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Rick Santelli: If you're playing a gold ETF, all you've got is a piece of paper

March 01,2013

You want physical bullion for crisis and insurance purposes, the CNBC analyst and former gold trader suggests

Rick Santelli: If you're playing a gold ETF, all you've got is a piece of paper

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CNBC analyst Rick Santelli interviewed Frank Lesh of FuturePath Trading in a Feb 27 interview on the subject of gold exchange-traded funds. Santelli makes some pointed observations on gold ETFs versus physical bullion:

"One of the biggest changes we have seen in the [gold] market is the fact that it has turned into a security here," Lesh says. "Evolution of ETFs. What this has done is enabled a lot of people to participate in this gold market that never would have been in it."

Santelli notes: "But didn't it take the whole point away to some extent, Frank? I hate to interrupt you. Back when I was trading gold, the newspapers used to have on the front page of the (Chicago) Tribune, the gold watch, the silver watch, people were taking antique silver sterling that was passed down and melting it. It is not the same now. If you're trading paper, the notion of many who trade gold, the Ayn Rand-ers as I call them, if the financial world comes to an end, they're going to have the gold. If you're playing in an ETF, you're going to have a piece of paper. You're not going to -- so it takes away some of what I perceive are the driving forces behind the run-up in the early stages after the crisis."

Lesh replies: "Yeah, all of this is true, because you're not going to be able to be able to get at that gold in a crisis." Santelli responds: "It's just my opinion, folks, but I don't know, in the garage of the ETFs, if all the gold that's supposed to be there is there. I know that may be heresy, but, Frank, what I'm saying is what all gold bugs talk about."

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