Hard-core gold bugs sometimes wonder out loud whether the United States Bullion Depository still holds any gold. Every once in a while a lawmaker tries to require an audit of the gold. Some observers will recall that the last time the Depository was subject to scrutiny in 1974 revealed that every ounce of Uncle Sam's gold was safe and fully accounted. That was a generation ago.
A generation is about as long as a typical gold mine's life cycle. The gold in the Depository is accounted to the ounce by auditors who physically see and touch it, while the gold in a mine is estimated to the ounce by geologists who extrapolate from random samples. Breaking into a gold vein with mining equipment is routinely feasible; breaking into the Depository is absolutely impossible.
Gold bugs should think about which system of accounting and estimation is more thorough and reliable. Gold ore in the ground is fairly secure from theft and available to competent mining companies. That's the gold investors should be worried about.
Full disclosure: Long GDX with covered calls and cash-covered short puts.
A generation is about as long as a typical gold mine's life cycle. The gold in the Depository is accounted to the ounce by auditors who physically see and touch it, while the gold in a mine is estimated to the ounce by geologists who extrapolate from random samples. Breaking into a gold vein with mining equipment is routinely feasible; breaking into the Depository is absolutely impossible.
Gold bugs should think about which system of accounting and estimation is more thorough and reliable. Gold ore in the ground is fairly secure from theft and available to competent mining companies. That's the gold investors should be worried about.
Full disclosure: Long GDX with covered calls and cash-covered short puts.
