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« Obama Has No Clothes | Main | Gold Prices Hit $1000 »

SPDR Gold Trust (ETF) A Safe Haven?

SPDR Gold Shares

This gold fund currently has a market capitalization of $27.00 billion, but does it really have the physical gold it reports to have or is it some form of paper equivalent?

We decided to ask them directly and found that their answers to be somewhat surprising.

14 February 2009
Dear Sirs,

We host a web site called where we have 6781 subscribers and up to 35,000 casual visitors on a daily basis.

Our readers have noted that your fund acquired another 45 tons of gold last month, which is a fantastic achievement, as your fund goes from strength to strength.

However two questions pop up:

1.Who sold the 45 tons of gold to you?
2.How can we prove to our readers that you actually have the metal and not the paper equivalent.

If you could provide us with an explanation that we could post on our web sites then it would give our readers and us for that matter the confidence to invest in GLD.

Best wishes,

Bob Kirtley

14 February 2009
Please see pages 25-29 in the GLD prospectus (Creation and Redemption of Shares section) for more insight about transactions that occur with Authorized Participants at:

14 February 2009

Thank you for your very prompt reply it is much appreciated. However your reference to pages 25-29 of the prospectus covers regulations in a general sense but you have not answered the two questions that we have tabled. So could you please provide us with answers to these two questions?

1.      Who sold the 45 tons of gold to you?
2.      How can we prove to our readers that you actually have the metal and not the paper equivalent.

Best wishes,

Bob Kirtley

14 February 2009
The Authorized Participants buys the gold, not the Trust. The section I referred to deals with Creation and Redemption of shares. This is important in understanding where the gold comes from and how the fund actually operates. We are currently working on a piece that addresses this issue and it will be posted on the website.

14 February 2009

The questions still stand, which Authorized Participants bought the 45 tons of gold and who did they but it off?

Who audits each of these Participants holding of physical gold and provides the proof that they actually have the gold?

Best wishes,

Bob Kirtley

17 February 2009

Is there anything else that you would like to add before we go to press?

Best wishes,
Bob Kirtley

18 February 2009
As far as “proof” that we actually hold physical gold; you can visit the website and download a copy of the gold bar list which numbers each gold bar. Moreover, page 26 of the prospectus lists all the Authorized Participants. Where they attained the gold is something I cannot answer.

We draw your attention to the very last sentence – they do not know where they attained the gold!

This statement gives us cause for concern, with such big numbers involved we would have thought that an approximate breakdown of who has supplied them with the gold would have been readily available. There should be in existence an audit trail which accounts for every bar of gold and then when a purchase of say 10 tonnes is made we could all see who the seller was and get some validation of the transaction.

In conclusion this is just too vague for us and we are not comfortable at this juncture with SPDR Gold Trust as an investment vehicle. For disclosure purposes we do not own this stock, however we have traded their options in the past.

SPDR Gold Trust trades on the NYSE under the symbol of GLD, has a market capitalization of $27.47 billion with 280.90 million shares outstanding and the average volume of shares traded is 19.74 million.

We will however attach any further comments the company wishes to make to this article as it is only fair to do so.

Got a comment, then fire it in.

Stay tuned folks..

If you are new to investment in the precious metals sector then you may wish to subscribe of our FREE newsletters regarding gold stocks, silver stocks and uranium stocks, just click on the links.

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Reader Comments (57)

Why does it matter? One assumes they attained it on the open market, and gold is gold is gold. It could have been mined by the Romans and we wouldn't care. It seems to be a large leap of logic to jump from "I cannot answer" to "they do not know." Who is Todd? He could be an intern assigned to you hired last week for all you know.

February 23, 2009 | Unregistered CommenterRAy

To RAy:

Why does it matter? To prove that they actually own the Gold that they claim they do. Obviously the trust that was taken for granted in the financial industry is no longer there. So when people ask questions, it's best to have good answers. Especially when i'm buying your stock based completely on the fact that you own 45 tons of gold, you had better be able to prove that you actually have it. It should be very easy for them to account for where that much came from. It's not like they bought it a little bit at a time from cornershops and trade shows.

February 23, 2009 | Unregistered CommenterJay

Great questions Bob,
The earlier comment doesn't seem to understand the meaning of the very important question: "From whom was it obtained?" (not where / when was it mined - LOL) Since no COMEX drawdowns even remotely this large have been observed or reported over the existance of this fund, it is indeed puzzling. The amount of gold purportedly aquired by the fund is more than most G7 countries have in their reserves. Open market?? Thats a laugh.
I share your caution as far as investing in this fund is concerned. Worst case scenario might be all paper gold to be used to "DUMP" the spot gold price at some strategic moment, and announce default on redemptions to shareholders. After all, who controls this fund, and all the short positions on COMEX?
Happy investing!

February 23, 2009 | Unregistered CommenterDennis


It does matter where the gold comes from. If it is bought or leased for example matters also.

A better question to ask here would be; After you established the origin and location of the stored gold, can an investor take actual physical delivery of the metal!?

With SPD Gold Trust, this wouldn't be possible. One way or the other...where still holding paper value. But its simply good to know, whether the gold is actually obtained and stored in disclosed SPDR vaults and not at some JP Morgan bank in New York...


February 23, 2009 | Unregistered Commenterde Graaf

Well done on your questioning. To RAy's comment : of course it matters. 'gold is gold is gold' - but who really owns it? I live in Hong Kong where it now appears Mugabe of Zimbabwe is busy stashing away his treasure. USA authorities are now chasing UBS in Switzerland about 'hidden accounts'. Who knows of some of the gold in SPDR may be liable to be seized at any time as illgotten gains. Where it was 'attained' - who has good title to it, and who truly owns it, is vital.

February 23, 2009 | Unregistered CommenterMelville Boase

We used to hold GLD fund and one day decided to thoroughly read prospectus. We could really find no protections for investors and all was very vague. There have been many rumors about banks using SLV and GLD to suppress prices which would not be good for the holders of the fund. Also one of our greatest fear was of confiscation by the government as in 1933.

February 23, 2009 | Unregistered Commenterrick

This is what I have been afraid of, hence never "invested" in any of the Gold ETFs. I would only buy something if I get physical delivery. I have been a buyer of kilo silver bars, but as of late have not been able to get any physical, the bullion dealer did offer grain though! Not much use to anybody as you can't hallmark each grain!!!
I hope none of the ETFs that claim to have physical gold actually do have the gold they claim, a piece of paper aint worth much, the ink is probobly worth more these days anyway?

February 23, 2009 | Unregistered CommenterG.M.

Correction, typo in last comment, please omit "none of" in the line "I hope none of the ETFs that claim to have physical gold actually do have the gold they claim, a piece of paper aint worth much, the ink is probobly worth more these days anyway?"

February 23, 2009 | Unregistered CommenterG.M.

It's been stated by a number of analysts (e.g. Ed Steer, Ted Butler) that SLV likely has the same issues. Care to comment?

February 23, 2009 | Unregistered CommenterMike Gettman

Nice post. Congrats


February 23, 2009 | Unregistered CommenterChimera

Confirms what I have been hearing from others about the SPDR Gold Trust...John Embry at Sprott Resources, etc., has been questioning this very point.
For an establishment handling this amount of bullion they should, at the very least, be able to demonstrate who they attained the gold from.

February 23, 2009 | Unregistered CommenterMark

Ok, so now the trumpets are sounding and interest/healthy curiosity is building about a very, very serious situation.

Just ponder for a minute about how easy it is with just a click of the mouse, anyone can unload their holdings in these ETF's.

I have questioned knowledgeable writers about what would happen if a run occurred, and most have serious concerns. For example, what would happen to the price and, specifically, what will happen to the gold when all the paper is sold back to the Fund and goes into the scrap heap.

Personally, for what it is worth, I stay away from funds and ETF's.

Thank you, Bob, for your persistence in trying to get to the truth.


February 23, 2009 | Unregistered CommenterJohn Ell

The fact that GLD cannot prove it has the physical gold it says it has is the reason I choose the smaller CEF which is a gold/silver combo which DOES have physical gold and silver. Also since CEF is technically a stock it is a 15% capitol gain ,rather than GLDs 28% capitol gain because it is a collectible. CEF is the only way to own gold/silver without actually having it in your hands or atleast the next best thing .

February 23, 2009 | Unregistered CommenterGORDON

What is in your opinion of CEF,Central Fund Of Canada Limited, in this regard?


February 23, 2009 | Unregistered CommenterRich

Not all ETFs are equal. In the UK there are stricter regulations & audits on ETFs. My investments (PHAG and PHAU) are covered by the FSA compensation scheme. I can also arrange for physical delivery of the bullion.

February 23, 2009 | Unregistered Commentertim

Mike Gettman - I don't know how feels about it but here is my thought:

"Sure, I would say so. All the ETF's that are substantial in size would be faced
with the same situation in the event of a big sell-off. The paper holders may
not want to hold all the physical during declining prices. Makes sense to me."

February 23, 2009 | Unregistered CommenterJohn Ell

Am I right about this? Wasn't CEF recommended by Howard Ruff?

February 23, 2009 | Unregistered CommenterJohn Ell

Bob, just look at those replies.

Gold is hot and so is your excellent topic.
If the reply from SPDR remains inadequate, you can bet this topic is going to get the headlines soon.

Full disclosure is at hand.


February 23, 2009 | Unregistered Commenterde Graaf


You mentioned John Embrey so we had a look on BNN and found this clip that might be of interest as John likes ETFs but not this one!

Commodities : February 19, 2009 : Mailbag [02-19-09 11:40 AM]

BNN speaks to John Embry, chief investment strategist, Sprott Asset Management, about the rally in precious metals, and the agricultural products market as well as oil, gas, uranium, and more.

February 23, 2009 | Unregistered CommenterGold Prices

So, if in fact the SPDR GLD ETF does not actually have the bullion to back the shares it holds then they would not have the gold to actually sell back into the market? How would the redemption of their shares impact the price of gold then? Perhaps someone should call the 'thought' police on this one. Or maybe the SEC gives a $#

February 23, 2009 | Unregistered CommenterSteve

Great q and follow up, Bob.

The fact that they don't have a straight and simple answer means that ... there isn't one. And that's not just a cause for concern, it's a warning sign to STAY AWAY. TOXIC - DO NOT TOUCH. Any company traded on the exchange should have official, transparent auto-answers ready for the public, released by an official spokesperson of the company. If Todd is indeed an intern, that puts the last nail into he coffin w/regard to GLD's integrity. I don't think Todd's an intern, but I don't think there's real gold bars in GLD either. It's all an illusion, and step 2 is next. We've all seen Wizard of Oz, when Toto pulled the curtain aside to reveal the truth.

I knew from reading the prospectus myself that there were no audits. It says so. Can you believe that? No audits, for how many tons of gold? Insane.

I agree that GLD can be thought of as a short term trading vehicle, but never as an investment vehicle. But that said, things have now become too critical to even put any money in GLD, haven't they? We could wake up some Monday morning, and find a new world, and our 50% trade in GLD is now just ... paper. For me, real gold and silver are found in CEF and GTU. These are solid companies, with vaults, audits, procedures, insurance, official communications, etc. Another is, with the legendary James Turk.

February 23, 2009 | Unregistered CommenterBill


Many thanks indeed for all the feedback it is very much appreciated.

Today we have sent a message to the SEC (U.S. Securities and Exchange Commission) regarding this matter and will post their response as soon we get it.

February 23, 2009 | Unregistered CommenterGold Prices


President Obama's speech today showed some serious confessioning about Bush's budget planning shortages. Zero budget planned for the Iraq war. Zero budget planned for natural disasters...unbelievable. Obama 'fully' discloses the US governments deceptionary policies of recent years.

And wit the SEC under severe pressure because of Madoff, I think our SPDR gold issue may get some serious attention this time.

I'm getting excited. This sounds like the end of the 'manipulation' era.

February 23, 2009 | Unregistered Commenterde Graaf

Remember Folks...

All new gold must -first come out of the ground.- Buying the major mining stocks such as Newmont, Goldcorp, Barrick, Agnico Eagle, Freeport McMoran, Kinross, etc. is the ticket to success in my opinion. Right here, right now. This is truly a once in a lifetime opportunity, and I have been trading stocks and commodities for over thirty years.

The "majors" such as the ones I just mentioned, have the capital in these difficult times to be able to purchase and acquire the "junior" mining companies. The majors are always working to build reserves. As we speak, this is exactly what is happening. The small "junior" companies have proven reserves, but they often lack the ability to raise the capital to actually build a mine and go into production. So in these difficult times, the majors are able to buy up the juniors at a deep discount.

Now the most important thing on gold I could ever teach you is this....
Physical vs. mining shares, which is the way to go? I am often asked this very question.

The correct answer is to have some physical -in hand- such as gold coins. This does -not- mean in a safety deposit box at the bank. Google the "Patriot Act" that was passed just a couple years ago. The idea of holding some physical gold and silver is just to protect against the worst. The very things we hope never come about. Having a bag of the old "junk silver" is a good idea too for small purchases. The old Mercury dimes and Washington quarters are a good example. You can have all the 100oz. silver bars in the world, but for a couple bags of groceries, they would be tough to use in a barter society. The 100s are however the best price per ounce, a couple -in hand- are a very good idea, but only buy the Johnson Matthey and Englehard.

But here is why the bulk of your money should be in the major mining companies. If you have a one ounce gold coin, and the gold price goes up one dollar, your coin is now worth one dollar more. No more, no less.

However with mining shares, lets use Freeport McMoran as an example. They produce about 1,200,000 ounces of gold annually. Now if gold goes up one dollar (and we assume it stays up) FCX will have an extra $1,200,000 flow right down to the proverbial "bottom line." Remember, they will be expending the same in labor, fuel, equipment expenses, etc. They will be going after the same gold, but now -each and every ounce- has gone up an additional dollar! Now there is your --leverage to the price of gold--!

I highly recommend the purchase of all the major miners at the current prices. If you look at the stock prices of these companies now verses the last time gold hit a grand, you will see the stock prices are -substantially lower.- I would guess because of a general distrust of stocks.

Good Luck and God Bless,

February 23, 2009 | Unregistered CommenterRedGold

These are great questions and I do hope that you follow up with GLD! The response is troubling on a number of levels. Had I seen something along the lines of "I don't know where the gold was purchased, but I will check and get back to you..." that would be something. But simply not being able to account for the source of a 45T purchase is quite disturbing in the best of times. In the current investment climate, I'd say that transparency and clarity are paramount, but GLD has exposed its failure in both through just three brief emails! I hold GLD in my Roth IRA acount, but must consider the wisdom of this holding after witnessing this exchange.

Thank you for your information service and please keep up all the good work you are doing!


February 23, 2009 | Unregistered CommenterN

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