLet's say I have gold and I put it in a vault - what is the mark to market price price of my gold? Isn't it the price indicated by a liquid proxy such as the comex?Secondly: it is not clear to me when the gold that backs physical delivery contracts has to be deposited:http://www.cmegroup.com/rulebook/NYMEX/1a/113.pdfI'd like to hear your thoughts on this.Thanks!
 
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Traden4Alpha
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Joined: September 20th, 2002, 8:30 pm

Physical vs Paper Gold

March 26th, 2013, 4:16 pm

What about if you have your gold in a vault in Cyprus (or the U.S. in 1933)? And why do you believe Comex will always be liquid?During "normal" times, the price of gold should be virtually the same in all markets and all forms. But during times of extreme economic stress or volatility, these prices can diverge with the divergent fortunes of counterparties and fiats of governments. In fact, the entire concept of mark-to-market might become invalid if no functioning market existed.
 
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chocolatemoney
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Joined: October 8th, 2008, 6:50 am

Physical vs Paper Gold

March 26th, 2013, 4:39 pm

Yes, thanks, this is true and well understood.This is an extreme scenario. An investor may not even be able to get access to his gold in a foreign country anyway..In the meanwhile, while waiting for an "extremely bad event", how is physical gold marked to market? Is ready at hand gold awarded a premium over contracts that bear counterparty risk? Is this premium growing?I'd also like to know when the gold that backs futures with physical delivery needs to be deposited. At expiry or close to the expiry date?Thanks!
 
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acastaldo
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Joined: October 11th, 2002, 11:24 pm

Physical vs Paper Gold

March 26th, 2013, 5:25 pm

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Last edited by acastaldo on March 25th, 2013, 11:00 pm, edited 1 time in total.
 
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farmer
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Joined: December 16th, 2002, 7:09 am

Physical vs Paper Gold

March 26th, 2013, 6:25 pm

QuoteOriginally posted by: acastaldoJust bury your stash someplace nobody will think to look, like the old Worth Street station.Little slip-up there?
 
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acastaldo
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Joined: October 11th, 2002, 11:24 pm

Physical vs Paper Gold

March 27th, 2013, 3:43 pm

I could have spared myself some inconvenience and derision by buying shares of GLD instead of physical gold.
 
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ppauper
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Joined: November 15th, 2001, 1:29 pm

Physical vs Paper Gold

April 12th, 2013, 9:49 am

then there's what happened with MF Global