Perception Is the New Truth: Physical vs. Paper Gold (Video)

Bloomberg Business interviewed Peter Hambro, Chairman and Co-Founder of Petropavlovsk – one of the largest gold mining companies in Russia. Hambro presented physical gold to the Bloomberg anchors, who seemed genuinely dubious as to its value, insisting that gold is for “speculators.” Hambro clarified that “paper gold” is for speculators, and he believes the Comex futures market is going to come crashing down eventually – something we wrote about yesterday.

As an industry insider, Hambro shared invaluable insights into the physical gold market, especially when it comes to Asian demand:

In the Shanghai market, which is the only big physical market, recently introduced by the Chinese – year on year, they delivered 55 million ounces from August to August. That’s 65 billion dollars worth of physical gold. That is about half of the world’s mine supply.”

Hambro also shared Peter Schiff’s opinion that the Federal Reserve is not going to raise interest rates. Rather, all the Fed has to offer are economic bedtime stories to influence market perception. Click here to learn why you want to buy gold when perception becomes more important than reality.

Highlights from the interview:

“I believe it [gold] is [still the safe haven]… [This gold coin] 2000 years ago buys the same amount of bread today as it did when Jesus Christ was born. That is a real safe haven asset…

“This is real gold. The alternative is paper gold – other people’s promises. That is nobody’s promise. This is real. You can feel the weight of it. It’s lovely… The promises are the things that very. Are you sure it’s as good to have Comex futures as it is to have the real thing? In the Shanghai market, which is the only big physical market, recently introduced by the Chinese – year on year, they delivered 55 million ounces from August to August. That’s 65 billion dollars worth of physical gold. That is about half of the world’s mine supply. When you add to that the gold that’s being bought by the People’s Bank of China… Chinese demand… What the Chinese have done for their people by encouraging them to buy gold, then devaluing their currency, is fantastic…

“Gold is what I call wealth insurance. You have health insurance, fire insurance – this is wealth insurance…

“My baseline is that they [the Chinese] have been buying it, the Indian people have been buying it in enormous quantities. It’s virtually impossible to get physical gold in London to ship to those countries. We get permanent requests in Russia now – would we please sell our physical gold to India and China, because there isn’t enough physical…

“I really worry that paper market is something that could be stamped on, and people would say, ‘Sorry, we’re going to have a financial closeout.’ And it’s all over. If you want to be in the gold business, you ought to be in the physical business…

“Do you think the Fed will [raise interest rates]? I’m not convinced by this. If they do, the cost of funding the United States is going to go up. That’s going to increase the deficit at a time when China is selling Treasuries. This is not a good time to do it. The labor market in the US is not as buoyant as people think it is. I do not see this as something that is going to happen. I think they’ll talk about it, because I think there’s a real worry about financial instability. So threats of interest rate rises – perception is the new truth.”

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