Is GLD and SLV safe?

[touchring]

Has anyone seen this claim?

http://messages.finance.yahoo.com/ETFs_(A_to_Z)/ETFs_I/threadview?m=tm&bn=29797&tid=3638&mid=3638&tof=4&frt=2 (http://messages.finance.yahoo.com/ETFs_%28A_to_Z%29/ETFs_I/threadview?m=tm&bn=29797&tid=3638&mid=3638&tof=4&frt=2)

"...
Hi Bill -
I just did a quick calculation on the market cap losses of the gold/silver cabal and it isn't pretty. Assuming that the top gold and silver shorts on the COMEX are the very same "Authorized Participants" in the gold/silver ETF's (which is more than likely) here's how they are faring in the last 6 months in relation to their market cap

Bear Stearns -99%
Citigroup -60%
Barclay's -44%
UBS -54%
Merrill Lynch -46%
Goldman Sachs -37%
JP Morgan -27%
Credit Suisse - 30%
HSBC -33%

Unfortunately EWT, LLC ( the computer program trading ring leader of the cabal) is not a public company so their market cap losses are unknown.

By now everyone must understand that had the bailout/nationaliztion of Bear Stearns not happened that the entire banking system would have melted down INCLUDING THE COMPANIES CONTROLLING THE COMEX AND ETF INVENTORIES!

It is obvious that those investors who bought GLD and SLV for "protection" against a market meltdown are now EVEN MORE exposed to a banking meltdown than they were BEFORE they bought the ETF's. The "Authorized Partcipants" are the only ones who can withdraw the gold/silver. Also judging from the prospectus' and my emails from the CFTC, it is likely they will withdraw all the metal to cover some of their COMEX delivery contacts.

If you know anyone who owns GLD or SLV please BEG them to take their money out and buy the real stuff!

Not much time left!
Bix ..."

[mercerbear]

Wow, that's more than a bit scary for me. I own bullion but I also have $20,000 in GLD. I hope someone else will weigh in on this and let us know if there is any truth to that claim...

[jk]

my understanding of gld, for example, is that participants can create or remove a basket of gold only by either depositing the gold in return for shares, or depositing the shares in return for gold. thus they can arbitrage any significant discrepancy between the price for physical and the price for the shares. someone tell me if i've misunderstood, please. thanks.

[touchring]

my understanding of gld, for example, is that participants can create or remove a basket of gold only by either depositing the gold in return for shares, or depositing the shares in return for gold. thus they can arbitrage any significant discrepancy between the price for physical and the price for the shares. someone tell me if i've misunderstood, please. thanks.


You can find more information about GLD here - http://www.streettracksgoldshares.com/us/index.php?noMsg=true

Gold held in trust for benefit of GLD shareholders as at June 2007

Streettracks claims that gold is held in trust, but some people believe that GLD does futures.

[Lukester]

Damned straight that these ETF's do futures. Especially SLV. A singularly crappy instrument for owning silver in my book. I don't regard it as 'owning' silver at all. It's owning a 'call' on silver. Lots of people owning SLV are in for the shock of their lives when availability on the Comex eventually goes haywire in this bull market - and it will. My two cents.

[touchring]

Damned straight that these ETF's do futures. Especially SLV. A singularly crappy instrument for owning silver in my book. I don't regard it as 'owning' silver at all. It's owning a 'call' on silver. Lots of people owning SLV are in for the shock of their lives when availability on the Comex eventually goes haywire in this bull market - and it will. My two cents.


So if Comex collapses in a financial armagedon, the numbers printed on the "book" kaputs?

Wow, this is getting scary.

[Tulpen]

Damned straight that these ETF's do futures.
I wonder how you can say that with regards to GLD? Could you back that statement up?

The GLD fund stores the physical gold in vaults in London.

[Lukester]

Guys, everyone makes their own judgement call.

Gold and silver fans have concluded for years that the ETF's were "strictly for traders". If others of you are buying paper gold and silver and thinking you are allocating these buys to your true 'safety assets", some others of us would suggest you've got the safety thingy all screwed up. You are still thinking like stock buyers.

Tulpen, why don't you ask Grapejelly - he has some very "distinct" views on this matter. I seem to recall Sapiens went to the mat to defend Grapejelly's view on this question last year with one or two "high profile" posters here. Metalman too.

Grapejelly is the most confirmed proponent of the view "if you got paper gold and silver you have not got gold and silver" - this (going forwards) has a good deal of sobering caution in it. I'm absolutely uninterested in "converting" anyone. If you think we are wrong, go right ahead and do it your way.

[Tulpen]

Fine, but you might want to reconsider using the words "damned straight" since by your own words it is obviously not damned straight if GLD is using futures or not.

And if it was not clear: my understanding is that they do not use futures. There is no need for futures since the fund uses physical gold, it's like a bank but instead of holding currency they hold gold.

[Lukester]

Fine Tulpen. I understand you are a confirmed trader at heart (BTW - how are your oil-short positions doing?).

Perhaps I should have said "ETF's with pooled metals backing their shares are most susceptible to the temptation (or necessity) of employing futures in their accounts, as the market heats up"?

I'll take a guess - you would not be so sensitive on this topic, were you not heavily employing the gold and silver ETF's for trend-surfing and market-timing in gold and silver? I really appreciate a lot of your posts, but I think you have assessed this area all wrong.

The bigger money is being made in this sector by people who play it in a way you would probably consider downright "flat-footed". ;)

BTW, where's GORDO these days? Seems that making market-timing calls in commodities appears to be a hazardous proposition.

[krakknisse]

I may be just re-discovering the same path that leads all bears eventually to selling the house, shedding debt, physical gold and eventually ITulip. But I'm a reasonably good googler:

Try googling "Turk gld". He has been saying this about GLD for years. This May 2007 post references his statements in 2003, 2004, 2006
http://www.financialsense.com/editorials/turk/2007/0305.html

My own take: 1. the contracts that structure GLD clearly contain enough legalese waffle that you do not have an ironclad legal guarantee that you're actually purchasing a share that is backed only by physical gold in a vault. 2. There is no independent audit of the physical gold. 3. If the shit hits the fan, the system is quite likely tilted towards the major financial institutions. They will get out.

In other words: BOHICA.
http://en.wikipedia.org/wiki/BOHICA#Slang_initialisms_and_acronyms

If every gold investor used a service that has an independent physical audit, or physical gold, I think TPTB would run out of ammo much faster. But it is "betting against the house". I wouldn't think it beyond TPTB to run down the price of gold at least $100, to a) save major institutional shorts, b) scare J6Ps, c) increase volatility to discourage new entrants.

[Tulpen]

Fine Tulpen. I understand you are a confirmed trader at heart (BTW - how are your oil-short positions doing?).

So far, not good :)

[c1ue]

Folks, Mark This Down: I am agreeing with Lukester.

This is a singularly rare occurrence.

My view on GLD is simple: Any and all other forms of 'real' gold require storage fees.

Where are GLD's?

If there ain't no storage fees, then something funny is going on.

One way to avoid storage fees (also known as security fees) is by never actually owning the metal itself. By intermediating GLD (or SLV) demand via options, it is easily conceivable to legally 'own' metal, but not actually have physical possession of it.

As an example: if you own options on metal, you 'own' the metal, and putting said options in a vault is thus having metal in a vault.

The trading strategy is not even very unique - anyone with market maker experience in stocks can employ the same strategies with metal.

Of course, where it can all go really wrong is if the ETF departs from the market maker strategies in order to squeeze out some extra profit - a temptation always there especially since market maker strategies do regularly incur losses.

This Chicken Little is not saying the sky is falling, just keep in mind that there is no substitute for physical possession. If you really do believe in PMs as a long term investment, then there is zero reason not to have your own physical possession.

Bullion laws just dictate that you buy gold coins...

[touchring]

Fine, but you might want to reconsider using the words "damned straight" since by your own words it is obviously not damned straight if GLD is using futures or not.

And if it was not clear: my understanding is that they do not use futures. There is no need for futures since the fund uses physical gold, it's like a bank but instead of holding currency they hold gold.


Yes, this is what GLD website claims, they even got photos of gold bars in their gold vault - http://www.streettracksgoldshares.com/us/index.php?noMsg=true

And a gold bar list with serial numbers - http://www.streettracksgoldshares.com/us/value/bar_list.php

But the rumors out there don't think so.

By the way, i found out about The Perth Mint Certificate Program (http://www.perthmint.com.au/certificateprograms.aspx), which is guaranteed by the australian government, and you don't have to pay for storage fees for unallocated gold, but there's a transaction fee, which is higher than ETF. The min. purchase is USD 10,000. I'm not aware if there are similar government guaranteed programs elsewhere. ;)

[rockyoyster]

I see some significant concern with GLD. I am betting that this same concern applies itself to IAU as well as all PM ETF's? Shit, perhaps this applies to ALL ETF'S?

Me being extremely green to all this, and not as proficient as I should be with a prospectus, I REALLY appreciate the time you guys put in in debating/explaining the details that you do!!!

[mercerbear]

Well, this thread has convinced the doomer in me to dump my shares of GLD. I'm going to try to wait for another dip in gold prices and give Hannes Tulving a call for another bullion order.