CEF gives you total golden certainty, but there is an unnecessary and often substantial premium associated with owning it [12% today]:
centralfund.com
IAU seems better managed [though Barclay's just sold its sponsorship interest to BlackRock; don't know what that will mean in the future] than GLD in this regard. From IAU's S1:
"The iShares will be backed by the assets of the trust. The trustee's arrangements with the custodian contemplate that at the end of each business day there can be in the trust account no more than 430 ounces of gold in an unallocated form. This means that the bulk of the trust's gold holdings will be represented by physical gold, identified on the custodian's books as the property of the trust and held by the custodian in New York, London and other locations that may be authorized in the future."
"5. Use of Subcustodians.
(a) Qualifications. Custodian may, with the prior written consent of Trustee, entrust Gold held in the Account to a specified subcustodian that is eligible to act as a custodian of Gold under applicable laws and regulations (a "Sub-Custodian") selected by Custodian with due care.
(b) Separate Account; Bookkeeping; Instructions. Gold held by a Sub-Custodian shall be kept in an account of Custodian at such Sub-Custodian that contains only Gold held by Custodian for its customers, and Custodian shall separately identify on its books Gold that is so held on behalf of Trustee. The account of Custodian with each such Sub-Custodian shall be subject only to the instructions of Custodian.
(c) Monitoring. Custodian shall monitor the conduct of each Sub-Custodian, and promptly advise Trustee of any difficulties or problems (financial, operational or otherwise) existing with respect to such Sub-Custodian of which Custodian is aware and shall take appropriate and lawful action to protect and safekeep Trustee's Property deposited with such Sub-Custodian, including to the extent feasible, the withdrawal of such Property from such Sub-Custodian.
(d) Access and Inspection. Custodian shall not entrust Gold held in the Account to any Sub-Custodian other than The Bank of England unless that Sub-Custodian grants rights of access and inspection to records and Gold that are similar to those granted by Custodian in Section 7.
6. Use of Agents. Custodian is authorized in its discretion to use agents in connection with Custodian's handling of transactions hereunder, provided that any such use shall not relieve Custodian of any of its responsibilities or liabilities hereunder.
7. Access to Records; Inspection Rights. Custodian shall permit officers and properly designated representatives of Trustee and independent public accountants for the Trust identified by Trustee reasonable access to the records of the Account for the purpose of confirming the content of those records. Upon at least ten days' prior notice, during Custodian's regular banking hours, any officer or properly designated representative of Trustee, any independent public accountants for the Trust identified by Trustee and any person designated by any regulatory authority having jurisdiction over Trustee or the Trust shall be entitled to examine on Custodian's premises the Property held by Custodian on its premises pursuant to this Agreement and Custodian's records regarding the Property held hereunder at a Sub-Custodian in accordance with Section 5 hereof, but only upon receipt from Trustee of properly authorized instructions to that effect. In addition, Custodian shall cooperate with Trustee in providing to Trustee's external auditors and the Trust's external auditors such reports (or portions thereof) of the external auditors of Custodian as relate directly to Custodian's system of internal accounting controls and procedures applicable to its duties under this Agreement."
The custodian is required to obtain from any subcustodian the same inspection rights as bind the custodian to the trustee, i.e., inspections for property and records, not simply records, as appears to be the case with GLD, all on 10 day's notice.
I would think IAU's subcustodians would have a heck of a time leasing gold, and I am not sure they are allowed to do so in GLD's case. |
