Gold ETFs

There was a comment on some old post of mine from Seeking Alpha where the reader questioned the gold in the vault for the SPDR Gold Trust (GLD). He said something like if you want your gold, will it be there and I think he was implying the same for the other physical gold ETFs. We own GLD for our clients.

This line of thinking is far from original, this has been a matter of doubt for a while with some people. I’m not sure what the origin for this is and I suppose it doesn’t really matter the origin, there are people who do not believe there is the proper amount of gold in the respective vaults.

Chances are there is no convincing someone who believes the vaults are deficient that the correct amount is there. This is very simple however. Do you believe the gold is in there? I think this is a straight forward yes or no question. It is for me, I believe it is in there without hesitation. You either think it is there or you don’t. If you don’t then you clearly should not even consider owning the fund. There is no need to take on this type of worry in your portfolio. I have zero doubt the correct amount is there and so we own the fund.

People seem to get very worked up about this which is ok I guess other than it seems like wasted negative energy. Perhaps there is something similar with my opinion about Chinese reverse mergers. While I certainly don’t think all of them are frauds the potential goes up in this realm and I simply don’t want to take on that type of worry/risk. Simple avoidance without negative energy. This makes investing and life in general much easier.

19 Comments

  1. didn’t you also believe it was good to open a bank account in Iceland?

    didn’t people believe madoff was legit? Actually he was legit at one point and the things changed.

    How do you know it will not change when you really need it?

    Reply
  2. if you want to bring up iceland, that is fair game but got my money out before the collapse.

    as for your comment; when you need it, need it for what? the entire post is about your line of thinking. If you think it is a fraud, don’t buy it. simple.

    Reply
  3. No I do not think it is a fraud, but that does not mean it will not change in a few years or 10 years and I might need it after it changes.

    I grew up believing fannie and freddie were not a fraud and I was right until it changed.

    IF it changes I am sure the little guy will be the last to know and that includes you. You might be a smart guy but you do not have inside info either.

    Reply
  4. Well at least we agree your a smart guy 🙂

    Reply
  5. Roger, you and most of the commenters on this site are definitely smart guys. The Iceland comment, however, hit a lingering nerve of doubt with me, as you were very big on Iceland for a while. That said, your response provides more evidence that you are indeed smart. What made you suspicious of the Iceland situation and drove you to get out before the collapse? Thanks.

    Reply
  6. Look forward to more pictures from Cicely (hope that’s the correct spelling).

    Reply
  7. let’s not get too bullish on my smarts….the Iceland thread seems like it would make for a good (followup) post for either tomorrow or Saturday.

    Reply
  8. fraud can occur anywhere (eventually)

    the idea behind actual gold is to diversify you from paper (or electronic in todays world) only holdings of stuff

    Reply
  9. Fraud appears to be inherent in human nature. Perhaps there is an errant gene some have. Many that have this gene seem to be located in AZ, especially in politics

    Reply
  10. Remember Elaine of Seinfeld and her “locked in the vault”.

    A couple of drinks and that Swiss banker…….

    T

    Reply
  11. Gold is a metal that some people seem to treasure quite highly. On another planet, or even in some cultures on Earth, it could just as easily be seashells.

    For most of us though, it is simply a speculation. One that has worked quite well, recently, but still a speculation with little intrinsic value and no income generation.

    Yes, I believe GLG has gld in it. But really, would it matter if it didn’t?

    Disclosure: long GLD

    BillM

    Reply
  12. maybe a bit off topic, Roger, but did you drive from AZ to Seattle or fly to Seattle and rent a car?
    Reason I ask is that I’ve been planning a trip up to the Pacific NW from Prescott and was wondering about the drive to get up there vs flying. Seems like it would take 2-3 days to drive it?

    Reply
  13. Conspiracy theorists always abound.

    A more serious question about GLD, if they do really hold 50+ B$ physical, plus the amounts held by other physical ETFs/funds, what will liquidity be like in a serious gold price correction? Who is going to buy all those ounces or how will they fund withdrawals?

    Seems kinda like “housing prices can only go up”. Been out for a while now.

    Reply
  14. Buyers in a price decline?

    Well, that’s what price discovery is all about.

    Buyers will be there. Price on the other hand …. now that might turn truly ugly.

    Especially ugly if every online brokerage account holder hits the ‘sell’ key on his keyboard all at once. Lemme see, mine is around here somewhere.

    BillM

    Reply
  15. Bill some get very worked up about this and I am not sure why. If they think it is a fraud then they should not own it and focus their attention on other things.

    Retired, we flew up. We’d just be getting there if we drove.

    John,

    Your question is really about whether the ETF process would work. We have seen short term dislocations with ETFs before with the Lehman fall out with bond ETFs and then equities in the flash crash.

    Gold is not a “can only go up” position far from it, but while any type of short term spasm is possible I do think gold is a “the market can function in the face of adversity” type of holding.

    Reply
  16. I think the reason this is an issue with Gold is that it is a core holding to hedge against doomsday. For those who want some shiny metal to store next to their ammo, food, water, seeds, etc. in their shelters, a piece of paper with real gold behind it is small comfort.

    If the zombie-pocalypse comes, I don’t think people will be able to go the vault and turn in their ETF shares for some universal currency. Think of how many zombies you’d have to kill just to get there!

    Reply
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  18. GLD is not a fraud, because they don’t represent their shares as being the equivalent of ownership of the physical metal. You buy it to track the market value of gold, not to own gold per se.

    I’m sure the banks that sponsor these the ETFs use the same supply of gold for various kinds of leverage. The whole fund could be wiped out by a margin call. They employ multiple custodians and sub-custodians to the point where accountability is completely opaque. You don’t have to believe it’s a “fraud” to be concerned about these variables.

    Nonetheless, I hold some GLD and SLV because they are good trades. If everything goes “poof,” they won’t be any better or worse than any other paper assets; and bars of shiny metal might not be, either.

    Reply

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Gold ETFs

There was a comment on some old post of mine from Seeking Alpha where the reader questioned the gold in the vault for the SPDR Gold Trust (GLD). He said something like if you want your gold, will it be there and I think he was implying the same for the other physical gold ETFs. We own GLD for our clients.

This line of thinking is far from original, this has been a matter of doubt for a while with some people. I’m not sure what the origin for this is and I suppose it doesn’t really matter the origin, there are people who do not believe there is the proper amount of gold in the respective vaults.

Chances are there is no convincing someone who believes the vaults are deficient that the correct amount is there. This is very simple however. Do you believe the gold is in there? I think this is a straight forward yes or no question. It is for me, I believe it is in there without hesitation. You either think it is there or you don’t. If you don’t then you clearly should not even consider owning the fund. There is no need to take on this type of worry in your portfolio. I have zero doubt the correct amount is there and so we own the fund.

People seem to get very worked up about this which is ok I guess other than it seems like wasted negative energy. Perhaps there is something similar with my opinion about Chinese reverse mergers. While I certainly don’t think all of them are frauds the potential goes up in this realm and I simply don’t want to take on that type of worry/risk. Simple avoidance without negative energy. This makes investing and life in general much easier.

Submit a Comment

Your email address will not be published.

WP-SpamFree by Pole Position Marketing