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Gold/Mining/Energy : Gold & Gold Stock Analysis -- Ignore unavailable to you. Want to Upgrade?

To: aknahow who wrote (4658)	12/12/2006 11:42:58 PM
From: The Vet	Read Replies (2) \| Respond to of 29622

George, I believe that most of the "authorized participants" are also traders in the spot gold market who would be buying and selling bullion for various customers as well as their own accounts. In that case GLD offers them an additional effective "spot market" with decent liquidity, low transaction costs and the ability to buy and sell odd lots and to aggregate small buy and sell orders on the stock market into deliverable bar lots in the real metal market. I wouldn't be the least bit surprised to find that for a lot of trading the costs for those traders are lower when trading GLD than they would be trading physical out of their own stock, with the advantage that they can get a small arbitrage profit at the same time. They can probably reduce a full days trading of real metal to one delivery or redemption to GLD when the books are settled. Of course if this trend continues it is quite possible that GLD and their stash of physical gold becomes the principal trading market and COMEX and the LBMA become secondary markets! It will probably take a while though seeing that London clears more than the entire holding of GLD every trading day! London clears over 20 million ounces (over 620 tons) daily, a figure I always thought a bit odd considering that all the gold ever mined is less than 150,000 tons on those figures the LBMA trades the lot almost twice a year! Obviously that much gold isn't being actually moved, so it must be predominately book entries. lbma.org.uk