The Epic American Credit and Bond Bubble Laboratory Message Board

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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: ild who wrote (48795)	1/5/2006 11:26:17 AM
From: aknahow	Read Replies (1) of 110194

Not sure, I understand the implications of your question. Physical gold is being delivered to GLD by the participants. The premium exist because the value of the shares is above the price of gold on the spot market. In other words one is able to buy gold at the spot price for less per oz. than the value of ten shares. If one was not able to buy physical gold on the spot market for less than the premium on the shares of gold then no purchase and delivery would be made. If your question is really a statement that it is much more difficult to capture the premium by buying gold and selling the shares short at the same time, I would agree. But at any give point the premium to spot gold is a known, if one is also making the market for the stock. Since the participant broker dealers are buying and delivering gold in exchange for new shares one has proof that they are able to buy spot and deliver. I assume, they are doing so for a profit, over all. It is perhaps possible that not all of their transactions are done at a profit, but given the small margin involved, most probably are or they would not involve themselves in this type of business.

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