How digital gold currency systems work

[jsp_1983]

Does anybody know how the various systems (e-gold, e-bullion, secunix etc.) actually work? Are there any articles?

[SundaySilence]

I know how GoldMoney works. Basically you purchase grams of gold which are held in some vault in London. The company itself is in Jersey one of the channel Islands. You open a holding (you got to send them a lot of info, utility bills, copy of driver's license, ect) and then you purchase grams either on there website goldmoney.com (expensive) or via Kitco. Your grams are held like a savings account. you can draw money on them in several different currencies. Problem is you have to have something like 400 oz of gold to be able to receive your gold if you want to closeout the account. Plus there are fees for holding (not expensive though). I live in the USA and buying from them incurred a wire transer which is 40 buck with bank of america. You can use their direct withdrawal by downloading the paperwork from there site... here comes the kicker: they wait 90 days before crediting your account .... I found that totally ridiculous. So I scratched the electronic gold and purchase the real deal... furthermore it feels better, looks better and I feel safer having it within my reach. I got some real useful tips from someone on this site once and followed through. Basically why use a middleman you always get shafted. Check out the main post E-gold or real gold and you will find all the good advice I got when I had the same questions. That said today I purchased from CNI a 1oz eagle, 1oz Philharmonic and a 1/4 oz eagle....God gold is addictive but great for your health.


Hope this is helpful.

[edjerider@]

http://www.cryptogon.com/2004_11_21_blogarchive.html

11/23/2004

WARNING: New Gold ETF on NYSE is a Paper-Based Derivitive :.


People who think this is an investment in physical metal are mistaken:

Given GLD’s recent launch, I was therefore interested to learn from its prospectus how GLD had been changed to provide the necessary assurances of integrity that the fund’s gold bullion assets really exist. More specifically, I was interested to learn how the WGC had improved the custodial controls so that GLD met the same standard that the SEC applies to other mutual funds. The answer came quickly. It didn’t.

Even before starting the prospectus, I downloaded the 2-page fact sheet from http://www.streettracksgoldshares.com, and there on the first line was an eye-opener laying out the essential nature of GLD: “Objective: Designed to track the price of gold”.

Its objective is not to provide investors with the opportunity to own gold bullion by investing in the shares of an ETF. Rather, GLD is designed to track the price of gold. That objective is no different than what is accomplished by a gold futures contract or any of the dozens of numerous gold derivatives available these days. More to the point, futures and derivatives are sold even if the seller does not own the underlying gold bullion needed to deliver on its obligation. They are in practice fractional reserve systems, which allow liabilities for gold to far exceed the quantity of gold owned by the seller of that liability.

Notwithstanding the numerous news accounts that described GLD as a means of investing in gold bullion, GLD cannot be accused of false advertising. Based just on their 2-page fact sheet, the WGC has by its own description created a security which has been designed to bet on the price of gold, not to enable investors to own physical gold bullion. My subsequent reading of the prospectus confirmed this conclusion because on the face of it, the weaknesses I identified in my December 2003 article have not been corrected. GLD has the same loose custodial controls described in the early draft prospectus.



ALSO.....

http://news.goldseek.com/JamesTurk/1102348803.php

[PONCE]

Again: If you cannot hold it in both your hands then you have nothing.

Anything else is only an "illusion" of "ownership" and you will not be able to buy bread with an illusion but only with physical silver.

[jsp_1983]

So is there an 'ideal' way for these systems to work?

I was also curious as to how these gold exchanges work- you buy your currency from them, but how do they get the currency to the chosen currency system? And how do they exchange from one system to another, if say, the storage vaults are in two different places? Perhaps the exchange 'sells' the original lot of currency and 'buys' the new lot? Or have I got the wrong idea about how these work?

I know I seem to have quite a few annoying questions, but the more I understand about how these work, the more knowledgeable I become- I'd like to be able to pass this information on to other people some day!

[jsp_1983]

No ideas, anyone? Surely someone around here knows something about DGCs?