Gold -14 Jun

Paper gold is really trying to get an up trend going here, but it is a slow grind. The chart is still short term neutral, a higher high and lower low, and the 1642 swing high resistance must be taken out in order to confirm an up trend. 1625 is strong resistance and was previous strong support back in March and April. Support is the 18 day moving average at 1591, then the swing low at 1556. RSI is neutral around 56 and MACD is setting up a bullish cross of the neutral line. Traders will focus on what happens tomorrow. If 1625 falls in a convincing manner and price closes above that level, I think the bulls will rush in and set up a run to strong resistance at 1680. Stackers can simply laugh at that tug of war and purchase physical safe in the knowledge that the value of their gold is not what their currency says it is.

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The expanded view gives a better idea as to how critical the 1625 area of resistance is.

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I have been getting some emails again about paper gold and how some people are trapped in employer sponsored brokerage accounts like 401ks and Defined Contribution retirement funds. My advice remains the same, if you are voluntarily funding these things to capture the company match or to get a tax break, stop. Pay your tax and then buy physical gold. Freegold valuation will more than make up for any company match or tax break you receive. If you have an employer that funds one of these type of retirement accounts without a required contribution from you, this is the case with me, then you must find the safest vehicle possible that will best retain the value of your savings.

ETFs such as GLD are probably the worst possible choice if your goal is gold exposure. These type of gold derivatives will not survive Freegold. In the past I have considered PHYS (Sprott’s Physical Gold Trust) to be satisfactory, but have been concerned about the redemption feature allowing one to close out shares in physical form. If you own at least 400 ounces worth of shares, you can actually take delivery of a 400 oz bar in lieu of cash. This sets up the possibility that a well capitalized individual or group could actually drain enough gold from the fund to make it’s continued operation economically unsound, and thereby lead to closing of the fund. If this happens prior to Freegold valuation, you may be forced into dying fiat currency at a most inopportune time. This is unsatisfactory.

There is a fund that is very similar to PHYS, but it does not offer the option of physical gold delivery in exchange for outstanding shares, the Central GoldTrust (GTU). This close ended fund is set up the same as PHYS and holds 100% gold bullion in allocated form. The Fund is operated by a Trust, where Trustees are elected by shareholders. The same people that have operated the Central Fund of Canada (CEF) also operate this fund. CEF has a long track track record since the 1960s and has an impeccable reputation. I believe this fund is the safest paper gold investment going and can survive the transition to Freegold with the allocated gold intact. Only the shareholders can authorize a closing of the fund, unlike PHYS where Sprott can close his fund at his discretion. I actually believe that this fund is very similar to what we will see after Freegold, where people will trade shares of a fully allocated bullion reserve as a pure savings vehicle. Here’s the chart:

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Daily volume is far lower than PHYS, but it really should not matter. This fund is for saving and not trading. If you insist on trading gold, you would do better with GLD. I have sold all of my PHYS and now hold all of my “paper” gold in GTU. Again, my employer funds my 401k/DC retirement fund with 14% of my earnings without any contribution on my part. This is not an option I can opt out of. The money goes in every month and cannot be removed unless I retire. Most people get a match from their employer only after they contribute on their own. If this is your situation, I would suggest that you take whatever your voluntary contribution is and purchase physical gold for your own storage.

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