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Guest Post: Got Gold? Why Owning GLD Can Be Hazardous To Your Wealth

Tyler Durden's picture




 

Submitted by Dave In Denver of TruthInGold

A quick note from the author, who points out that when this article was penned in February of 2009, GLD held 850 tonnes. This has since grown to 1,100 tonnes.

Owning GLD Can Be Hazardous to Your Wealth

Given that the stated amount of gold in the GLD Trust has grown to over 850 tons, it appears that a lot of investors believe and trust that investing in GLD is the same thing as buying physical gold bullion. A close reading and analysis of the GLD Prospectus, however, reveals that investing in GLD is drastically different from owning gold. This analysis will show why GLD is nothing more than another form of a derivative security which is loaded with counter-party default risk. Ultimately, the value of the GLD Trust, and the price of its stock, has the potential to experience substantial loss. Under certain circumstances GLD could be worthless. As an investment advisor, I do not recommend that anyone use GLD instead of buying physical gold because it is not an investment in gold and the legal structure of GLD is such that unsuspecting investors could end up losing all of their money. Furthermore, because the risks embedded in GLD are documented in the GLD Prospectus, investment advisors who recommend GLD and use it in client portfolios are exposing themselves to the risk of negligence lawsuits.

Introduction

GLD is a legal trust designed to track the price of gold, net of trust expenses. The Sponsor is the World Gold Trust Services (World Gold Council), the Trustee is The Bank of New York, the Custodian is HSBC Holdings and the Marketing Agent is State Street Global Agents (State Street Bank). My source of research is the S1 Prospectus filed on November 15, 2004.

GLD is a “derivative” because it is a piece of paper that is supposed to move with – or is derived from - the movement of the underlying asset, which is gold. It is also a derivative because unless a shareholder owns 100,000 shares, a GLD shareholder can never take physical possession of any GLD gold.

As shown below, the Trust has been legally structured in a way which makes it impossible to determine if the gold in the Trust is being leased. This is a huge problem because, if the Trust is indeed leasing gold, it could become difficult for the Trust to replace the leased gold in the event that the counter-party leasing the gold defaults. Furthermore, in the event that the Custodian becomes insolvent, and the gold has indeed been leased out by the subcustodians, shareholder's have almost no legal ability to seek recovery from the Trust/Custodian.

GLD does not even promise that the gold is in the Trust

The biggest problem with GLD is there is no way to legally force the Trustee/Custodian to prove that the goldbeing kept by the Custodian is in the Custodian's vault. The Custodian has the ability to use “subcustodians” to safekeep the gold. The  subcustodians are permitted to use their own subcustodians to safekeep the gold.

The Trustee/Custodian/Subcustodian relationship is where the validity of GLD disintegrates into a maze of legal barriers which ultimately prevent anyone from physically verifying that the GLD Trust holds anything more than promises of gold. In other words, GLD has been set up by the Sponsor and Trustee, and the structure approved by the Securities and Exchange Commission, in a manner which would allow GLD subcustodians to lease out the gold being held by subcustodians, thus leaving nothing in GLD but lease-receivables.

I'll start from the top and work down. The Trustee, upon reasonable notice, is permitted to visit the the Custodian's vaults and examine the Custodian's records twice a year. From the prospectus:

The ability of the Trustee to monitor the performance of the Custodian may be limited because under the Custody Agreements the Trustee may, only up to twice a year, visit the premises of the Custodian for the purpose of examining the Trust's gold and certain related records maintained by the Custodian. (p. 37)

The auditor may also visit the Custodian's premises in connection with their audit of the financial statements of the Trust - the auditor does not audit the actual gold. Please note that Trustee and auditor visits “will not be allowed when no gold of the Trust is held in the Custodian's vault.” (p. 48). For clarification, this could occur when all of the GLD Trust gold is being held by subcustodians, who then turn could around and lease the gold. Just as the Trustee has limited oversight of the Custodian, the Custodian has limited responsibility and no oversight of the subcustodians:

The Custodian is required to use reasonable care in selecting subcustodians, but otherwise has no responsibility in relation to the subcustodians appointed by it, and the Custodian is not responsible for their selection of further subcustodians. The Custodian does not undertake to monitor the performance by subcustodians of their custody functions or their selection of additional subcustodians. The Custodian is not responsible for the actions or inactions of subcustodians (p. 44)

In addition to the above problems, and in what I believe is negligence on the part of the SEC, neither theTrustee nor the Custodian has any legal ability whatsoever to monitor or visit the premises of any subcustodians, or subcustodians of the subcustodians, for purposes of verifying that subcustodians are holding what they are supposed to be holding:

In addition, the Trustee has no right to visit the premises of any subcustodian for the purposes of examining the Trust's gold or any records maintained by the subcustodian, and no subcustodian is obligated to cooperate in any review the Trustee may wish to conduct of the facilities, procedures, records or creditworthiness of such subcustodian." (p.37)

To make matters worse, the Prospectus states that there will be no written contractual agreements between subcustodians and the Custodian or the Trustee (page 11-12). The Prospectus further states quite clearly that “because neither the Trustee nor the Custodian oversees or monitors the activities of subcustodians who may hold the Trust's gold, failure by the subcustodians to exercise due care in the safekeeping of the Trust's gold could result in a loss to the Trust.” (p. 12).

As thus can be seen from its legal structure, the Trust does not have any legal safeguards in place to keep subcustodians from leasing out the GLD gold. As of the date of this prospectus, the subcustodians being used were: Bank of England, The Bank of Nova Scotia (ScotiaMocatta), Deutsche Bank AG, JPMorgan Chase Bank, and UBS AG (p. 47). Please note that all of these banks actively lease gold.

Shareholder Recourse

The Trust has been structured to make it difficult, if not impossible, for shareholders to seek recovery from losses which could occur from Custodian/subcustodian negligence or outright fraud. Shareholder recourse against the Trust is limited (p. 11). The Trust will not insure the gold. The Custodian is responsible for insurance and “shareholders can not be assured that the Custodian will maintain adequate insurance” (p. 11). Furthermore, “Custodian and the Trustee will not require any direct or indirect subcustodians to be insured or bonded” with respect to gold held by the subcustodians on behalf of the Trust (p. 11). “Consequently, a loss may be suffered with respect to the Trust's gold which is not covered by insurance and for which no person is liable in damages” (p. 11). If subcustodians are used outside of the U.S., it may be difficult or impossible to seek legal remedy against the subcustodians (p. 12). This is significant because the Custodian's primary vault is in London. The subcustodians' vaults can be anywhere in the world.

A further, and not inconsequential, source of risk is the possible insolvency of the Custodian, HSBC. As described on page 13 of the Prospectus, “if the Custodian becomes insolvent, its assets may not be adequate to satisfy a claim by the Trust...In addition, in the event of the Custodian's insolvency, there may be a delay and costs in incurred identifying the bullion held in the Trust's allocated gold account." On the surface, this makes it sound like the GLD Trustee can make a specific claim on  those bars on behalf of the Trust. But let's examine this a little further. That there may be a “delay and costs incurred identifying bars in the Trust's allocated gold account” undoubtedly refers to the possibility that allocated bars may be held by subcustodians. And if these subcustodians have leased out those bars, it will take substantial time to call in those bars. Worse, if the subcustodians fail to return leased gold to the Custodian, there are no contractual agreements which enforce subcustodian performance by the Custodian. As noted above, the Custodian can not be held liable for actions of the subcustodians, thereby leaving GLD shareholders in line with other creditors in the event HSBC files for bankruptcy.

Yet another loophole in the GLD Prospectus which allows the gold to be leased

In consulting about this report with James Turk, a well-known precious metals market analyst and the founder of GoldMoney, Mr. Turk discovered another loophole in the legal language of the Prospectus which further bolsters the case to be made that the GLD Trust leases out its gold:

I'm reading the Aug 2008 prospectus, but it's probably the same in earlier ones. It can be found in Use of Proceeds on page 3 (and in various other places too), which states: "Proceeds received by the Trust from the issuance and sale of Baskets consist of gold deposits and, possibly from time to time, cash." Note the word "deposits" . This word has a precise meaning in the law, and is the exact opposite of "bailment". To explain, if you deposit dollars in a bank, the bank gives you a certificate of deposit, checking account statement, savings book or some other evidence of its debt to you. You no longer own those dollars; the bank now owes them to you. Title/ownership changed from you to the bank, which can now do with those dollars whatever it wants. With bailment, the bank is simply storing for you an asset you placed with them for storage. There was no change in title. The asset continues to be owned by you. So if there were physical gold in GLD, the above statement should be changed to "Proceeds received by the Trust from the issuance and sale of Baskets consist of gold bailments and, possibly from time to time, cash."

My point is that "gold" is one thing and a "gold deposit" is something entirely different. "Gold" is physical metal stored/bailed in a secure vault. A "gold deposit" is a liability of a financial institution. The former is a tangible asset (physical gold). The latter is a financial asset (paper gold). In summary, the GLD prospectus is full of legal loopholes. While GLD may in fact hold some physical gold, there is enough uncertainty with it that it seems clear much/most of GLD is paper. Otherwise, why doesn't GLD audit the gold to prove that it exists?

As shown by Mr. Turk, the Sponsor of GLD has chosen to structure the Trust using language which would permit the Trust to purchase gold and immediately lease out that gold. The lease receivable document would then satisfy a strict legal interpretation of the use of the term “gold deposits” by the Prospectus. A lease receivable document has risks embedded in it which further increase the inherent derivatives risk of GLD. A lease receivable document is NOT physical gold.

As for the annual auditor's report, found on pages 70-71 of the most recent GLD 10K filed 11/25/08, the auditor clearly states that their “responsibility is to express an opinion on the Trust’s internal control over financial reporting based on our audit.” As shown above, the internal controls rely on a tenuous chain of accountabilityfrom the Trustee down to the subcustodian's subcustodians, with almost no legal means to independently verify the existence of physical gold in the vaults used to store GLD gold. The auditor of GLD is neither required nor, in the case of access to subcustodian vaults, allowed to perform an actual physical accounting of the gold reported to be held on behalf of GLD by the Custodian. Ultimately, the auditor certifies its accounting for GLD based on financial reports from the Custodian and subcustodians which could ultimately be based on lease receivables rather than actual physical gold.

As can thus be seen by the risky legal structure and superficial auditing of GLD, and the willingness of the Governmental regulatory agencies to look the other way, anyone investing in GLD is taking on the risk of being victimized by the misleading financial and accounting schemes that have deeply infected the U.S. financial system. I would be quite surprised if any of the vast majority of institutional and retail investors, or their highly compensated advisors, are even remotely aware of the acute risks embedded in the GLD Trust. Make no mistake about it, investing in GLD is completely different than investing in actual physical gold. GLD does not even accurately index the price of physical gold, as the premiums on physical gold products like bullion coins have expanded from 10% to 40% above the spot price of gold over the last five years. This premium is not reflected in the price of GLD. If you invest in GLD now, with the intent of selling GLD in the future and buying physical gold, you will discover that your investment proceeds from GLD will purchase substantially less gold than was represented by your paper investment in GLD.

I have no problem with the concept of using GLD for daytrading to make directional bets, long or short, on the short term swings in the price of gold. But if you invest in GLD with the intent of making a long term investment in gold, please be aware that GLD is NOT an investment in actual physical gold. GLD is nothing more than a piece of paper which proclaims, but does not promise, to have gold on the other side of its highly structured legal barriers. Furthermore, for the reasons shown above, there is the possibility that you might wake up one day to find out that the price of GLD has suddenly dropped well below the spot price of gold and that GLD could even end up worthless.

 

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Sat, 04/10/2010 - 13:42 | 294698 Jim in MN
Jim in MN's picture

I guess the question is since GLD is just a gold price deriviative, why does it have any trust expenses?  The obvious answer is that investors are kind of dumb, but perhaps there is another explanation.

This is clearly just a paper asset with extra fees. 

Anyway, nice clear thorough writing...and thanks for the contribution!

Sat, 04/10/2010 - 16:29 | 294843 peterpeter
peterpeter's picture

It is not just a price derivative.  They have over 36M ounces of Gold in vaults:

http://www.spdrgoldshares.com/assets/dynamic/GLD/file/barlist/Barlist.pdf

> This is clearly just a paper asset with extra fees. 

It is not.  It is a paper asset backed by physical gold, and the fees are to account for the costs of taking and moving inventory around, and vault fees, plus the profit margin for running the SPDR Gold Trust.

Try trading or storing physical gold for anything close to the cost of trading GLD and you'll quickly discover that GLD is usually much cheaper.

Sat, 04/10/2010 - 17:43 | 294906 cbaba
cbaba's picture

Dont worry PeterPeter;

You are not alone,

Some people are always ignorant what is crystal clear and dont accept the facts and choose to learn the hard way.

You wil learn when you loose everything that the GLD is a shit of paper.

 

Sat, 04/10/2010 - 18:23 | 294937 GoldSilverDoc
GoldSilverDoc's picture

To prove that there is gold behind GLD, you just gave us a link to a piece of.... paper.

You didn't really do that, did you?

Sat, 04/10/2010 - 18:45 | 294951 peterpeter
peterpeter's picture

Oy

So Short GLD or buy some PUTs and make money off of the alledged scam.

You people are funny.

Sat, 04/10/2010 - 19:46 | 294994 knukles
knukles's picture

If its so screwed up, how come Soros has steadily increased his GLD holdings?  How come the People's Bank of China is one of the largest holders? 

Either they're delusional, unsophisticated  or its just plain good enough for the power elite, eh?   

Sun, 04/11/2010 - 21:13 | 295810 GoldSilverDoc
GoldSilverDoc's picture

Funny is better than stupid, peterpeter.

Sun, 04/11/2010 - 00:01 | 295173 Pure Evil
Pure Evil's picture

Oh yes he did!

I also have a link that proves I have 36M ounces of physical gold.

Here it is:

http://www.this_is_a_scam_but_invest_anyway.com/ha_ha_you_stupid_moron/i_will_steal _your_money_and_get_rich_if_you_do.pdf

Sat, 04/10/2010 - 19:49 | 294998 Sabremesh
Sabremesh's picture

"GLD is cheaper"! Yes, but only because they don't have any gold storage costs. Their main overheads are covering up their giant scam and marketing it to gullible mugs like you. 

Sun, 04/11/2010 - 01:38 | 295227 akak
akak's picture

+1161!

Sun, 04/11/2010 - 03:30 | 295253 freebo
freebo's picture

"Try trading or storing physical gold for anything close to the cost of trading GLD and you'll quickly discover that GLD is usually much cheaper."

How about BullionVault or Goldmoney, allocated accounts in your name with daily bar audits, low dealing, trading & storage costs. Insured and idependantly audited, not as good as physical in your posetion but better than GLD.

Sun, 04/11/2010 - 17:51 | 295706 DosZap
DosZap's picture

Or better yet, Perth Mint..............allocated, and a hell of a long way off.

Sat, 04/10/2010 - 23:08 | 295130 caconhma
caconhma's picture

What about investing in Gold mining stocks (like ABX, GG, GDX, etc.,)?

Sun, 04/11/2010 - 09:39 | 295334 kalum
kalum's picture

what about Sprotts PHYS? Anyone?

Sat, 04/10/2010 - 13:52 | 294708 Lux Fiat
Lux Fiat's picture

Read the GLD prospect a while back and stopped using it, even as a short-term trading vehicle, after concluding that there was essentially no audit allowed of the holdings.  When the investment vehicle is supposedly based on physical holdings, but no audits can in reality be conducted of the physical holdings, that is a major red flag.  It's the equivalent of "trust us".  No thank you.

Readings of the UNG prospectus show that they essentially allow front-running of retail ETF holders by the institutions who can create and redeem UNG baskets.  Suspect the same can occur in USO and other commodity ETFs as well.

When going the equity route, I prefer to put my money in the companies that have actual assets - although estimates of proven reserves can have their own issues...

Sat, 04/10/2010 - 13:52 | 294709 Crab Cake
Crab Cake's picture

I think the most dangerous thing one can do right now, financially speaking, is to put faith in "paper"/computer/electronic holdings; of anything.

You want to be in cash?  Good.  Take delivery, and put in a safe, bury it, or put in a safety deposit box.

You want to own gold and silver?  Good.  Take delivery, and put it in a safe, bury it, or put it a safety deposit box.

TAKE DELIVERY.  I don't care what bet you want to place on inflation/deflation, but take delivery of your assets before it is too late.

Sat, 04/10/2010 - 14:32 | 294749 merehuman
merehuman's picture

`safe deposit box? Oh yea, sure it will be safe in a bank, especially during a holiday.

sarcasm, or being a bitch for the moment, either way its a reflection of growing impatience with ignorance.

Sun, 04/11/2010 - 17:56 | 295707 DosZap
DosZap's picture

As I understand it, it's now against the law to hold cash,bullion in Bank SDB's..................only Collectibles.( How's that for a Bitch?).

First, that's the last place I would put either.

It's not insured, and you cannot prove it was there top begin with.

Spend the bucks on a TL 15/30, and sleep well.

Sat, 04/10/2010 - 16:41 | 294859 primus
primus's picture

My sediment exactly.

Sooner or later, history is going to teach us all very hard lesson and people that don't wise up to this fact are in for a very rude awakeing. Debt is not wealth, credit is not money and that which cannot go on forever won't.

I am all about tangible assets.

All 401k's, IRA's and pensions will be looted reformed in some sort of government swindle inside the next 5-10 years, likely when the next tsunami of crooked accounting comes home to roost. When that happens, more people will lose confidence in the system. It is a vicious cycle.

Sat, 04/10/2010 - 17:54 | 294910 futboller04
futboller04's picture

Why would they confiscate the 401ks and ira's if Benny can simply print more money?

Sat, 04/10/2010 - 18:30 | 294943 Crime of the Century
Crime of the Century's picture

1) Because they still have to keep up the appearances of "accounting", and "accounting" says retirements ain't happening.

2) The printer isn't for the little people.

Sat, 04/10/2010 - 22:52 | 295117 Pure Evil
Pure Evil's picture

Well, they don't exactly confiscate the 401k's and IRA's they just help you invest those monies into Treasuries.

Sorta like your investment in payroll taxes for Social Security.

When you're a socialist, or a Marxist-Fascist, or a Nationalist Socialist Marxist, then the thought of someone holding private wealth for retirment is anathema to them. They prefer government dependency and the redistribution of your wealth.

And, don't believe for one second that they believe in re-distributing your wealth to the poor and the downtrodden. The only thing they believe in is redistributing your wealth from your pocket to the governments pocket.

In my limited lifetime I have not seen the reduction of poverty through the Great Society or any other type of government program. I have only seen poverty increase exponentially.

Sun, 04/11/2010 - 08:07 | 295311 pan-the-ist
pan-the-ist's picture

We've had this discussion here in the past.  'We' don't like the sensationalism of your words, this isn't fox news.  Please refrain from using Marxist-Fascist, National Socialist Marxist etc, that don't have any meaning besides your subjective sensationalist meaning.  Thanks.

Sun, 04/11/2010 - 17:58 | 295708 DosZap
DosZap's picture

THe same reason they are F*#**^#^ us out of SS, and Medicare.........

Their BROKE BITCHES..............cause THEY SOLD their GOLD BITCHES!!!!!!!!

Sat, 04/10/2010 - 14:02 | 294718 Magua
Magua's picture

So Paulsen, the guy that made $4 billion for his hedge fund by shorting the mortgage security market, is one of the biggest holders of GLD. Does he give some back on this trade or is he just parking?

Sat, 04/10/2010 - 14:13 | 294733 WilliamShatner
WilliamShatner's picture

Well, if anyone could bust the Comex or GLD it could be Paulsen.

If the demands physical delivery then we could see if GLD is all it's made out to be or if it's just another smoke & mirrors scam.

Sat, 04/10/2010 - 14:39 | 294753 MarketTruth
MarketTruth's picture

.

Sat, 04/10/2010 - 14:40 | 294757 Carl Marks
Carl Marks's picture

Paulson did take delivery on the advice of Alan Greenspan who works for his hedge fund. Greenspan is a gold bug. Think he knows something?

Sat, 04/10/2010 - 14:48 | 294771 WilliamShatner
WilliamShatner's picture

Got a link to an article to back that up?

Not calling you a liar, I'd just like to see the source for my personal perusal.

Sat, 04/10/2010 - 14:59 | 294783 GoldmanSux
GoldmanSux's picture

As at Dec.31/09 filing he owned $4Billion in GLD. Also, he is marketing an issue right now that claims it will own 15% in GLD.

Mon, 04/12/2010 - 12:36 | 296508 GoldmanSux
GoldmanSux's picture

Just spoke to an aquaintance who works for Paulson. They have not taken delivery, but believe they have the ability to do so.

Sun, 04/11/2010 - 18:00 | 295710 DosZap
DosZap's picture

IF that happens, then there are going to be a lot of bloody a**holes, and broke SOB's.

Sat, 04/10/2010 - 14:44 | 294760 GoldmanSux
GoldmanSux's picture

Paulson is the largest holder in GLD at $4billion. He can request delivery as he has over 100,000 shares.

Sat, 04/10/2010 - 16:25 | 294840 peterpeter
peterpeter's picture

You must be an authorized participant to convert shares into Gold or Gold into shares.  It's not clear whether Paulson & Co. is or is not an authorized participant:

 


Each Authorized Participant must (1) be a registered

broker-dealer or other securities market participant such as a bank

or other financial institution which is not required to register as a

broker-dealer to engage in securities transactions, (2) be a

participant in The Depository Trust Company or DTC Participant,

(3) have entered into an agreement with the Trustee and the

Sponsor, or the Participant Agreement, and (4) have established an

unallocated gold account with the Custodian, or the Authorized

Participant Unallocated Account. The Participant Agreement

provides the procedures for the creation and redemption of Baskets

and for the delivery of gold and any cash required for such

creations or redemptions. A list of the current Authorized

Participants can be obtained from the Trustee or the Sponsor.

Sun, 04/11/2010 - 02:15 | 295236 Willzyx
Willzyx's picture

I have a feeling Paulson can easily meet the "authorized participant" definition if he wants to.

"Taking delivery" from GLD ETF is quite a different process than buying futures.  ETF shares are created as institutional investors exchanges shares of the underlying for ETF depository receipt shares.  This open endedness is what makes ETFs different from closed ended funds.  When the NAV premium gets big enough, someone can capture the small spread.

This means GLD shares are probably created with paper gold to begin with.  With Paulson's size, I he could redeem his shares for real gold, tank GLD, spike the price of gold, and profit from his other gold related investments.

Sat, 04/10/2010 - 14:03 | 294720 exportbank
exportbank's picture

If you think you own stocks - ask for the actual share certificate.

If you think you own bonds ask for the bond

If you think you own gold - unless it's in your hand you don't

Everything is a game of musical chairs - just hope the FED band keeps playing..

Sat, 04/10/2010 - 16:40 | 294857 knukles
knukles's picture

Oh for Christ's sake.  Just about every stock or bond in the world are held in a DTCC, Fed Book Entry or similar depository system.  The ETF, closed end fund or similar structure is there to facilitate practical ownership.  Of course its a piece of paper.  Also held by DTCC, etc.
Try reselling a 440oz'er that's been taken out of a LMBA good delivery system vault.  Good luck, discount, cost and hassle.  

Sat, 04/10/2010 - 17:51 | 294908 akak
akak's picture

"Oh for Christ's sake. Just about every stock or bond in the world are held in a DTCC, Fed Book Entry or similar depository system."

 

Isn't that the whole point here?  Almost EVERY financial asset that you think you "own" is really encumbered in some way or another ---- except physical precious metals, and certain other tangible assets.  So why is there such a concerted propaganda compaign, even here in this forum, on the part of certain individuals to denigrate and attack those who would chose to go the unencumbered route by holding PMs in their own personal posession?  What is it about the idea of individuals holding precious metals that so threatens and enrages so many people?

Mon, 04/12/2010 - 00:44 | 295962 DoChenRollingBearing
DoChenRollingBearing's picture

That is an interesting question akak.

Why do some attack us who hold the physical gold and other PMs?  All the attacking makes me want to own MORE physical.

I want to have physical PMs (and cash FRNs) in a variety of locations.

Diversification...  A good idea even among precious metals holders...

Sun, 04/11/2010 - 05:13 | 295273 dumpster
dumpster's picture

Of course its a piece of paper.  Also held by DTCC, etc.
Try reselling a 440oz'er that's been taken out of a LMBA good delivery system vault.  Good luck, discount, cost and hassle.  

you compare 100 shares of X   to 440 oz of gold

500,000 bucks ...just buy the coin , coin dealer,  in hand ,

knuckles chew gum walk 'either eat the meal . or try to take the whole years supply of food in on gulp.

sound like MB  yep tomorrow gold will sell for 80 billion an oz.

fallacious reasoning.    

 

Sat, 04/10/2010 - 14:09 | 294727 Amish Hacker
Amish Hacker's picture

How does GLD account for the income they earn from gold leasing? If they have leased some significant portion of their 850 tons, it seems like it would add up to real money, which would have to be explained.

Sat, 04/10/2010 - 14:55 | 294772 MarketTruth
MarketTruth's picture

They don't per se, their custodians/subs do. So it is very possible they hand over free money to their friends. It could easily be a type of payola/pyramid scheme. Better still, they all get nice fat paychecks. Well, they did stop racing with the LeMans (or was it Rolex series) with a car i have a feeling their shareholders paid for. You know, start a business and then rake in the cash and use some of it perhaps for your own personal fun toy under the guise of advertisment. Seen various companies do this over the years with race cars, so it is nothing new really. One guy i know who does this is a lawyer in Canada(!).

 

FYI: Form 10-K 25 November 2009
www.spdrgoldshares.com/media/GLD/file/10-K_11_25_09.pdf


Shareholders do not have the protections associated with ownership of shares in an investment company registered under the Investment Company Act of 1940 or the protections afforded by the Commodity Exchange Act of 1936, or CEA.


The Trust is not registered as an investment company under the Investment Company Act of 1940 and is not required to register under such act. Consequently, Shareholders do not have the regulatory protections provided to investors in investment companies. The Trust will not hold or trade in commodity futures contracts regulated by the CEA, as administered by the CFTC. Furthermore, the Trust is not a commodity pool for purposes of the CEA, and none of the Sponsor, the Trustee or the Marketing Agent is subject to regulation by the CFTC as a commodity pool operator or a commodity trading advisor in connection with the Shares. Consequently, Shareholders do not have the regulatory protections provided to investors in CEA-regulated instruments or commodity pools.

 

 

Sat, 04/10/2010 - 14:12 | 294731 Sudden Debt
Sudden Debt's picture

I don't believe in the whole Gold bug pumping thing either.

If everybody believes gold is going to explode to 2000, 3000, 4000...

Then why are there so many offers to buy physical gold?

I have had at least 3 offers this week to buy bullions, coins, bars at a 10% price reduction! And it's already like this FOR WEEKS!

For my that means only one thing. If you own it, you want to get rid of it.

Because?

A DROP IS COMMING!

What is the earning reports all report nice gains?

BAM! IT GOES DOWN LIKE A ROCK!

Sat, 04/10/2010 - 14:40 | 294761 merehuman
merehuman's picture

bullshit. Any of us who own PMs and have the actual wont sell due to price drop. We will sell some if we need cash.

Thats been my experience. I keep whats real and spend the green paper always hoping its still accepted.

I have no such fear about silver and gold. That value is imbedded from the miner to the coin fabricator and the scarcity.

As for banks , dont trust them any further than you can toss the building. And yes in California a bank raided safe deposit boxes illegally.

Sun, 04/11/2010 - 18:09 | 295716 DosZap
DosZap's picture

Bingo, folks just do not get it...........it's not bought by true Gold Bugs for an Investment...........it's INSURANCE. Anyone on this site, is smart enough to know, they had better have their ass-ets covered.............And there's NOTHING else on the planet,( PM's) that will do it.

You do not lose, or make a dime, unless you SELL .

Not true with PAPER!

 

Sat, 04/10/2010 - 14:41 | 294763 Bow Tie
Bow Tie's picture

because the people doing the buying stand to make a profit as the price increases?

i doubt the people being persuaded into selling their physical for less than spot price are going to be on the right side of that trade. why else would all these cash 4 gold schemes exist? to make a loss?

Sat, 04/10/2010 - 14:42 | 294766 Carl Marks
Carl Marks's picture

Everybody isn't buying gold and GLD is a scam operated by the TBTF banks to suppress the price of gold through manipulation of futures contracts

Sat, 04/10/2010 - 15:29 | 294805 Orly
Orly's picture

When all other possibilities have been exhausted, the one that remains, no matter how absurd, is the solution.

Sat, 04/10/2010 - 17:03 | 294881 LeBalance
LeBalance's picture

/wink/

"You will not apply my precept," he said, shaking his head. "How often have I said to you that when you have eliminated the impossible, whatever remains, however improbable, must be the truth? We know that he did not come through the door, the window, or the chimney. We also know that he could not have been concealed in the room, as there is no concealment possible. When, then, did he come?"
     The Sign of the Four, ch. 6 (1890)
     Sherlock Holmes in The Sign of the Four (Doubleday p. 111)

Sat, 04/10/2010 - 15:32 | 294806 EscapeKey
EscapeKey's picture

Lol! A "10% price reduction". What you have found is a website that sells gold at a 20% markup from the spot price.

Tell you what, I will give you 20% off if you buy right now (I do charge 75% above spot price, however).

 

Sat, 04/10/2010 - 14:14 | 294737 Fish Gone Bad
Fish Gone Bad's picture

I was just thinking, how can this end in such a way that pretty much everyone is screwed?  The old stock market saying is, "The market will do whatever it has to do to prove the most number of people wrong."  So that being said, what fucked up thing can happen to GLD, to destroy the most number of people?  Well this creepy line, "Under certain circumstances GLD could be worthless." certainly fits the bill.  I guess I should make up another poorly drawn cartoon for FishGoneBad.com making fun of all the people who thought they had secured their futures.

Sat, 04/10/2010 - 14:32 | 294750 Keith Piccirillo
Keith Piccirillo's picture

No GLD for me, thank you.

Sat, 04/10/2010 - 14:42 | 294762 akak
akak's picture

Any tiny remaining shred of inclination that I might have ever had toward buying or using GLD has finally died.  I sold the last of my GLD and SLV in late 2008, and will advise anyone I know who still owns either ETF to do the same.  The legalistic games these bastards play to pull the wool over the eyes of the unsuspecting average investor, I hope  will earn them a very special and particularly warm place in Hell.

Sat, 04/10/2010 - 14:44 | 294767 Lost in the Wil...
Lost in the Wilderness's picture

I am still amazed that anyone, especially a "sophisticated investor" or credited financial adviser, would touch this with a ten foot pole, there is zero accountability, as disclosed.

Sat, 04/10/2010 - 14:54 | 294776 Mongo
Mongo's picture

Physical gold bitches!

Mon, 04/12/2010 - 00:50 | 295967 DoChenRollingBearing
DoChenRollingBearing's picture

+ $1160

Gold IMHO is a gift at less thah $1500 / oz. 

Sat, 04/10/2010 - 15:04 | 294792 taraxias
taraxias's picture

Quick, post your thoughts before Master Bates hijacks the thread with yet another anti-gold nervous breakdown.

Sat, 04/10/2010 - 15:12 | 294796 Bow Tie
Bow Tie's picture

i thought master bates left? he realised that a site posting largely anti-establishment/stat-quo information didn't really fit in with his stock market 'small correction and to the moon' world view :0

Sat, 04/10/2010 - 15:21 | 294802 akak
akak's picture

LOL!

We can only hope.

Trolls are highly annoying in any situation, but paperbug trolls are the worst (and most rabid) of all!

Sat, 04/10/2010 - 15:28 | 294804 Segestan
Segestan's picture

They are ignorant of economic reality and they want you to be. Either way advice not good for you're protection.

Sat, 04/10/2010 - 15:38 | 294811 Bow Tie
Bow Tie's picture

admittedly there are some thick as plank goldbugs out there in the internet community too. not really on here.

i get quite annoyed with the 'gold is money' rhetoric as the answer to all the world's problems for now and the forseeble future. because its not, the underlying issues are much bigger than that. but the move to a sound monetary system can fit in with a progression toward a more wealthy, efficient world 'economy'.

Sat, 04/10/2010 - 16:14 | 294828 Segestan
Segestan's picture

Agreed... and that is what Gold is for,  a Foundation of trust.

Sat, 04/10/2010 - 16:15 | 294830 dumpster
dumpster's picture

whats your solution for a wealthy efficient world economy.  the austrian economist say gold is the best way.

maybe condense your thoughts on this solution ,

if its a wealthy solution ,, they will beat a path to your door .

Keynesian stuff stinks present model

austrian has not really been tried.. takes the profit from crooks  

a third economic system the wealthy way by bow tie  

Sat, 04/10/2010 - 17:55 | 294913 Segestan
Segestan's picture

My favorite model would be a 'Constitutional Republic free of usury' the currency backed by Gold and silver coinage. Productive Wealth to stay with the citizen, minimum tax, government , a small standing military, and above all in a dangerous world  a huge armed Militia nation, with the Right to Bears Arms. . But in the current global environment , that is elitist central banking not possible, not without Big changes.

Sun, 04/11/2010 - 18:23 | 295722 DosZap
DosZap's picture

AMEN!..................and NO CENTRAL BANKS!

Our Founders had already seen that work.............why do we think we were more intelligent than they?.

The Fkrs ,who allowed this to ever happen should have been drawn and quartered ( allow a Central Banking System ).Funny some of the same names, are still around, and in the middle of the shite storm, eh?.

My trigger finger is directly pointed at the head of CONGRESS.

They GAVE away their POWER........and here we are, nearly 97 yrs later, screwed to the wall.

When the balloon on this debacle goes ^, I would not want to be a  Politician, Banker, or a Broker.

Sat, 04/10/2010 - 18:26 | 294939 Bow Tie
Bow Tie's picture

:D

but on the surface, the austrian way is quite similar to what we have now. and that's presuming we start on an even playing field where particular groups of people don't already have most of the gold.

not saying i have the answers or anything, but wouldn't common sense dictate that our idea of monetary wealth is not the most productive system, on a wider scale. we want things like a highly educated populace, high technology and efficient use of natural resources to provide greater quality of life for all. this is what is really valuable, not lumps of metal.

but i am definitely a 'goldbug' for now, you could say. the competitive element of free markets can lead to much higher efficiencies when allowed to work properly. anything that could curb the obscene levels of meddling and corruption present with fiat money :|

these people running the show, their shortsightedness and stupidity is overwhelming...

Sat, 04/10/2010 - 21:56 | 295077 dumpster
dumpster's picture

greed,,, power,, no law,  oversight  stinks .

 

unending war.poverty unemplyment  the results of the Keynesianway. the austrain model... and now is as different as night and day.

the wealth way is the austrian model . with laws to protect ,  property rights , a crowd does not trump the individual in the democratic state ,, meaning 10 votes doesnt not take away my right . even if i have just one vote ,

democracy and the majority rule is a piece of trash.

our population are nincompoops led by the likes of  29 year old master bates out of work sucking on the tit of his free (paid for by some one with gun to head) education. Demanding more in a show of ignorance ,

 

 

and various levels of made up hopes,  to mine the trough of others endeavor ,

the productive free person is seduced and made a hollow man from years of the Pavlovian cry for free bread ,  taught in the ivory towers of Harvard ,

paid for through the politicians who buy the gun through the vote to herd the mentality into pools of spit.  tossing the rose of human advancement into the gutters of Calcutta, and the tent cities of L.A. 

The death of millions from the imilitary  industrial complex .  Citizen who lust on trash , on lies from the orwellian govement . and arrive at the end with hope of a government check ,

 

 

 

 

 

Sat, 04/10/2010 - 22:01 | 295085 Al Gorerhythm
Al Gorerhythm's picture

Hey, Bow Tie,

I'm confused by your statement. In what way, in any form of modern monetary policy, is there any similarity to Austrian Economics, considering today's model (to my layman's understanding) is Keynesian based, worldwide? Not attacking, just curious?

Can you elaborate on how educated people, high technology and efficiency of natural resource use is linked to the question: "What is money"? This, in my humble opinion, is the foundation of Austrian economics. I don't know what you mean when you claim that you despise the fact that the argument for gold as money is over the top, as espoused by Austrian theory.

Next, you claim you are a gold bug. Is your gold bias based on trading for profit, or savings based?

Sat, 04/10/2010 - 22:58 | 295119 Bow Tie
Bow Tie's picture

purely savings based.

sorry, probably getting a little carried away with utopian ideals, just don't think any economic system put forward so far is able to, in itself, ensure the most productive outcome for humanity. and i certainly do not despise gold, just the simplistic idea that a gold based money system can resolve everything for everyone.

really need to study austrian school in more depth. agree with all of the concepts from it so far. it does make sense right now. but i feel like a more radical shift in our value system, perhaps to the point where there is no 'money' in a traditional sense, will be needed in the long term.

Sun, 04/11/2010 - 00:23 | 295163 Al Gorerhythm
Al Gorerhythm's picture

The laws of nature hold that no system can solve everything for everyone, although government benevolence with paper money has convinced most true believers otherwise. At least gold and silver are enduring and represent something real, as they require an honest effort in their extraction.

You could use fictitious exchangeable moonbeams as money, as long as they were tied to exchangeable wealth. A commune I know of, records the hourly work that its members do, so that they can exchange them (Moonbeams) with each other. Effort for effort, value for value. As they lead a simple life, there is little conflict within the group when they exchange them for goods or services. There are trade-offs inherent in the system, that they accept. The moonbeams are paper derivatives of their stored work. How they cash out of the system I don't know, but it works for them and they are out of the loop.

Gold and silver represent the same thing but are universally recognized (as another form of moonbeam). They represent stored wealth and cannot be counterfeited, unless of course you are a modern day banker who have bewitched the masses into believing that their credit based money is actually worth something (despite the gold window closing, some still believe that the dollar is gold backed).

Using the power of the law to force the populace to use their "Moonbeams" is fraud. There is no effort on their part in the exchange. They have come into the commune and just started printing their own moonbeams. They get something from you by deceit, having you believe they actually produced something of value to exchange with you. You are left holding their fraudulent paper, which should have been an obvious (to you) exchange of your effort for their proposed IOU. A promise from them to do an hours worth of work for you.

A moneyless economy? Now that is Utopian. It's called a hunter/gatherer existence or a credit based Keynesian system. In a lot of cases, I'd say we are on the verge of having both, considering the unemployment situation and people running out of real moonbeams.

Now, I know that gold is pooh-poohed by a lot of people, but when I see CBs buying and the uber-rich holding it as recognized wealth and as hedges against deceit, then I know which side of the fence I'm going to be standing on. I know it's simplistic, but it works for this unsophisticated soul.

Sun, 04/11/2010 - 15:08 | 295596 RockyRacoon
RockyRacoon's picture

Thank you for asking that question of the eminent Bow Tie.  I was wondering the same thing myself.  How could one be a gold-bug but not see gold as money, assuming he actually meant currency. (Let's differentiate "money" and "currency".)  As for gold not being money/currency, look again. 

http://www.vnnnews.net/central-bank-ponders-controversial-halt-on-gold

Nguyen Ngoc Tam, Deputy General Director of Nam A Bank claims that if SBV does not allow mobilization and lending in gold, this will influence bank operations and profits, but the impact will not be enormous....

Vietnamese people typically keep assets in gold and many habitually make their payments in gold as well. According to Huynh Trung Khanh, Member of the World Gold Council and Deputy Chair of the Vietnam Gold Business Council, at least 500 tons of gold are hidden under beds throughout Vietnam....

 

Will the administrative order be obeyed in reality if it comes contrary to market demand? Vo Tri Thanh, Deputy Director of the Central Institute of Economic Management (CIEM), pointed out that the Government has prohibited foreign currency transactions in Vietnam since 1994, but in fact, such transactions are common....

There is more in the article.  Read on.   It would be a good idea to keep an eye on HOW Vietnam stops the use of gold in the economy.  Should gold become a currency in the U. S. the same methods could be used by our own gubmint.

Sun, 04/11/2010 - 01:22 | 295216 Al Gorerhythm
Al Gorerhythm's picture

Folks may be upset at the demise of Master Bates

Worry not! He may have clocked off but..........

Next shift, new flagellator.

He is here in the form of peterpeter.

The king is dead, long live the king.

Sun, 04/11/2010 - 01:46 | 295230 DoChenRollingBearing
DoChenRollingBearing's picture

I think you guys are reading Master Bates wrong.  He presents (or sometimes presents) good questions and challanges to us who like gold.

Besides, we NEED more anti-gold people!!!  They will help those of us who buy and hold gold.  If we are right, and the MBs are wrong, then WE will win if the system is as corrupt as we think.

So, don't ad-hominem attack MB and others who think like him.  The Wanker is obviously smart, but I think he lacks a sense of history.  History, and a wariness of .gov (etc.), would lead most smart people to buy gold.  Bitches.

Sun, 04/11/2010 - 14:03 | 295516 akak
akak's picture

"History, and a wariness of .gov (etc.), would lead most smart people to buy gold."

 

Perfectly said, DCRB!  Those are the two traits that I find most in common among all the hysterical paper-pushing, anti-gold zealots: a naive, misplaced and dangerous trust in government and authority in general, and a glaring lack of any historical knowledge or perspective.

I know I tend to automatically consider such people as "the enemy", but as quite a few of them have turned out to be only in their 20s or early 30s, perhaps we should not be TOO hard on them --- they may very well just be stubbornly arguing from ignorance, not having been willing or able yet to break out of their pro-statist, fiat-oriented "Matrix".

Sun, 04/11/2010 - 15:06 | 295595 peterpeter
peterpeter's picture

I find it funny that you think I am a hysterical paper-pushing anti-gold zealot.

I probably have in coins (Buffalos, Eagles, Philharmonics and overwhelmingly Maples) more physical gold than most of the people who have been so offended by my support of GLD (in which I also have a substantial position).

There is nothing wrong with holding physical gold, and I have never claimed otherwise (I just point out that it like everything else, it carries some risks).

It is just the mis-information presented as fact (erroneous interpretation of obvious outcomes of building a commodity based ETF, baseless statements of a lack of physical gold backing a fund when there is proof to the contrary, and restrictions inherent with all ETFs limiting their conversion to underlying assets to a select few Authorized Participants which gets interpreted incocrrectly by people who have never given much thought to how an ETF works), which I take issue with.

Everyone is certainly entitled to their opinions as to the value of various paper assets, but I take issue when people make factless allegations or insinuate that I (or anyone else) should be shot for holding different positions.

And then when you are all in support of this article which closes with "there is the possibility that you might wake up one day to find out that the price of GLD has suddenly dropped well below the spot price of gold and that GLD could even end up worthless.", I find it quite odd that you take umbridge in my suggestion to buy far out of the money PUTs to profit from this conspiracy that you are so sure exists!

 

Mon, 04/12/2010 - 01:06 | 295898 akak
akak's picture

Shove your puts and face the facts: your precious ETF paper Ponzi scheme is increasingly being revealed for the fraud that it is, and an increasingly large section of the investing public is coming to realize that, or to at least suspect it.  The clock's ticking for this latest precious metals scam --- where do YOU want to be when it all blows up, holding REAL metal or just some electronic bookkeeping entry?

Sun, 04/11/2010 - 14:21 | 295540 peterpeter
peterpeter's picture

I've got no idea who/what Master Bates is.... but it/he is not me.

 

Sun, 04/11/2010 - 05:17 | 295274 dumpster
dumpster's picture

MB is out delivering  pizza tonight . 

monday has to spring for a credit card payment on his lap top...

 

Sat, 04/10/2010 - 16:28 | 294835 fasTTcar
fasTTcar's picture

My GLD is spelled GOLD.

If you don't hold it, you don't own it.

 

 

Sat, 04/10/2010 - 16:35 | 294849 RobotTrader
RobotTrader's picture

If there were any problems with GLD right now, it would have already been reflected in the price.

So far, that hasn't happened.  It is still tracking gold bullion very well.

As one of the largest ETFs on the planet, the likelihood of failure is close to zero. No way an ETF this big could fail.

I'd say the odds of failure are larger with TLT than GLD.

Sat, 04/10/2010 - 17:57 | 294915 akak
akak's picture

"As one of the largest ETFs on the planet, the likelihood of failure is close to zero. No way an ETF this big could fail."

 

Oh, it's "too big to fail", eh?  LOL!

Apparently, you have been asleep for the last 30 months.

If you have not, one would think that the events of the last 2 1/2 years would have shaken you out of your complacency regarding the presumed infallibility of giant financial entities and conventional economic orthodoxy.

Sat, 04/10/2010 - 16:35 | 294850 RobotTrader
RobotTrader's picture

If there were any problems with GLD right now, it would have already been reflected in the price.

So far, that hasn't happened.  It is still tracking gold bullion very well.

As one of the largest ETFs on the planet, the likelihood of failure is close to zero. No way an ETF this big could fail.

I'd say the odds of failure are larger with TLT than GLD.

Sat, 04/10/2010 - 18:07 | 294923 cbaba
cbaba's picture

Close to zero ?

Just reading the contract wording is enough not to buy any GLD shares.

Its a scam. just like Comex Futures which was established after 1974 when Nixon stopped backing dollar with gold. If you control the futures you dont have to own physical gold,you can control the price of gold.

GLD is designed to send physical bullion to the Rotschild banks( all subcostodians above plus the JP,MS,and the mothership GS). When they are short of gold they can use this 850 tons of gold to control price and they dont have to give it back to GLD, it may bankrupt, they dont care.

 

Sat, 04/10/2010 - 19:16 | 294974 boiow
boiow's picture

" It is still tracking gold bullion very well."

with the 'rigging' of the gold and silver markets there has been no 'price discovery' for so long that noone knows the real price of gold.

the gold price that people use as 'spot' is the comex. which is 'paper'.

Sat, 04/10/2010 - 20:42 | 295036 mudduck
mudduck's picture

Over/under I make at 1.5 metric tons. Odds are 4/5 pickem. All bets must be paid in advance of issuance of bet receipt. Good luck (ever finding out how much gold there actually is held for GLD by these upstanding, beyond reproach corporate pillars of virtue).

Sat, 04/10/2010 - 21:54 | 295080 TBT or not TBT
TBT or not TBT's picture

"I'd say the odds of failure are larger with TLT than GLD."

Are you talkin' to me?!

Sun, 04/11/2010 - 05:20 | 295275 dumpster
dumpster's picture

enron had quite a run until the problem was reflected in the price .  (it was in to scam some time before it was reflected in price , 

best to move the buck in to real before that happens

Sat, 04/10/2010 - 16:36 | 294851 Pure Evil
Pure Evil's picture

"Under certain circumstances GLD could be worthless"

I just pinched a loaf that had more value than GLD.

(sound of commode flushing)

...Oops, can't get those boyz back.

Sat, 04/10/2010 - 16:54 | 294870 peterpeter
peterpeter's picture

> In consulting about this report with James Turk, a well-known precious metals market analyst and the founder of GoldMoney.....

Asking James Turk about GLD is ridiculous.  GLD and GoldMoney are in direct competition with each other for client funds... with GoldMoney having a higher margin than GLD (i.e. more expensive per ounce).  You can see GoldMoney's rates here: http://goldmoney.com/buy-gold-and-silver.html

As to the nonsense about the fund taking deposits and the legalese around that - utter rubbish.  This was not meant to create loopholes - but is an obvious artifact of creating an ETF that can be traded on an exchange.  You can't deliver ~10K ounces of Gold to the GLD Trust in exchange for 100K shares of GLD and expect that those shares (which could then be traded to another party) would somehow magically still be owned by you.  An ETF and the assets held within it are surely not like a bank account - nor would anyone want them to be so.

> It is also a derivative because unless a shareholder owns 100,000 shares, a GLD shareholder can never take physical possession of any GLD gold.

All ETFs are in that way a derivative product, however the GLD shares do have audited ounces of gold backing them.

As for the 100K shares and delivery - it is only Authorized Participants who can create or redeem shares of GLD.  This list is a small subset of broker-dealers who have relationships with the sponsor and accounts with the DTCC.  This is no different from any other ETF (save for ML HOLDRs which are very odd ducks).  It is the role of the authorized participants to arbitrage the shares for the underlying assets when the price of the ETF moves too far away from NAV (net asset value), and they along with many other day traders and stat arb funds keep GLD typically within a penny of the fair value of the NAV.

It is surely possible to take physical delivery of Gold and store it yourself - but it is not free of risk or cost.  The risk is in theft or getting bogus product, and the costs are in transport, markup and storage.

From reading this nonsense, you would think that there is veil of secrecy around the underlying gold bars, but a list is published weekly:

http://www.spdrgoldshares.com/assets/dynamic/GLD/file/barlist/Barlist.pdf 

And it is audited twice per year, with this being the last report

http://www.spdrgoldshares.com/media/GLD/file/Stockcount_Certificate-October_21_2009.pdf

The audit from October 2009 did find a few errors (nothing material) with 7 pages of errors (not a meaningful percentage given the bar counts).

If you think an audit like this is free - you are - well - an idiot.  So, keeping the audit count at twice per year is either a way to hide how they're stealing from holders of the paper (the read from gold bugs, tinfoil hat crowd, or people trying to sell you physical gold with a much higher markup), or it is a way to keep the expense load of the fund down at the 0.40% level.

Anyone who really thinkgs GLD is a scam and that the audited reports and bars are a fake should step up to the plate and buy out of the money PUTs on it (hey - you can buy physical gold to hedge your bets).

 

Sat, 04/10/2010 - 18:37 | 294942 Bow Tie
Bow Tie's picture

thought goldmoney was actually allocated metal, not comparable to the the derivative junk paper trashcan ponzi cash settlement GLD? and that james turk had links to GATA etc. well worth the higher premium i would think!

Sat, 04/10/2010 - 20:05 | 295010 Sabremesh
Sabremesh's picture

I have an account with Goldmoney, and yes, it is definitely allocated metal. It is a bailment system - you own it, not goldmoney, Oh and there are there are no custodians, sub-custodians or bestfriend's-sister's-stepmom's-hairdresser's-custodians. In other words, not remotely the same thing as GLD, in fact the exact opposite of GLD, and this Peterpeter guy is either clueless, or he's a GLD employee.

Sat, 04/10/2010 - 18:57 | 294957 cbaba
cbaba's picture

This is NOT nonsense ;

 

this is the truth, you must be working in one of these GS or its derivative companies and desperately trying to make us believe that GLD is not a scam, its a SCAM, i dont care what you think but the truth is crystal clear and you are trying to divert it.

The real Audit is done only once a year, and the second audit is just a sampling audit, not real audit, so they can take the gold and use it somewhere else for 1 year and nobody will know when it will be back, if it doesnt come back next year september , holders of GLD will drink  a cup of cold water on their savings but it will be too late.

 

The weekly announced bar list is full of errors, Ron Kirby is writing this issue in his blog for years .

see "More Irregularities in GLD Bar List" in  www.kirbyanalytics.com/ (need membership)

Besides what you say "the GLD and Goldmoney is in direct competition" is ridiculous.

Everybody is selling physical gold and there is always a premium to buy physical because the alternative is a worthless piece of shit.

 

Sat, 04/10/2010 - 19:08 | 294965 peterpeter
peterpeter's picture

Again, if you are so convinced that GLD is a scam and that they'll fail an audit at some future point, then you must be a big buyer of far out of the money PUTs.

You should load up on these:

http://finance.yahoo.com/q?s=GVD110319P00060000 (Mar 2011 $60 PUTs with current ask $0.28 per).

Really - you people who all think this is a giant scam are in my opinion fools, but if you really have conviction, step up to the plate and make an options play that could make you ridiculously wealthy.

$10K of those PUTs would be ~35.7K options at $60.  If GLD went to 10% of its value as some of you have suggested, then your PUTs would be worth $48.70 each, for a trading profit of about $1.74M

If you're not putting on that trade, then you're an even greater fool (for not trading on your errant conviction).

Sat, 04/10/2010 - 21:31 | 295068 cbaba
cbaba's picture

We are not fools but you are the greatest in this post.

We dont play in casino, you play your own money and see what happens when shit hits the fan.

 

Sat, 04/10/2010 - 22:46 | 295097 Al Gorerhythm
Al Gorerhythm's picture

Buy some puts as a bet against the honesty of GLD!!!!

As if the buying power of one or two puts, is going to sway the billion $ positions of the likes of Paulson. It's not like we're market movers with a printing press underwriting our bets.

Get real.

I, as well as many others, basing our bets on the fundamentals, have  been ripped one too many times by hugly powerful naked short, price manipulators in the COMEX metals casino. Trusting the regulators to do their job in protecting the speculator investor, is something I'm not prepared to do again. Fool me once theory and all.

Buying physical is the same but safer bet, that removes wealth directly from the system, eliminating risk in both directions, i.e. your account can't be forced to zero and you have removed the risk of default delivery in a price rise.

Stick your paper games where the sun don't shine, big mouth.

Sat, 04/10/2010 - 23:35 | 295149 akak
akak's picture

What he said!

Sun, 04/11/2010 - 00:27 | 295192 Al Gorerhythm
Al Gorerhythm's picture

I should have said, minimizing risk in a price attack and eliminating it in a price increase.

Sun, 04/11/2010 - 00:35 | 295193 akak
akak's picture

PeterPeter just can't seem to wrap his mind around the idea of anyone refusing to play in the rigged casino of the major markets, and becomes absolutely enraged by the thought of anyone daring to cash in their chips and walk out.  If we're not all playing against the house as they constantly change the rules in the middle of the game and grab our chips off the table from in front of us and then tell us "it was for your own good", that somehow makes us "kooks" and other such misfits.  Well, if thinking for oneself and yanking the financial reins from the banksters makes me a "kook", then I am proud to call myself one.

Sat, 04/10/2010 - 18:08 | 294920 akak
akak's picture

Why the shrill tone of denial and fervent defense of an obviously opaque and UNauditable financial entity?  Methinks you doth protest too much.

Please pull your head out of the sand or out of your ass, as the case may be.  Your inability to directly address the real, unavoidable issues regarding the patent dishonesty of GLD that is purposely hidden by Byzantine legalistic complexity is abundantly apparent, and your pathetic refutations of the damning evidence against them are unworthy of being addressed individually, as the whole pattern of your diatribe in support of the GLD is clearly nothing more than that of a troll desperately trying to defend the indefensible.

Sat, 04/10/2010 - 18:53 | 294956 peterpeter
peterpeter's picture

So go short GLD if you don't believe their auditor or bar inventory.

Really - if you think it is a scam that will be uncovered, make some money off of it buy either going short GLD or buying far out of the money PUTs (which are quite cheap).

> Your inability to directly address the real, unavoidable issues regarding the patent dishonesty of GLD that is purposely hidden by Byzantine legalistic complexity is abundantly apparent

It should be obvious to anyone who thinks about how to structure an open ended exchange traded fund that the assets backing the shares issued with creation units are treated materially differently than banking deposits, but if that concept is beyond your abilities, well - then there is little point in trying to explain matters futher.

 

 

Sat, 04/10/2010 - 20:19 | 295019 Sabremesh
Sabremesh's picture

Nobody is saying that GLD will definitely crash, far less are they making predictions about when, so stop banging on about puts and shorts.

What is being said is that anyone who is 1) able to read the GLD prospectus and, 2) understands the concept of due diligence would NOT invest in GLD. 

Sat, 04/10/2010 - 21:06 | 295051 peterpeter
peterpeter's picture

There is nothing terribly alarming in the prospectus.  It is written as all prospecti must be written - to cover the ass of the registrant (that is their legal responsibility when drafting it - to outline all of the potential risks).

If you own *any* US listed equities and read their prospectus, you'll find equally alarming statements.

With GLD at least, the assets are periodically subject to an audit - which is more than can be said for almost every other exchange traded security.

Sat, 04/10/2010 - 21:24 | 295063 akak
akak's picture

"If you own *any* US listed equities and read their prospectus, you'll find equally alarming statements."

 

Excellent point!  That point being perhaps that GLD is not so very abnormal in respect to its inherent opacity and dishonesty, but that MOST paper assets are less stable and secure than most investors are willing to admit or realize. 

But you just keep on trusting the psychopaths who keep assuring you that everything is fine, even as their financial dominoes keep falling and their corrupt manipulations continue to surface.

Got (Physical) Gold?

 

Sat, 04/10/2010 - 21:49 | 295076 peterpeter
peterpeter's picture

> Got (Physical) Gold?

Yes - I do.

How well did you assay your gold on delivery and where is your's kept?  Do you think it is immune from theft, confiscation or irradiation (assuming you took delivery of what you believed it to be)?

 

Sat, 04/10/2010 - 22:37 | 295108 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

"Do you think it is immune from theft, confiscation or irradiation."

First, the banks steal more gold than people do.  Second, gold will not be confiscated.  Third, simply, coins.

Sat, 04/10/2010 - 22:45 | 295111 akak
akak's picture

"How well did you assay your gold on delivery and where is your's kept?  Do you think it is immune from theft, confiscation or irradiation?"

That's a red herring, and you damn well know it.

The danger to anyone holding physical gold in their own posession is utterly minute, compared to the very real danger of losing a good chunk, if not virtually all, of one's paper assets as a result of confiscatory taxation, corporate bankruptcy or corruption, ongoing currency depreciation, possible hyperinflation, and inevitable currency collapse, just to name a few serious current risks.

Yes, my gold is for all practical purposes safe from theft, AND also safe from confiscation --- with no paper trail and no possibility that I would EVER surrender it to any tyrannical government.

But I do have to laugh at how banksters and their brainwashed subjects love to hype such a minor and unlikely threat as theft of personally-held gold, while they are in the middle of perhaps the single greatest theft of the wealth of an entire citizenry ever seen.

Sat, 04/10/2010 - 23:01 | 295124 peterpeter
peterpeter's picture

> Yes, my gold is for all practical purposes safe from theft, AND also safe from confiscation

Those are bold statements, unlikely to be as true as you believe - while still ensuring that your heirs have access to your stored wealth.

> But I do have to laugh at how banksters and their brainwashed subjects love to hype such a minor and unlikely threat as theft of personally-held gold

While not a threat to be dismissed, a much larger threat associated with the private storage of assets is the death or other dibilitation preventing the owner of the asset from describing the location of the stored asset to an heir.

Many people have died with their wealth hidden in walls, only to be waiting for some future home owner to make a lucky find on renovation.

http://www.cbsnews.com/stories/2007/12/13/eveningnews/main3617369.shtml

 

Sat, 04/10/2010 - 23:41 | 295154 akak
akak's picture

You gold-hating trolls are just SUCH a hoot!

Yes, let's run from the mouse of losing hidden gold upon our untimely demises, and ignore the elephant in the room of systematic corporate and bankster fraud, corruption and manipulation!  Yes, such a rational evalution of the risks faced by today's savers and investors!   LOL!

How much do you get paid per anti-gold post, troll?   I bet they don't even pay you in cash --- and certainly not in gold!

Sun, 04/11/2010 - 15:24 | 295606 RockyRacoon
RockyRacoon's picture

So, a pile of paper money, fiat, was discovered.  Its only value above face is as a collectible.  There is now a huge legal hassle over the discovery.   If they had found real gold the story would be on the front pages of most major newspapers.  Even if they had found gold or silver certificates, their value would be zip as regards the exchange for the metal from the Mint.  Another promise not kept by our glorious government.  Look for more unkept promises.

Sun, 04/11/2010 - 21:04 | 295805 dumpster
dumpster's picture

s P>P> you have real gold expecting it to be stolen . lost. or when you die a frozen in time asset that will be unearthed by . creatures walking on four legs in a millenium...

such verve , you have gold but it is stupid idea , 

and you own a product with no gold

so both meet same fate.

and peter peter what rational thought lol

  

Sat, 04/10/2010 - 22:18 | 295087 Pure Evil
Pure Evil's picture

Well now, you finally hit the nail on the head.

What you have succinctly pointed out is that all investment prospectuses are 90% legalease trying to cover up their ponzi schemes.

Just like a snake oil salesman promising relief from life's pains and frustrations, investment prospectuses promise dreams of wealth for the gullible and the unaware. Anybody that lost savings in the last great ponzi scheme crash can tell you that the prospectus lied.

And, anyone with an ounce of common sense knows that stocks, bonds, and any type of fiat investment paper is not worth the paper it is printed on, up to and including FRN's.

There are myriad ways to scam the system and make paper money playing the market with GLD as you have succinctly pointed out.

But, I think the main point Tyler is trying to make is that the uninitiated investor trying to decipher the gobbledy-goob found in the GLD prospectus will come away not realizing that GLD is a ponzi scheme being run by GS and Paulson.

Who cares if the gold is real or where it is stored or if it is audited 2 times a year or every day of the year.

At the end of the day it is virtually impossible to redeem your shares into physical gold and that's what gets the gold bugs in a tither, and rightfully so, possession is 9/10ths of the law.

Not only do they have your money but they also have the gold, and unless you go to great lengths to obtain the actual physical paper shares of GLD, they also hold on to that through broker/dealers, and you're just left with a mark somewhere in some electronic book.

My question is this, does the GLD trust really own the gold, or are they just the leasee of the gold instead of a leasor as some might suspect. Or, are they just playing games with someone else's physical gold? Sure, all those custodians hold gold, but contracturally who owns the physical gold? Or, why is it nearly impossible to redeem your shares in physical gold.

Since I only have the prospectus in front of me instead of the acutal contracts between the trust and the custodians, I have no idea what those contracts say so I'm only left with what they want me to know in the prospectus.

My other question is this, has anyone actually redeemed their shares of GLD into physical gold? I'm sure there are quite a few investors out there with enough shares to to be able to request this type of transaction.

And, even if someone did try to redeem their shares for physical metal it wouldn't be that difficult for GLD to go on the spot market and cover that transaction. It only gets sticky if all owners of GLD try to redeem their shares for the actual physical metal supposedly stored somewhere under the vast association of custodians and sub-custodians.

To get to the bottom of this perplexing conumdrum it would take a vast army of lawyers that specialize in contract, corporate and trust law to look under the hood called the investement brouchure and prospectus.

We would need to study all the contracts between the trust and the custodians to determine who the real owners of the so called audited gold bars. We should all look at the articles of incorporation, all minutes of the board of directors, and just about anything related to the running of GLD.

I'm an ignorant shmuck from the sticks, but after reading this article even I had to go take a bath in chlorine just to feel clean.

My last question is this, who actually owns the gold, if any still exists, at Ft. Knox? Is it the people of the United States, the US Government, or the private for profit central bank, the Federal Reserve? Or was the vast majority moved to the NY Federal Reserve Bank, or sold to the other banks named as custodians, to be leased out in a ponzi scheme called GLD.

Sun, 04/11/2010 - 00:38 | 295197 Al Gorerhythm
Al Gorerhythm's picture

SWEEEEEETTT!!!! Oh Evil One.

It's encumberd, the lot of it! The debt of the nation dictates so. Go get gold. Get it on the dips if possible or at every opportunity until you see Jamie Dimon et al, in shackles.

When you see the surprised look on Dimon's face, on the front page of the WSJ, as he is bent over and butt fucked by Bad Boy Bubba, in cell block "C", it's time to sell. I hope it's a thorough reaming Jamie me boy.

Sun, 04/11/2010 - 15:32 | 295608 RockyRacoon
RockyRacoon's picture

Some decent questions here -- thanks for the studied message.

Not only do they have your money but they also have the gold, and unless you go to great lengths to obtain the actual physical paper shares of GLD, they also hold on to that through broker/dealers, and you're just left with a mark somewhere in some electronic book.

 

You have, inadvertently perhaps, pointed out the difference between "investment" and "store of value".   Nobody expects to see gold if they are into GLD.  It is an investment, and by definition, you give up control of your money when you invest.  If one wanted to actually trade fiat for gold they would go directly to the metals market (coin dealer) and get what they want.  Buying coins is not an investment, it is creating a store of value.   Understanding this concept is what allows the transition from the "investing" market mentality to the realm of the goldbug.

 

Sat, 04/10/2010 - 23:32 | 295148 merehuman
merehuman's picture

pearls before swine

such a waste of time

the gold thats real

i like to feel

 

Sat, 04/10/2010 - 18:31 | 294944 Goods
Goods's picture

Just to back track here... If Sprott has the money to call IMF's bluff, why doesn't he try making a run at the comex and blow it up if all the claims are true?

Sat, 04/10/2010 - 21:07 | 295052 The Disappointed
The Disappointed's picture

Remember what happened to the Hunt Brothers? TPTB changed the rules on them! I'm sure Sprott knows this!

Sat, 04/10/2010 - 18:50 | 294954 MarketTruth
MarketTruth's picture

Guys, you can easily get physical from, say, Tulving. Some math:

Kilo bar is a mere $9 over spot. Tulving ships free to you next day air.

When you want to sell, they pays for next day shipping and right now buy at -10/spot and send you a check within a day or so.

Ok,so you have a $19 spread an ZERO shipping costs and 'round trip' time is about five business days.

Have any of you ever seen the costs associated with physical delivery of a COMEX 400 oz bar and the time/effort/costs for that?

BTW, if you buy ~400 oz from Tulving you may indeed expect a nice discount in your favor both ways (sell/buy).

The above is simply an example, feel free to try other dealers of course.

As for GLD as a trade, it is a paper game where those day traders know it is just another electronic blip within their portfolio. The Rothschilds and other truly large/longstanding investors always hold actual physical bars. In fact the Rothschilds have their own gold bars stamped with their name on them.

Sat, 04/10/2010 - 22:34 | 295105 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

To add, the Rothschildes own a shit ton of gold and silver (the metric is too large to use anything other than the term "shit ton").  More than we know, that is for sure.  Especially now considering we are finding out ALL of the vaults of the Central and private banks are empty of the good stuff.

Sat, 04/10/2010 - 19:19 | 294978 Bruce Krasting
Bruce Krasting's picture

This story keeps popping up. We will not know if there is a problem with GLD unless there is a big (20%) run up in the cash price. Something to look forward to.

Behind GLD are big spread positions. Long futures/Short GLD or Short GLD and Long LME. There are dozens of way to hedge a short GLD book. A market maker could be short GLD and long an OTC contract from a Chilean gold producer. This is a complex market and a big one.

My point is that this is one of those systemic issue. A blow up in GLD would punch a big hole in the LME and the COMEX. If the spread of GLD to cash starts to fade, watch out.

It raises an interesting question, Is GLD a TBTF? Nah, but it could be the source of a big heafty implosion.

 

Sat, 04/10/2010 - 20:02 | 295008 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

And its price tracks the metal at a low level.  Why own something that isn't worth what the ownership is supposed to be worth?  ETFs are as ridiculous as mutual funds.

Sat, 04/10/2010 - 21:29 | 295067 peterpeter
peterpeter's picture

> And its price tracks the metal at a low level

If by that you mean tracking error on the ETF relative to the NAV, it is on GLD always within 1 cent.  GLD has gotten so big, that it now sometimes leads the COMEX price, but the 2 never diverge far from each other.

The expense load on GLD is 0.4% (through at least November 2011) - and given how low equities commissions are (retail rates at 1/2 penny per share are easy enough to find at places like IB), holding GLD in a retail trading account is likely cheaper than the alternative of taking delivery of gold, having it properly assayed, securely moving it, and then securely storing it.

Yes - you could trust your dealer to sell you bars that you dont have assayed by anyone else, put them in your car and store them at home for just the price of the gasoline to and from your local deal - and possibly come close to the 0.4%, but you could write a long list of risk disclosures that would be scarier than the GLD prospectus, and trying to make that investment as safe as owning GLD will cost you a more than 0.4%.

ETFs are tax efficient, low cost and transparent.  None of those attributes apply to mutual funds.

 

Sat, 04/10/2010 - 22:26 | 295094 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

ETFs are for ninnies, as are mutual funds.  And as for my remark, "And its price tracks the metal at a low level", GLD is supposed to track the price of the sunny stuff at one tenth of the price.  It does not.

GLD closed at $113.64

Multiplied by 10 you DO NOT get $1161.9

So once again, it fails at tracking the price of what it is supposed to be tracking.

Today I biked to my coin dealer, bought Maple and Philharmonic silver bullion coins, and grabbed a gold silk necklace and two sterling silver chains (and a pretty pennant) for a lucky lady.  I paid a premium, sure, but not any more than I would have for the equal amount of GLD from an online account.

I do not trust banks.  I trust myself.

ETFs are paper traded for paper.  Paper burns into ash.  Bullion does not.

Sat, 04/10/2010 - 22:36 | 295107 peterpeter
peterpeter's picture

You should read some more.

GLD *started* at 1/10th of an ounce per share, however 0.4% of the Gold held in the trust is sold each year for the fee.  So, there are now 36,685,623.48 ounces of gold backing 374,700,000 shares.

Do the math...  To the extent you see a spread at the end of the day (11 cents in this case), it is due to different closing times and reported trade times.  Given the size of GLD, it is quite often now leading the COMEX if you look on a small enough time scale (milliseconds).

Compared to an ounce of gold with no markup or costs for storage, GLD will lose 0.4% per annum, so it loses about 0.001% per day compared to the price of Gold.  However, factoring in that expense (or decay rate), it trades at fair value within 1 penny.

Now, where did you store that beautiful Maple (gold Maples are my favorite coins even though the scratch easily), and what was your markup on your coins relative to the COMEX price?  I would expect much higher than 0.4% if your dealer is paying his/her rent and isn't selling fakes...

If you are paying more than $8 per trade in an online account, you are getting robbed.  You should be paying at most 1/2 penny per share at Interactive Brokers for a retail account.

> ETFs are paper traded for paper.  Paper burns into ash.  Bullion does not.

They both have their place.  Bullion is easier to lose or have stolen without a large investment (unsuitable for small holdings) in security.

 

Sat, 04/10/2010 - 22:55 | 295120 akak
akak's picture

"Bullion is easier to lose or have stolen without a large investment (unsuitable for small holdings) in security."

 

Stop drinking the bankster koolaid, buddy!

Bullion is simplicity itself to store, and only the most irresponsible imbecile would lose it!  Or do you imagine gold owners routinely carrying it around in their pockets?

This wildly overhyped "threat" of theft and loss is just more bankster propaganda, designed to make us as individuals insecure and distrustful of taking our financial destiny into our OWN hands!  Yes, keep peddling irrational fear, Fear FEAR!!  But the REAL threats that we face FROM the banksters, are they going to inform or warn us about those?

Anyone irrationally scared of holding their own gold deserves to have their assets stripped by predatory paper pushers.

Sat, 04/10/2010 - 23:07 | 295129 peterpeter
peterpeter's picture

So where is your gold kept (vaguely - no details needed)?

How many other people know the exact location?

If the answer to question #2 is 0, then what happens tomorrow if you die or have a massive stroke, and how unlikely do you think those events are (or are you immune from those threats as well?).  If you have no heirs, then this form of self directed storage of Gold is a good choice.

If on the other hand, there are other people who know exactly where the gold is (or have a well defined means to figure it out upon your untimely death), then how do you know the Gold is still there?

Sat, 04/10/2010 - 23:22 | 295141 akak
akak's picture

Any bullion that I might posess would be known by only one other person, and only in a vague enough manner that they would be able to recover it upon my death, but only with some time and work needed to find it. 

In any case, I find your implication that the danger of losing one's physical gold due to theft (or death) to be somehow greater than the threat to one's paper assets in today's climate of economic and monetary upheaval and widespread financial corruption to be absurd and intellectually insulting.

Sun, 04/11/2010 - 01:29 | 295224 Al Gorerhythm
Al Gorerhythm's picture

That is a policeman's question and deserves no reply, other than, Fuck Off!.

Sat, 04/10/2010 - 23:04 | 295127 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

"Where did you store that beautiful Maple?"  My answer, safely.

"What was your markup on your coins relative to the COMEX price?"  One doelarr and some sense per coin. 

"I would expect much higher than 0.4% if your dealer is paying his/her rent and isn't selling fakes."  I believe the math is dead even.  I think I would have spent the equal amount of premiums online.  Fakes?  You jest.  Fake Philharmonics and Maples?  Look, it's Elvis!

Sun, 04/11/2010 - 00:13 | 295177 akak
akak's picture

LOL!

We should probably go a little easier on the poor troll --- I am coming to suspect that he just graduated from troll school, and is still wet behind the ears.

Sun, 04/11/2010 - 00:55 | 295203 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Akak looks over his shoulder.  He is standing over someone with the name tag "Peterpickedapepper".  He says, "He isn't moving."  I walk over and ask, "Is he breathing?"  "I can't tell."  Akak takes a silver coin out from his pocket and puts it in front of the mouth of Peterptertpeter.  "It appears he is."  "Ok, you grab his arms, and I'll grab his feet.  On three we throw him in the pool.  We're gonna baptize this one!"

Sat, 04/10/2010 - 21:21 | 295061 sleestak
sleestak's picture

peterpeter clearly you don't understand what you're talking about. i work in bankruptcy business and regularly witness investors who'd assumed their claim on a borrower's assets or business finds themselves with an armful of... air.  same could easily happen here based on the above analysis.  did you even read it?

 

Sat, 04/10/2010 - 21:27 | 295066 sleestak
sleestak's picture

sorry, had a sentence-construction issue there and it wasn't posted in the right spot either.  point is, the reason one would believe in gold as an investment is precisely to avoid the sort of counterparty risk GLD obviously has.  don't own it. 

Sat, 04/10/2010 - 21:34 | 295071 Bow Tie
Bow Tie's picture

yes. the irony of gold 'instruments'. people just need to remember that gold is denominated in grams, ounces, kilos. not an amount of shares or any other investment unit. very simple really.

Sat, 04/10/2010 - 23:43 | 295160 merehuman
merehuman's picture

 viagra

when instruments deflate

Sat, 04/10/2010 - 21:46 | 295075 peterpeter
peterpeter's picture

No investment is without risk, and I don't claim that ownership in GLD (or IAU or PHYS or CEF etc. etc. etc.) is without risk.  However one needs to weigh the cost of the risk mitigation against said risk.

I own physical and paper gold, and believe that I understand the risks with both, and that they both have their place.

I find it funny though that so many people here believe that they can secure their own gold cheaply and effectively, when it can't be done.

Someone will think they secured their stash of Gold in their wall, under their sewage line etc... and if they don't tell anyone else where it is - then there is the huge risk (well over 1% if they were old enough to buy bullion) that they die and leave it to no chosen heir.  On the other hand, there is the risk that someone else will take their stash away, which is heightened by recording where said stash is located.

Risk can't be avoided entirely - and to the extent that someone is aware of their inability to properly secure their own holdings of gold beyond their own risk tolerance, GLD offers an entirely different vehicle for doing so (with an entirely different set of risks).

To date, no one (nor their legal heirs) has lost more than their 0.4% per annum with an investment in GLD or IAU (in gold terms).  The same can not be said for the many generations of folks who have buried their treasure.

 

Sat, 04/10/2010 - 23:15 | 295128 akak
akak's picture

"To date, no one (nor their legal heirs) has lost more than their 0.4% per annum with an investment in GLD or IAU (in gold terms).  The same can not be said for the many generations of folks who have buried their treasure."

 

Again with that red herring argument overhyping the "threat" of loss or theft of one's physical gold.

Let me ask you this: how many people in the last three years in the United States, do you think, lost their physical gold due to theft?  Really, how many?  Maybe dozens, maybe even hundreds? I highly doubt it would even be in the thousands.

Not ask yourself, how many Americans have lost a significant chunk of their retirement or life savings due to depreciation, bankruptcy, or the plunge in market value of their 401k's, IRA's or other financial assets?  This one is easier: over one hundred MILLION!  And this financial debacle is only just beginning --- just wait until we have a sovereign debt implosion and/or a currency crisis!

 

As for trying to imply that some overwhelming number of people who have stashed gold over the centuries were the victims of their own secrecy, that is simply idiotic and absurd.  Pray tell, what would be the motivation for ANYONE to bury gold, and then not bother to go back for it later?  Is that something that YOU would be stupid enough to do?  (I am beginning to wonder.)  The fact is, most unrecovered hoards were unrecovered for one simple reason: due to the owner's demise due to war or invasion.  In such cases, any assets those people posessed would have been lost regardless of whether it had been buried gold or anything else.  Again, another red herring.  But I will give you credit: you pro-establishment trolls are getting a bit more refined in your arguments.

Any rational examination of the REAL risks involved today wildly favor holding physical precious metals over financial paper.  Sorry to burst your, um, bubble.

Sat, 04/10/2010 - 23:25 | 295142 peterpeter
peterpeter's picture

> The fact is, most unrecovered hoards were unrecovered for one simple reason: due to the owner's demise due to war or invasion

Agreed

> In such cases, any assets those people posessed would have been lost regardless of whether it had been buried gold or anything else.  Again, another red herring.

Rubbish.  If you own GLD in a trading account and either have a will, are domiciled in a state that recognizes an heir in the absence of a will, or you have identified an heir on your brokerage account - then the GLD transfers to that heir (along with the tax liabilities).

> Any rational examination of the REAL risks involved today wildly favor holding physical precious metals over financial paper.

I hold both, but disagree with your assertion.  Perhaps I am less confident in my abilitiy to protect my stash or stay alive/healthy than you do... or perhaps you have no heirs to consider.

Sat, 04/10/2010 - 23:49 | 295165 akak
akak's picture

"I hold both, but disagree with your assertion.  Perhaps I am less confident in my abilitiy to protect my stash or stay alive/healthy than you do... or perhaps you have no heirs to consider."

 

Or perhaps you are wildly uncognizant of not just the very real risks, but the ACTUAL losses suffered by TENS OF MILLIONS of Americans who have naively trusted in a corrupt and manipulated casino financial system in which the deck is always stacked against them.

You keep harping on almost non-existent threats and worries, and REFUSE to acknowledge the overwhelming threats of corporate and central banking malfeasance and corruption, and the extreme if not inevitable dangers of a financial collapse, sovereign debt crisis, and run on our fiat currency, any or all of which will affect EVERYONE and are much more significant risks than losing one's gold in one's walls.  Get fucking real!

Sat, 04/10/2010 - 23:49 | 295164 merehuman
merehuman's picture

better not cross the street, there are cars!

dont bother getting up in the morning, something might happen.

All your giving is fear based reasoning.

No fear. common sense at work. Paper bugs and trolls. Nadler in spades.Crapadoodle do where the hells my silver? Forgot! Wait.... i already took that pill

Sat, 04/10/2010 - 21:56 | 295081 MarketTruth
MarketTruth's picture

If GLD is a legal trust designed to track the price of gold, net of trust expenses.

QUESTION: So, why would anyone be required to pay the 28% tax on this paper that is not really under the CFTC or anything like that as though it were an actual commodity? Makes sense to just pay regular capital gains.

Sat, 04/10/2010 - 22:31 | 295104 YYZ
YYZ's picture

Is SGOL a better investment than GLD?

Sat, 04/10/2010 - 22:43 | 295112 peterpeter
peterpeter's picture

A 0.39% per annum fee rather than 0.40% is not a sufficient benefit to deal with the lack of liquidity.

The bid/ask spread on SGOL is much wider than GLD, so unless you know what you're doing and are buying SGOL with IOC limit orders placed by a computer with access to real time COMEX and/or GLD pricing, you are likely to lose more on the wider spread than you'd save from the reduced 0.01% fee.

If you feel like allocating your paper gold into several different buckets as a risk mitigation tool, then add SGOL to the list along with IAU, GLD and PHYS.

 

Sat, 04/10/2010 - 22:53 | 295118 YYZ
YYZ's picture

Thanks!

Are you familiar with SGOL's claims of allocated gold?  They say it is allocated to the trust (not to individual holders), publish a list of the bars on their web site, and claim to be audited.  I was wondering whether this was all BS, or is it in fact a way to compromise between GLD and physical gold.

Sat, 04/10/2010 - 23:13 | 295133 peterpeter
peterpeter's picture

It is not BS, and is exactly what GLD does (with different parties involved, and storage in Switzerland rather than primarily UK/US/CA for GLD/IAU).

Any commodity ETF must by give out shares into a trust that holds the commodity allocated to the trust rather than individuals.  It is the only means by which to facilitate trading of the shares, which is the entire purpose of the ETF.

I understand why some folks who are in the business of selling physical gold would make this out to be nefarious (GLD has dented their business), but why the rest of the folks here take issue with the gold allocated to the trust and the shares holding a percentage of the trust's assets is beyond me.  It is just an obvious requirement for the construct of a commodity ETF.

Sat, 04/10/2010 - 23:30 | 295145 akak
akak's picture

"I understand why some folks who are in the business of selling physical gold would make this out to be nefarious (GLD has dented their business), but why the rest of the folks here take issue with the gold allocated to the trust and the shares holding a percentage of the trust's assets is beyond me."

 

It is beyond you because you completely fail to see or acknowledge the widespread if not almost ubiquitous corruption and wholesale theft inherent in the current political and  financial system.  If you cannot admit that MILLIONS of Americans have ALREADY lost trillions of dollars in net worth due to a corruption-riddled financial establishment and a Ponzi-scheme monetary system that has been raping them for over 80 years, then you are beyond redemption.

Sat, 04/10/2010 - 23:39 | 295153 peterpeter
peterpeter's picture

So take your guns, grains and gold and go live in a cave.

Millions of Americans have lost trillions of dollars through mal-investment.  Very few have lost material wealth through Ponzi schemes (although they are much more entertaining to read about, hence get much greater MSM coverage).

 

Sat, 04/10/2010 - 23:55 | 295168 akak
akak's picture

And why don't you take your GLD shares and other paper assets (sic) and shove them up your ass.  Oh, wait, we'll have to get the bankster who is already in there to vacate for a minute.

Our very fiat monetary system, backed by NOTHING, is the very essence of a Ponzi scheme, and has been stealing the savings of every American through inflation for decades.  But again, too inconvenient for your pro-bankster mind to acknowledge.

Trolls like you are so fucking despicable, they deserve to be shot.  You are a malicious traitor to the truth and to every American, and to everything honest and good.  Eat shit and die, you bankster-loving SOB.

Sun, 04/11/2010 - 11:54 | 295411 peterpeter
peterpeter's picture

How very enlightened of you to think that anyone who doesn't subscribe to your beliefs that all paper assets are worthless should be shot.

Sat, 04/10/2010 - 23:21 | 295136 Pure Evil
Pure Evil's picture

It may be allocated to the trust, but is the trust the custodian of the gold.

The devil is in the details of the corporate charter and the contracts between the trust and the custodian.

Without being able to read all the legalease you only have the prospectus to guide you.

He who holds the physical metal is the rightful owner. A lot of banks that purchased derivatives in the mortgage markets have found that they are not the rightful owners of some forclosed properties. Its a total fiasco and has been covered extensively by Tyler and associates on ZH.

The same thing can happen with GLD. You have a million shares and want to redeem your shares for the physical. How much you want to bet how many years you'll be in court trying to prove that your the legal owner of so many bars of gold.

We've also heard tall tales of gold derivative issuers asking people to take cash instead of the actual physical.

These ETF's make for decent investment vehicles but like any other fiat investments, when the bubble pops all hell can break loose.

If the stock market collapse along with the real estate collapse didn't provide any lessons, then god be with you.

I think Tyler's main point is don't hope to be able to redeem your shares when heads start getting lopped off and blood starts filling the aisles.

Sun, 04/11/2010 - 01:05 | 295210 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

"Well, I've lost my house, my car, my wife, my cable and TV, my season tickets, my pool table...but at least GLD owes me money!  Wait, the doelarr is kaput?  Crap."   

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