How to Profit in Gold: Professional Tips and Strategies for Todays Ultimate Safe Haven Investment

224 Pages·2010·1.01 MB·English

by  Jonathan Spall

How to
PROFIT
in
GOLD
This page intentionally left blank
How to
PROFIT
in
GOLD
Professional Tips and
Strategies for Today’s Ultimate
Safe Haven Investment
JONATHAN SPALL
New York Chicago San Francisco Lisbon London Madrid Mexico City
Milan New Delhi San Juan Seoul Singapore Sydney Toronto
Copyright © 2011 by Jonathan Spall. All rights reserved. Except as permitted under the United
States Copyright Act of 1976, no part of this publication may be reproduced or distributed in
any form or by any means, or stored in a database or retrieval system, without the prior written
permission of the publisher.
ISBN: 978-0-07-175911-3
MHID: 0-07-175911-5
The material in this eBook also appears in the print version of this title: ISBN: 978-0-07-175195-7,
MHID: 0-07-175195-5.
All trademarks are trademarks of their respective owners. Rather than put a trademark symbol
after every occurrence of a trademarked name, we use names in an editorial fashion only, and
to the benefi t of the trademark owner, with no intention of infringement of the trademark.
Where such designations appear in this book, they have been printed with initial caps.
McGraw-Hill eBooks are available at special quantity discounts to use as premiums and sales
promotions, or for use in corporate training programs. To contact a representative please e-mail
us at [email protected].
This publication is designed to provide accurate and authoritative information in regard to
the subject matter covered. It is sold with the understanding that neither the author nor the
publisher is engaged in rendering legal, accounting, securities trading, or other professional
services. If legal advice or other expert assistance is required, the services of a competent
professional person should be sought.
—From a Declaration of Principles Jointly Adopted by a Committee of the American Bar
Association and a Committee of Publishers and Associations
TERMS OF USE
This is a copyrighted work and The McGraw-Hill Companies, Inc. (“McGrawHill”) and its
licensors reserve all rights in and to the work. Use of this work is subject to these terms. Except
as permitted under the Copyright Act of 1976 and the right to store and retrieve one copy of
the work, you may not decompile, disassemble, reverse engineer, reproduce, modify, create
derivative works based upon, transmit, distribute, disseminate, sell, publish or sublicense the
work or any part of it without McGraw-Hill’s prior consent. You may use the work for your
own noncommercial and personal use; any other use of the work is strictly prohibited. Your
right to use the work may be terminated if you fail to comply with these terms.
THE WORK IS PROVIDED “AS IS.” McGRAW-HILL AND ITS LICENSORS MAKE
NO GUARANTEES OR WARRANTIES AS TO THE ACCURACY, ADEQUACY OR
COMPLETENESS OF OR RESULTS TO BE OBTAINED FROM USING THE WORK,
INCLUDING ANY INFORMATION THAT CAN BE ACCESSED THROUGH THE WORK
VIA HYPERLINK OR OTHERWISE, AND EXPRESSLY DISCLAIM ANY WARRANTY,
EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. McGraw-Hill
and its licensors do not warrant or guarantee that the functions contained in the work will meet
your requirements or that its operation will be uninterrupted or error free. Neither McGraw-
Hill nor its licensors shall be liable to you or anyone else for any inaccuracy, error or omission,
regardless of cause, in the work or for any damages resulting therefrom. McGraw-Hill has no
responsibility for the content of any information accessed through the work. Under no circum-
stances shall McGraw-Hill and/or its licensors be liable for any indirect, incidental, special,
punitive, consequential or similar damages that result from the use of or inability to use the
work, even if any of them has been advised of the possibility of such damages. This limitation
of liability shall apply to any claim or cause whatsoever whether such claim or cause arises in
contract, tort or otherwise.
In Memoriam
Jack Spall
1930–2009
This page intentionally left blank
Contents
Preface ix
Acknowledgments xi
1
Gold at Record Highs 1
2
What Drives the Price of Gold? 9
3
The Offi cial Sector 25
4
Lenders and Borrowers of Gold 53
5
Bullion Banks 65
6
Gold Exchanges 93
7
Exchange-Traded Funds 109
8
Physical Gold 115
9
Gold: Myths and Reality 123
10
Getting Exposure to Gold 137
vii
Appendix A: “Rules” for Trading Gold 147
Appendix B: Frequently Asked
Questions 149
Appendix C: Glossary of Terms 163
Appendix D: Properties of Gold 193
Appendix E: Bar Weights and
Their Agreed
Fine Gold Content 199
Index 201
viii
Preface
I believe that too many books on the gold market concen-
trate on theory and some notion of how it ought to operate.
I am not an academic, and I have no research background—
in fact, I recently sat eating dim sum with a friend from the
market, and we were giggling at the notion that there are
people who believe that supply and demand are always the
prime determinants of moves in the gold price just as if it was
a normal “commodity.” All highly childish, and while they
are the drivers from time to time, they are most certainly not
always, and when they are, it is generally a very short-lived
phenomenon. My knowledge of this fi eld is fi rsthand, and
to write this book on what interests traders, how the mar-
ket works, and what dealers concentrate on, I have drawn
upon the experience I gained working in a trading room for
a living.
I started my full-time career in the gold market in 1983.
Apart from the odd foray as a foreign exchange and bond
trader, this is what I have spent my working life doing—
trading and talking to customers about precious metals mar-
kets. Over the last 27 years or so, I have been employed by
ix