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« Are Gold Producers Under the Spell of the DOW? | Main | Should You Put Gold into Your IRA? »
Thursday
Feb262009

SPDR Gold Trust (ETF) A Safe Haven? (Part 2)

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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:


Bob-
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,
Todd



Hi Todd,

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.

Best wishes,

Bob Kirtley

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..

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 (17)

There are other gold ETFs. Can't you just find one that is more transparent and let us all know which one so we can switch our investments over to it?
Ken

February 27, 2009 | Unregistered CommenterKen

If I purchase something via a broker do I have the right, or does the ability even exist, to know who the seller was? For something like a car or land where an id exists and the state records ownership and title transfer, yes we can see past owners. But in a case like water or gold or lumber or sand, the broker delivers the product form 1 our more sources. The broker may have commingled product and may not have the ability, incentive or legal right to identify individual providers.

If you buy or sell 100 AEM, you do not know who the other party is. Whiel the exchange and authorties can audit and know, that information is private and not provided to you.

Why do you think that is available for gold?

February 27, 2009 | Unregistered CommenterBC

BC makes a good point. They will never reveal their customers/supplier's privacy that easily. You can always ask though.

With American official now backing the gold suppression scheme in the lease of CB gold, according to GATA, we now have reason to believe things might change under the Obama rule. I think the financial overhaul that is happening in Washington will also open several documents that might provide proof of this scheme. Time will tell.

Lets hope for full disclosure within the coming four years. Obama surely has other priorities momentarily, rather than fighting the gold suppression scheme, indirectly decreasing the current nominal value of the dollar currency.
The role of a strong dollar is too important for the US gov in order to remain funded by the US foreign lenders. Monetizing would not be a beneficial option in times like these...

Hold on to your precious metals. ;)

February 27, 2009 | Unregistered Commenterde Graaf

Have you knowledge of any gold ETF which will issue certificates redeemable for physical?

February 27, 2009 | Unregistered CommenterNR

This is strictly 'paper gold' as the parties provide IOU's, but the share holder can not redeem shares for bullion, if they want to do so. This whole scheme was created by the parties who are controlling the market. Very similar to the Presidents Working Group on Financial Markets (PPT), with similar players controlling the action.
Agree, hang on to the real thing.

February 27, 2009 | Unregistered CommenterRich M

The last comment made by DE GRAFF hopes OBAMA can offer some disclosure about the gold suppressing scheme. Iwould like that very much. I would also agree that by letting Gold go to its real value would depress our dollar. However by actually using our supply of gold to properly back a new TREASURY would that not set the wheels in motion for a higher t-bill,eventually . We have 200 billion in gold at todays prices . If gold were to be 5000 an ounce that would mean a new high caliber t-bill unequaled throughout the world. All other current government backed securities would continue as they are,which is exactly what will happen if this is done or not. The point is use our superiority in gold to benefit all not just inside speculators , banking institutions who have had it there way long enough. Its time for a new beginning with GOLD

February 27, 2009 | Unregistered CommenterGORDON

Dear Todd,
If I am holder SPDR Gold Trust Shares Do I have the right to be the bearer on demand and receive physical gold. This trust does not seems to use this transaction.
Sincerely
Doug Grant

P.S can you comment on CourD'Alene Mines

February 27, 2009 | Unregistered CommenterDoug

Doug,
If you could, it would be one of the very few ways to buy the metal at close to retail. I suspect that you can't get actual metal. Or else if you can, the fees would be very high.

The only other way I have seen is to buy a commodity futures contract and take actual delivery of the metal. The difficulty with that is the size, for example a silver contract is 5000 oz with actual delivery as 5 1000 oz bars. I have been told by commodity brokers that several contracts were bought specifically to take delivery and get the actual metal.

February 27, 2009 | Unregistered CommenterBC

Any concerns on SLV as well?

February 27, 2009 | Unregistered CommenterM

Aren't you overlooking another important aspect of the question of whether or not GLD is backed by physical gold? That question is since GLD can be sold short without actually owning physical gold, what happens to the purchaser of GLD when the other side is a short sale? There can be a lot more shares of GLD owned than the physical gold GLD may have because the other side of the transaction may have been a short sale. In case of a liquidation of GLD who would get the physical gold and who would get the paper IOU from the short sale? It could be a nightmare!

February 27, 2009 | Unregistered CommenterL

Seems to me that the Trust is running like a ponzi scheme to a lesser degree

February 27, 2009 | Unregistered CommenterDoug

Perhaps some questions to ask are, what is their policy for auditing the gold that they claim to physically own? Is gold held in a GLD segregated account? When was the first audit of the gold done? How often is a audit of the gold done? Are representatives of GLD or a third party representing shareholder interests present for, or sign off on the audit?

By comparison, if one wishes to own/obtain or invest in physical metals, the following are much smaller, are offshore, and have been around for several years. If one wishes to deposit to the likes of, Bullion Vault, Goldmoney, or Anglo Far East, it is not as simple as buying shares through a broker. Account opening, direct deposits are required. They claim to, however, do audits of their metals holdings, and suggest that delivery of metals can be taken by account holder.
I have only looked at web pages, and have not as yet become involved with any of the above, but would be interested in comments from others.

February 27, 2009 | Unregistered CommenterAl R

Thank you for your determination in asking some serious questions regarding the GLD ETF. I look forward to reading any further correspondence you may receive from GLD. A further question: is it prudent that GLD stores its (our/my) gold in HSBC bank? Well, at least they don't store it in the USA. That is good to know.

I thank you once again.

March 1, 2009 | Unregistered CommenterA

Something related to Gold Prices SPDR researh, an add-on:

http://www.istockanalyst.com/article/viewarticle/articleid/3150687

March 26, 2009 | Unregistered Commenterde Graaf

Maybe we missed the point but this article does nothing for us in terms of proving or not proving that they actually have the gold.

March 26, 2009 | Unregistered CommenterGold Prices

Maybe not for the Gold Prices crew, but I recall part 1. where alot of people do not exactly know what the issue was with SPDR.

As you know, different angles in a story broaden your views and standpoints. So will the ones of your readers. This is the point I make. Its an add-on. Support for the common cause. Regain some light on the issue.

Ah whatever...you propably catch my drift. ;)

March 26, 2009 | Unregistered Commenterde Graaf

Got it!

March 26, 2009 | Unregistered CommenterGold Prices

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