Date: Thu Dec 09 2004 15:40
trotsky (rijjj - last one...i'm worn out too.) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
"Regarding discounts and premiums, if the etf doesn't arbitrage away market vs NAV discrepencies in what sense can it be said to "track" gold? When you float paper IOUs they take on a life of their own. They start trading in their own right and have price action in their own right. Price differentials between the IOU and underlying bullion are guaranteed to develope. By not allowing the "retail" customer the ability to demand his GLD gold bullion you are guaranteeing this differential will always be in favor of the paper."
no, such discounts and premia are NOT 'guaranteed to develop'. it is not necessary for the trust to arbitrage anything away, since the MARKET ITSELF WILL DO THAT. anyone who owns a basket ( i.e. 100,000 shares ) can arrange with his broker for redemption and delivery. if smaller, 'retail' amounts could be redeemed the costs would become prohibitive. retail accounts that wish to own small amounts of physical gold are free at anytime to go out and buy them.
"Let's not even get into the leasing of the bullion. "
no, let's. the ETF's gold is held in an allocated account. it CAN NOT be legally leased out. period.
"The comments I have heard regarding auditing of the bullion leads me to believe only the custodian is audited periodically. There is no requirement for subcustodians and subsubcustodians to be audited. This leaves a crack you can drive a truck through as James Turk has rightfully pointed out."
goes to show you haven't even read bulliondesk's open letter. currently, every single ounce is with the main custodian, HSBC. the only reason why sub-custodians have been chosen is to have a safety valve in a pinch ( i.e. to facilitate deliveries ) . all the sub-custodians ( there are only 4 ) are like HSBC, members of the LBMA in good standing. to expect them to moneky around with the holdings of the ETF is really absurd, to say the least. it really wouldn't be worth it ( the trust's holdings are but a tiny percentage of the gold that is held for customers in the vaults of these custodians ) .
"Turk's product has integrity - GLD does not. "
it is probably true that Turk's product has integrity from what i know about it. the charge that GLD doesn't have integrity by comparison is downright bizarre however.
Date: Thu Dec 09 2004 15:07
trotsky (Aurum@custodians and and sub-custodians) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
the custody issue has been extensively ( and satisfactorily imo ) dealt with in the bulliondesk article. it HAS to be this way, since it's an open ended fund. it must have the possibility to arrange for redemptions in a cost effective and secure manner.
as an aside, the custodial arrangements with LBMA members and allocated gold acounts have worked without a hitch for hundreds of years. unless one believes something fundamental has changed in this business it is to be expected that they will continue to do so.
Date: Thu Dec 09 2004 15:02
trotsky (morbius) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
"The answer for me is a priori - If it's paper pretending to be gold, it's banksterism. "
i sympathize with this objection, but don't forget that one can look at this quite differently. i see it simply as an avenue for gold investment opening up for those who didn't have such an avenue before ( like e.g. mutual funds ) . i would still recommend that individuals go for actual bullion rather than the ETF shares - there remains a crucial difference after all ( you can bribe the border guards with gold coins, but not with a broker statement that lists your GLD holdings ) .
but the point remains, these new vehicles have a positive effect on the investment demand for gold, and as such are a welcome development.
Date: Thu Dec 09 2004 14:39
trotsky (Hambone@dead horse) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
true enough. anyway, i only took it up because i happen to think these ETFs are good for gold...so i wanted to slow down the myth creation process a bit.
Date: Thu Dec 09 2004 14:34
trotsky (frustrated@open interest) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
a very good sign imo. means we got rid of some of the weaker hands. always keep in mind that about 60-80,000 contracts on the big spec long side are position trader contracts that apparently are held as a long term position and keep getting rolled over.
Date: Thu Dec 09 2004 14:14
trotsky (rijjj) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
"I'm not saying the etf willingly dumped gold. I'm saying it had to because a large holder of etf shares dumped shares on the market. this caused a mismatch between share price and NAV. Since the etc tracks gold, this forced the etf to sell gold and buy etf to reallign the two. In other words, a large holder of etf shares can force the etf to dump gold merely by selling his etf shares. The etf thus becomes a tool of TPTB."
did you just make that up? the ETF does NOT sell gold to make up any discounts or premia in NAV that might occur from trading activity. from experience with other open-ended funds it is btw. well known that such discounts and premia are usually very small - too small to matter in fact. if they were to grow too big, they would be immediately arbitraged away by owners of the shares, that's true. it's just that it rarely happens.
in any event, the trust itself does NOT buy or sell gold in order to arbitrage discounts or premia in the ETF shares.
it occurs to me that many of the misconseptions that are swirling around could be dealt with by actually READING the prospectus. nobody seems willing to do that...instead, the allegations just keep flying.
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