James Burton had no money invested in gold of 142.8 billion U.S. dollars

James Burton had no money invested in gold of 142.8 billion U.S. dollars that succeeded as CEO of Retirement California Public Employees' system in 2002. Why should I? The metal had been in a market downward for two decades.

However, shortly after announcing his retirement from the largest public pension fund in the U.S., Burton agreed to fly to London to entertain a job offer from a mining group trading companies had never heard of. Smashing through a golf rain-soaked British holiday shoes in early June 2002, he heard what sounded like a crazy idea: The sale of gold as an investment for the masses.

It was time to get investors to buy precious metal that had been rejected for a generation, Christopher Thompson, new president of the World Gold Council, said that day. The key was the division of gold bars in securities on the New York Stock Exchange. Burton wanted to lead the effort, largely by their relationships with institutional investors. Gold was trading below $ 328 on an ounce in London.

"I was convinced there was a market for the common man who was buying a large amount of gold if he could find an easy way," says Thompson, 62, who at that time was also chairman of Johannesburg-based in Gold Fields Ltd..

$ 1,431.25 an ounce

Thompson beat Burton in match play in the hole 17, to convince him to take the post of executive director of World Gold Council. What the two displayed next to the role mining played in the bull run of gold in at least 90 years, reaching a record $ 1431.25 an ounce on 07 December. Gold traded at $ 1,383.97 an ounce at 10:30 am Hong Kong time today.

Under the leadership of men, a trust created by the World Gold Council, which includes producers such as Barrick Gold Corp. and Newmont Mining Corp., won approval from the Securities and Exchange Commission an exchange-traded products backed by gold. Were given access to investors in gold without the cost and hassle of taking physical delivery.

The fund, SPDR Gold Trust (pronounced the spider), now has 1,299 metric tons of gold worth about $ 57 million more than the Swiss central bank. Investors include the University of Notre Dame, the bottom of the Texas teachers pension and a who's who of the titans of hedge funds and money managers like John Paulson, Paulson & Co., Inc. Laurence Fink BlackRock, and George Soros Soros Fund Management LLC.

More funds

Globally, the 10 largest funds now have a combined total of 2.113 metric tons of gold rather than foreign exchange reserves accumulated by all but four countries in the world: the U.S., Germany, Italy and France.

Its popularity has helped drive record profits for the precious metal, and some people, including analysts from Goldman Sachs Group Inc., for example, gold can go higher.

Soros, who made one billion U.S. dollars by betting against sterling in 1992, called gold the "final asset bubble" in the World Economic Forum meeting in January in Davos, Switzerland, when the gold price was $ 1087.10 the oz. Its shares held $ 664,800,000 in exchange-traded funds backed in gold from 30 September.

rise of gold reached similar move before the three major accidents in the last decade: the Nasdaq technology stock bubble of 2000, the bubble of the U.S. housing market 2005-2006, and the peak of crude oil at 2008 prices.

In a Dec. 14 interview, Jason Toussaint, director general of the World Gold Council for the U.S. and investment, according to a September report by the group saying that the pace and the rising price of gold is not comparable to the characteristics of the recent bubble. The rise of the metal is in line with its long-term average compared with other assets, including equity indices and oil, according to the report.

Parabolic rise

History shows that when the price of an asset has a parabolic rise as gold is, which is eventually forced to crash, according to Mark Williams, an executive in residence and senior lecturer in finance at Boston University and the Department of economy. And when it does it is almost always the smaller, individual investors to get out too late, he said.

As many as half of the gold exchange-traded funds can be purchased by individual investors, according to BlackRock, the largest money manager.

"Your little guy is going to be beaten by the doorknob to leave," said Williams.

Promote social change

Since gold prices are driving record-reaching social change worldwide. In the more remote parts of Africa, the villagers scrambling for increasingly valuable spots golden death risk in the hands of Mine Safety and parents squeeze the mineral wealth of gold have accidentally poisoned their own children in the process. In India, where gold has a cultural meaning, parents are overwhelmed can not buy their daughters gold jewelry everything they wanted for their wedding.

The council refused to comment on dividends painful.

When we worked to create the fund, a concern is that the products traded may contribute to a bubble. Burton and his investment team was concerned that too successful gold prices shoot up too fast, leading to an accident such as occurred in January 1980, he said. At that time the bubble burst in one day and took two decades to recover.

When you press each button

Ultimately the engineering that would become SPDR Gold decided that it was his job to worry about it.

"Our main mission was to find all the buttons you could push to stimulate demand," said Burton, 59, in an interview in London. "We also knew we had started something he could not control."

His time was impeccable. They opened the safe-haven investment in a reputation potentially millions of new investors just before the financial crisis of 2007 and 2008 and the subsequent global economic downturn. Until then, bullion was seen by many as a band of exploitation of the rich vaults of Swiss banks or gold bugs housed in the metal next to the canned foods to protect the Apocalypse.

"They were very patient and hit a real need for depth in the normal investor to buy and sell gold as an action," says Jeremy Siegel, finance professor at the University of Pennsylvania Wharton School in Philadelphia.

'Turning Point'

The creation of the fund was a "turning point," said Scott Malpass, chief investment officer at Notre Dame in South Bend, Indiana. It is a vehicle for gold investors who made readily available and inexpensive and easy to trade, he said.

Got about $ 5.5 billion at the close of fiscal 2009, and the allocation of additional funds for the school.

A skeptic of gold, he began buying in the SPDR Gold s after the collapse of Lehman Brothers Holdings Inc. in 2008, the acquisition of some 111 million by July 1, 2009. The school held about 65.8 million U.S. dollars in the fund at September 30, according to SEC filings.

While the World Gold Council was not the first in the world to develop an exchange-traded products backed by gold, bringing the U.S. market was crucial, Burton and Thompson say.

The fund, SPDR Gold now called, began operations in 2004 and opened the way for exchange traded products backed by U.S. products Of the $ 1.4 billion worth of goods traded worldwide in late November, 171.7 billion U.S. dollars were backed by or linked to commodities, according to BlackRock.

Atomic number 79 in the periodic table, gold has captivated humans for at least 6,000 years, because the silversmiths fashion decorative objects and jewelry in the Black Sea coast in what is now Bulgaria.

Malleable metal

It is a malleable metal, gold is actually consumed. Virtually every ounce of gold that has ever been mined is still around: an estimated 165,000 metric tons. Peter Bernstein, the late economic historian, citing a calculation that all the gold in the world could be blown to fit on a single tanker in its history in 2000 from selling the precious metal, "The power of gold."

The first Croesus minted gold as money in the 6th century BC in what is now Turkey. In the 20 th century, the U.S. and most nations formally adopted the gold standard.

The price is effectively set at $ 35 an ounce to U.S. President Richard Nixon abandoned the gold standard in August 1971, paving the way for a price explosion. Investors flocked to gold in the decade after the financial and political crisis. On January 21, 1980, which brought the then-record price to $ 850 per ounce, equal to today's inflation-adjusted $ 2,266. Gold crashed the next day.

In 2000, the mining industry is facing the prospect of entering a third decade straight of a bear market for gold. SPDR Gold was born of that crisis.

Turkish Game Show

Since its inception in 1987, the World Gold Council had focused on the promotion of gold jewelry, traditional industry anchor. Very little was done to push gold as an investment, according to Kelvin Williams, executive director of AngloGold Ashanti Ltd. marketing until 2006.

A staple of the investment advice of the highest profile involving a Turkish television game aired in 2000. The contestants competed to win his weight in gold, two women marched with skirts and bikini tops covered with coins.

Other developments encouraged Muslims to use gold as a way to save his time in a lifetime pilgrimage to Mecca. The council also pressed India and Italy to sell gold on the counter at post offices and banks.

The World Gold Council hired the consulting firm Bain & Co. to review its operations. The mission grew in early 2002 to include a plan to be known as "Project Sun" to consider how to create a foundation, according to Thompson.

Wildest Dreams

The council achieve their wildest dreams, if a negotiable instrument created a demand for 900 tonnes of gold or $ 20 billion, Burton and Thompson say they Bain said. Bain declined to comment for this article.

For his part, Jeffrey M. Christian, the director general of New York, researcher CPM Group and consultant to various gold producers, wrote an open letter in January 2001 to the executives of the industry's insistence that they realize that "increases in demand investment for physical gold can have immediate and dramatic impact on gold prices. "

His research showed that gold prices increased significantly only when investors bought more than 529 metric tons a year. He said that mining executives were frustrated that their companies were losing time and money in promoting sales of jewelry.

"Mining companies are starving," says Christian now. The rates of major gold miners, FTSE Gold Mines Index of London and the Philadelphia Gold Medal and Silver Index, reached record lows in late 2000 and early 2001.

Fortune Cookie

Christopher Thompson was already a believer in the need to open the gold to investors when he joined the World Gold Council

Unlike most of its counterparts in the mining, Thompson, who was born in Johannesburg, had a background in finance: in the U.S. won three closely-held funds that invest in gold mining companies.

In 1998, during dinner with his wife and children in a Chinese restaurant in Denver cracked a fortune cookie. The little slip of paper inside saying, "You're going to Africa and take over the largest gold mine there."

A few months later accepted a job as president and CEO of the newly created Gold Fields mining company, gaining a seat on the executive committee of World Gold Council. Thompson frames the fortune and leaning on his desk in Johannesburg. Came with strong ideas about how to jump start the gold price.

Bars and Coins

For starters, he says he understands that markets are made in the margins and marginal players in the gold market were always investors. Introduction to buying gold was the challenge.

Two types of U.S. investors bought gold were inconvenient, says Thompson. Buy bullion meant the payment of commissions, storage costs and insurance as well as the rights to sell out. Although less expensive, gold coins had higher rates of buying and selling, says Thompson.

Thompson said that solve for the World Gold Council to find a way to make buying gold easier.

However, the Council still attached to gold jewelry after more than a decade of marketing campaigns inspired by the ubiquitous "A diamond is forever" advertising by De Beers, the world's largest producer of gems. In May 2001, the World Gold Council embarked on a new, $ 55 million of the "Glow with gold." The council aimed to boost sales of jewelry and bring the precious metal through advertisements, claiming gold brand was tainted by the likes of gold credit cards and cereal for breakfast.

It did not break the losing streak. Spending pushed the council into a deficit, according to Thompson and Burton. Also fueled the debate over the existence of the group.

'Jeopardy'

"The future of the council was very much in danger," said Katherine Pulvermacher, who joined the team of investment advice in 2001.

The following April, the World Gold Council had a stormy annual meeting in Melbourne, Australia, according to Thompson and Kelvin Williams.

Neither will detail what happened, but ended with Bobby Godsell, former president and CEO of the then AngloGold Ltd., will leave the post of president of the World Gold Council and Thompson take his place. Godsell, 58, did not return calls seeking comment.

Thompson wasted no time moving forward. Not renew the contract of the then director general of the World Gold Council with which Godsell had led to the "Golden Glow" campaign.

401ks

During his round of golf with Burton rainy days, presented his idea: create a trust offering gold through shares sold in the New York Stock Exchange. The trust property is divided one bar, 400 ounces of gold in about 4,000 shares, which rise or fall with the spot price of gold.

At that time, when millions of Americans had become comfortable investing through their 401ks, gold could be elevated to the same category as other assets, Thompson argued.

Nothing like it had been approved by the SEC.

"If you can not get to do, he is shot," Burton recalls Thompson said. He accepted the challenge.

With the staff of the World Gold Council, Burton up and tested similar products in other markets first. The group offered its support and marketing support for Graham Tuckwell, Australian natural resources consultant in his own created the first ingot of support, the exchange-traded fund and is listed on the Stock Exchange of Australia in 2003.

Tuckwell

Tuckwell, founder of London-based ETF Securities Ltd., a blow to the idea after an acquaintance mentioned a rare commodity in 2002: the values of wine. They were "funny little things" that allows shares in a particular time to be listed on a stock exchange, said.

The World Gold Council and Tuckwell then has a similar product is listed on the London Stock Exchange. And the World Gold Council supported a side project in South Africa Absa Capital Vladimir Nedeljkovic.

Each success brought the momentum and confidence, says Burton. The New York Stock Exchange was the Holy Grail. It was the only market large enough to have a real impact, Thompson and Burton said.

It took two years and up to $ 15 million in the preparations and the lawyers of Burton and his team to win approval, according to Burton, who is now a partner at California Strategies LLC, a public affairs consulting firm.

While working in 2003 and 2004 to shape a product of New York Stock Exchange that could pass muster with the SEC, Burton and investment staff began to play what he called "threat scenarios."

'Perfect storm scenario'

What if the funds were so successful that the gold came in a bubble?

"There was a potential perfect storm scenario where suddenly the gold would fall into the hands of hedge funds and momentum traders in very, very aggressive, plays leverage, which could increase the price and then place the flat below it, "Burton recalls conversations.

"Our biggest concern was that it burned a new generation of investors and started the whole damn story with tears again," he says.

In the SEC in Washington, the main concern was trying to understand an active unregulated knew very little, said Robert Colby, deputy director of the agency then the Trade and Markets Division.

They were aware that approving the first exchange-traded fund based products open the door to a wide range of similar investment vehicles, Colby said.

Chocolate Bars

The SEC will not approve new forms of values until it was convinced that there were easily manipulated, Colby said. Although no regulation on trade in gold, the fact that many nations still held a significant portion of its gold reserves helped the council win this point, she said.

On November 18, 2004, Burton went through the floor of New York and launched agents chocolate bars wrapped in foil to resemble gold ingots. He and Thompson rang the opening bell together as the World Gold Council launched its fund publicly traded under the name StreetTracks Gold Trust GLD and the ticker. Bank of New York Co. acted as trustee, while a unit of State Street Corp. sells the fund.

When trading stopped, the champagne flowed. The frenzy for gold among investors was instantaneous.

In the eight trading days to November, the new ETF attracted more investment in the month that all but two other funds available in the New York Stock Exchange, including mutual funds, data compiled at the time by Financial Research Corporation

Fastest growing ETF

For the 30-day mark, the fund that made $ 1,290,000,000 fastest growing ETF in history, as published at the time by TrimTabs Investment Research of Santa Rosa, California, an independent research firm.

That was more than double the $ 610 million raised by the previous record holder, iShares Lehman bond fund, said TrimTabs.

"We shout," Pulvermacher says.

Thompson retired the following year. His successor, Pierre Lassonde, former president of Greenwood Village, Colorado-based Newmont said ETFs "our biggest success in 25 years, most from the Rand of South Africa in 1970."

Coins containing an ounce of gold gained access to millions of individual investors to the gold market during its last significant tour. The world anti-apartheid movement and the global decline in gold sales combined to cancel the 1980's.

In a private investment conference Sept. 27, 2005, at the Westin Hotel in Denver, Lassonde linked to the growing demand for investment of the fund to the rising price of gold and looked toward a future in which his group used these funds to stimulate demand for all the world.

'Huge' Impact

SPDR Gold is now in Japan, Hong Kong, Singapore and Mexico City. Gold prices went, especially as more funds joined the fray. Gold rose more than 58 percent within 18 months after SPDR Gold started its work at more than $ 700 in May 2006, reaching a maximum of 25 years, without adjusting for inflation.

"Big, huge, large and ongoing," is how Dennis Gartman, economist and editor of the Gartman Letter in Suffolk, Virginia, characterized the exchange traded products impact on gold prices. Societal concern about the dollar, other currencies and monetary policy will continue to channel the demand for gold investors for the foreseeable future, said Gartman.

Gold's popularity shows how investors are buying hard assets such as governments and central banks led by the Federal Reserve to pump more than $ 2 trillion in the global financial system.

Goldman Forecast

Analysts at Goldman Sachs forecast Allison Nathan and Jeffrey Currie in a Dec. 13 report that gold will rise to $ 1,690 in 12 months. Last year, the investment exceeded the jewelry as a major source of demand for the first time in three decades and kept the top spot this year, according to GFMS Ltd., a research firm in London.

To meet demand, mining companies pushed the global gold production to a seven-year high in the first half of the year, according to GFMS. The industry average total cash cost to produce one ounce of gold rose 17 percent in that period as companies pushed to extract the ore that would otherwise not make economic sense, GFMS said in a September report.

New York, BlackRock runs a gold fund fastest growing today. Size is about 100 shares for each ounce of gold, up from 10 per ounce actions created by the World Gold Council Foundation.

Thus, the iShares Gold Trust makes it possible for day traders or college students to play the gold market for about $ 13.44. That's less than the cost of a pepperoni pizza delivered 16-inch to a residence in Chicago.

Day Trader

A day trader like James "Pat" King, 25-year-old finance graduate of Boston University who began working in the basement at the home of his parents in Lincoln, New Jersey, after losing his work on Wall Street in August 2009.

King had invested in the fund SPDR Gold in April of that year on the advice of his father who was "very suspicious that the federal government and its ability to make money appear out of nowhere," he says. He argues that investment, while equity trading iShares Gold Trust BlackRock more often, hoping to capitalize on price swings driven metal news.

Sure how will you know when to sell their gold holdings principal.

"There is so much uncertainty in the ground state of the macroeconomy," he said. This translates into "a big money pouring gold from the sidelines, even mothers-and-pops and high net worth individuals want a piece of it."

"Yellow Elephant '

World Bank President Robert Zoellick has suggested that the Group of 20 countries should consider the use of gold as an international benchmark of market expectations on inflation, deflation and currency futures values, as world monetary system reform.

"Gold is the elephant in the room yellow," Zoellick said on 10 November. "Markets are already using gold as an alternative monetary asset, because the confidence is low."

Byron Wien, senior vice president of Blackstone Advisory Partners LP, said he is recommending institutional portfolios 5 percent of assets in gold. That has come as a surprise to some clients. He says he has run out of conference rooms.

"People think it is just another bubble or is not real," he said.

Wien said he sees gold reaching $ 1,500 within two years, although any potential price increase is less important than having a safety net. "I am recommending gold as a kind of insurance policy against calamity in financial assets," said Wien, 77.

While Soros has called a golden bubble, not out of the market.

SPDR Gold was the largest single celebration of Soros Fund as of September 30, according to a filing with the SEC. The fund purchased 5,000,000 shares of the iShares Gold Trust, the filing shows.

"Where Are You '

"It's all a matter of where you are in that bubble," said Soros, 80, in a speech at a meeting organized by the Canadian International Council in Toronto on November 15. "Current conditions in real deflationary pressures and the fear of inflation is quite ideal for gold to rise."

"The big downside is that many people know this and a lot of hedge funds are heavily exposed," added Soros. He declined an interview request for this article.

Siegel, finance professor at Wharton, says he is skeptical about the metal in the long term, especially for small investors. He believes it will have a hard time judging when to buy and sell.

His research shows gold has underperformed stocks, bonds, bills and even real estate in the long term. It has a total real returns of 0.6 percent per year since 1802, compared with 6.6 percent for stocks, 3.6 percent for bonds and 2.8 percent for bills. One of the things he has won gold only is the dollar, said Siegel.

Unlike assets like oil and wheat consumed on the basis of economic factors, the real value of gold is difficult for ordinary investors to judge, "said Siegel. Its value is often determined by the fear of inflation or financial collapse, he said.

"If you can judge these investors assess fears, you'll do well," he said.