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 continue with our investigation into how this fund is able to acquire so much gold so quickly with a series of questions and answers. We start with the latest response from GLD:
Following up on our previous correspondence regarding the SPDR Gold ETF (GLD), Authorized Participants buy the gold for creation orders in the global over-the-counter market, which is deep and liquid and trades 24/7. The OTC is the wholesale market for gold, and transactions are based on London Good Delivery bars, weighing approximately 400 ounces. The normal quotation in the global OTC wholesale market is for settlement in London Good Delivery bars stored in London vaults, such as the one owned by HSBC where the Trust stores all of the GLD gold. In fact, much of the gold APs deliver to the Trust to create new GLD shares was already in the HSBC vault, so the bars simply had to be allocated to the Trust and carried over to the physically segregated section of the vault.
Moreover, please visit the following site to view the GLD frequently asked questions: http://www.spdrgoldshares.com/sites/us/faqs/
Hope this is helpful,
Thank you very much indeed for replying to us so promptly it is very much appreciated.
However our question of Who sold the 45 tons of gold to you? remains unanswered.
If as you say much of the gold was already in the HSBC vault and has now been reallocated to the GLD trust, then it should be easy for HSBC to tell us from whom they purchased this gold.
Could you please ask HSBC to supply you with a breakdown of this purchase of 45 tons of gold, then we would have some transparency with this transaction and much of the mystery would be removed.
Team, Please remember that we are not investigative journalists and may not be asking the the right questions but we do seek to establish some clarity in terms of how so much gold can be accumulated in such a short space of time and who are the sellers standing on the opposite side of these trades.
On a positive note we include this snippet by Denis Gartman in that he is confident that HSBC are holding gold for GLD as seen on BNN
The Street : February 26, 2009 : Ask Gartman [02-26-09 8:50 AM]
February 26, 2009
Guest co-host Dennis Gartman, editor and publisher, The Gartman Letter, takes viewers' questions and emails.
Click this link
As we see it, if you buy into GLD you are effectively buying an IOU from GLD for a quantity of gold, they in turn have a back to back agreement with an enterprise such as HSBC who give GLD an IOU for the same quantity of gold.
The gold for the most part remains in the vault and is re-allocated to the latest purchaser.
To be comfortable we would still like to know who sold it to GLD and if that data is not forthcoming then it is not for us. If you are comfortable with this vehicle for your investment needs then we wish you well and hope that our concern is unfounded.
SPDR Gold Trust trades on the NYSE under the symbol of GLD, has a market capitalization of $26.15 billion with 280.90 million shares outstanding and the average volume of shares traded is 22.55 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..
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