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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: ild who wrote (47845)12/21/2005 11:45:03 AM
From: aknahow  Read Replies (1) of 110194
 
No. The ETF itself makes no decision in regards to what the pog will do it adds to its' gold holdings and reduces them only in response to the actions of others.

Each issued share represents 1/10 of an oz. of gold. Without new share issuance, the premium could and would continue rising, if buyers continued to be willing to buy.

Broker/dealer participants can and will borrow shares to sell short to meet this demand, knowing that they can also obtain new shares to cover borrowed shares, by delivering gold to the GLD ETF.

So demand for gold by those who choose the ETF GLD to meet their demand or lack of demand, determines the ultimate addition or redemption of gold. But until broker/dealer participants decide they need new shares or that they want their gold back arbitrage keeps the premium/discount very close to the price of 1 oz. of gold.

Apparently $50,000,000 appears to be some sort of trigger point as deliveries of gold to the ETF seem to involve close to 100,000 oz., or 3 tons. (Have already agreed that $50 million is not a big sum)

Why it may be a trigger point, I don't know. Can I predict when an add will occur? No.

Do I think any of the above helps me make any money? No.

I simply want to be be in a better position to understand the adds so that if suddenly 6 tons or 9 tons or even more are added, I don't draw a wrong conclusion and do something stupid.
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