Email of the day (1)
Comment of the Day

December 28 2012

Commentary by Eoin Treacy

Email of the day (1)

on funds and fake gold bars:
“Not having read Comment of the day on a regular basis, can you remind me when you last did an article on :

-South East Asia funds
-an India fund
-an Australia Fund
-a fund for the 5O leading European shares -an index fund for the German DAX.

“Given recent fears about how gold bars might be tampered with, I presume the cheaper silver and palladium bars would be safer, and even platinum bars , provided there is no metal like tungsten with the same density as platinum that might pass off as the real thing.

“Given the lower unit value of bullion coins, I would assume that there is an even lower risk of faking. With best wishes for 2013.”

Eoin Treacy's view Thank you for this email which others may have an interest in. The South East Asian Fund we have spoken most often about is the Aberdeen Asian Income Fund. We both hold the JP Morgan India Trust while the iShares MSCI Australia Fund is perhaps the most accessible method of participating in that market. The Jupiter European Opportunities Trust has been one of the better performing vehicles in its class and contains a number of Autonomy-type companies. The iShares DJ Euro Stoxx 50 Index Fund (EUE) may also be of interest.

Since gold is by far the most liquid market for precious metals, it inevitably attracts criminals who seek to hide their activities through dilution. Both platinum and gold have almost the same atomic weight as tungsten so it could be possible to create tungsten filled platinum bars. However since it is a much less liquid market, the chance of such activity being discovered is higher and therefore less attractive.

Gold coins are generally traded at a significant premium to spot gold prices and are prized more for rarity than metal prices. Here is a section from an answer to a similar question posted on November 12th:

From the perspective of an investor who is concerned about the integrity of their gold holdings, the alternatives range from buying expensive testing machinery to buying gold that is unlikely to ever be tested. The latter is the more cost effective route and is one of the reasons ETFs backed by physical gold are so popular. Trading gold futures, CFDs or via spread-bets in the UK and Ireland also removes this risk.

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