There is another, pronounced trend taking place in the metals markets. There appears to be a significant shift to holding physical gold. As evidence of this trend, we refer you to the chart below which shows the yearly net change in demand for physical gold versus the amount of demand for holding paper gold via ETFs.
What this chart is showing is that the demand is increasing each year for physical gold holdings in the form of bars and coins (the Bar-Coin =, blue bars). The ETF demands have shown a marked decrease over the prior two years.
Why is this happening
The reasons for this shift in demand has more to do with awareness of the average citizen of the policies and practices of our governments and our economic situation and our trust in paper based investments.
Reason 1 – Government Printing: The average person is now more aware that our government has created massive debt that it cannot pay for and the only way it can pay for such debts is to either take more from us (i.e. tax us more) or print more money. The government is doing both and plans on continuing to do both. This printing is clearly inflationary and debases the dollar. This drives people to a safer currency and inflation hedge in the form of gold holdings.
Reason 2 – Trust: Many people have become concerned about the physical availability of their metals. Many people are now aware of situations like MF Global and the fact that banks do not have all of your money on hand. Additionally, there is the awareness of the reckless behavior of our government in terms of protecting our money held in social security. Its a well known fact that the government has been taking funds from our funds.
Reason 3 – Bogus Inflation Reporting: It has become self evident over the last 2-3 years that the inflation rates of 1.5% to 2% that the government reports does not comport with what the average consumer feels or perceives. The average consumer is seeing higher inflation than what the government is reporting. So, not only is this another nail in the trust coffin, but people need to hedge themselves due to their loss in purchasing power. Inflation by itself does not mean that people need to physically hold gold, but with the printing, trust, lack of believability people are losing confidence in paper based investments.
What does this mean for your self directed IRA
This shift towards physical metal holdings means that the actual metal will become more scarce to find, at least in some forms. This factor coupled with the current trends in gold prices will definitely lead to a scarcity situation.
Therefore, we recommend that if there are metals that you have not acquired in your self directed IRA portfolio, you need to strongly consider taking action now.
Disclaimer: The information provided is for educational purposes only and are not a solicitation or offering of an investment, investment advice, or tax advice. You should consult with your tax, legal or financial advisor to determine the suitability of any investments made with a self directed IRA account.