Mannkal Economic Education Foundation

For those goldbugs of a libertrian/Austrian economics bent (most seem to be, funnily enough) this organisation is likely to be of interest. Their mission:

We aim to strengthen the free market system in Western Australia and Australia, by promoting ideals of voluntary co-operation, choice, personal rights, limited government and responsible resourcefulness of individuals.

The Liberal Democratic Party may also be of interest. How can you argue with this Econ 101 on the WA branch's site:

9. Prices Rise When the Government Prints Too Much Money. When a government creates large quantities of the nation's money, the value of the money falls. As a result, prices increase, requiring more of the same money to buy goods and services.

10. Government Manipulation of Interest Rates and Money Quantity Causes Booms & Busts. Making money cheap (low interest rates) and abundant leads to excessive short term consumption which leads entrepreneurs to over invest in non-productive assets. Excessive demand for goods from consumers and entrepreneurs then raises the price of goods and money (higher interest rates) which results in the liquidation of non-profitable investments (mal-investments). The destroyed capital and associated production dislocation is the recession.

Why has the WGC bought into BullionVault?

On Monday the World Gold Council (WGC) announced that it and Augmentum Capital had completed a £12.5 million funding round in BullionVault in exchange for an equity interest.

It is an interesting development in their strategy. Until 2002, the WGC strategy was to support those selling gold. The 12 August 2002 announcement by WGC of the appointment of James E Burton (ex-CEO of California Public Employees Retirement System) as their new CEO foreshadowed two important changes:

1. a realisation that investment demand, rather than jewellery, was more capable of driving the price higher; and
2. a shift from supporting the industry to sell gold to developing its own "products" and competing against them.

Perth Mint got first hand experience of this new strategy when it was developing its ASX listed gold product in late 2002/early 2003. At the same time a Mr Tuckwell was developing what would become the first gold ETF in the world. The WGC decided to "take sides" and chose to endorse the Tuckwell product. Needless to say, we weren't too impressed. They then went on to develop and sponsor many other gold EFTs, the US listed GLD being the biggest.

However, I will concede that considering the cost and work involved in launching an ETF, especially on overseas exchanges, it may have been excusable for the WGC to get involved in developing such products since no one else was willing to (Perth Mint and Tuckwell excepted).

But, given the huge success of the various WGC sponsored ETFs, is it really necessary for the WGC to further compete against others in the industry? After all, the WGC ETFs hold 48 million ounces compared to BullionVault's 635,000. Does online gold trading have the potential to match the ETFs for impact on the gold price? I doubt it, so what is the WGC's motivation to extend beyond ETFs?

The Telegraph reports Marcus Grubb, managing director of investment at the WGC, as saying taking the BullionVault stake was part of the Council's strategy of "increasing its portfolio of successful platforms for gold investment". Does increasing its portfolio mean WGC will next buy a refinery to make WGC bars, or open WGC coin shops?

Is it a simple case of management empire building, or has WGC management been told to expand its portfolio with the objective of becoming self funding, or are gold miners (the WGC's members) using WGC as a front to move down the gold value chain without being seen by their shareholders as getting involved in non-core businesses?

I note with interest that IAMGOLD Corporation, a shareholder in James Turk's GoldMoney (one of BullionVault's biggest competitors), is also a WGC member. Note that Durban Roodepoort Deep (not a member of WGC) is also a shareholder in GoldMoney. It will be interesting to see if IAMGOLD pulls out of the WGC as a result of their support for GoldMoney's competitor. It would result in a WGC miners versus non-WGC miners fight in the online gold market.

Visit to Melbourne

I will be speaking at the next ANDA Coin, Banknote and Stamp Show being held at the Caulfield Racecourse, Concourse Ground Level, Caulfield, Melbourne on 3rd and 4th July.

While my talk will be aimed at newbies, I will be holding an unofficial "masterclass" Q&A session on Saturday at 1pm after my talk, primarily for members of www.silverstackers.com but it is open to all. ANDA show details below.

Saturday 3 July

11.00am – Bron Suchecki - ‘Options for Bullion Investment’

2.00pm – Mark van der Sluys - ‘Gold as Money’ and ‘The role of Gold in an Investment Portfolio’

Sunday 4 July

11.00am – Andrew Crellin - ‘Trading Coins for Wealth’

1.00pm – Bron Suchecki - ‘Options for Bullion Investment’

3.00pm – Rob Jackman - ‘Investing in Rare Coin & Bank Notes’

Mark van der Sluys – ‘Gold as Money’ and ‘The role of Gold in an Investment Portfolio’ – Economic and monetary historian and CEO of BULLIONMARK, Mark van der Sluys, will present a, not to be missed, two part presentation covering the subject of ‘Gold as Money’ and ‘The Role of Gold in an investment portfolio’. Important insights that are central to protecting and growing your wealth.

Bron Suchecki – ‘Options for Bullion Investment’ – Perth Mint Senior Analyst Bron Suchecki will present a one hour information session on the variety of ways you can buy gold and silver including coins and bars, certificate programs, storage options and even via the Australian Stock Exchange.

Andrew Crellin - ‘Trading Coins for Wealth’ – Andrew Crellin, Managing Director of Sterling & Currency and industry renowned author, will provide an introduction to his next book titled “Trading Coins For Wealth”, written to give an insight into how successful collectors approach their craft.

Rob Jackman – ‘Investing in Rare Coin & Bank Notes’ – Rob Jackman, Managing Director of The Rare Coin Company, will give investors the benefit of his 26 years experience in the industry with a presentation on the intricacies of Investing in Rare Coins and Bank Notes for private investment portfolios.

How Can We Possibly Calculate the Future Value of Gold?