SPDR ('GLD') ETF v. Physical Gold

SPDR ('GLD') ETF v. Physical Gold?

SPDR ('GLD') ETF v. Physical Gold?

I consider an article yesterday titled 'The Seven Sins of GLD' written by Jeff Neilson to be a 'must-read' for anyone owning, or considering owning, SPDR (NYSE symbol GLD) Gold Shares as a proxy for physical gold, as contrasted to owning the physical metal or bullion coins directly.  If you take the time to read the article - reading time 10 minutes - I recommend you then 'think for yourself carefully' and form your own views and make your own decision as to whether 'GLD' or for that matter any other gold or silver ETF is 'right for you'.

The article addresses seven concerns that Mr. Neilson has with respect to GLD, each discussed in detail under the headings:  (1) Lack of Transparency, (2) Damages, (3) Structure, (4) Fees, (5) 'D-Day' (apparently the sunset on guaranteed GLD fees is November 11, 2011), (6) Quality, and (7) Custodian.  I commented on the article as follows:

Hello Jeff: Again, an article well worth reading, and one I am going to briefly summarize and link to tomorrow in my www.stockresearchporta... morning e-mail.

I too have read the GLD prospectus carefully, and in fact have discussed both the trusteeship and gold holdings with the GLD marketing group in New York on at least two occasions. You may be aware there is a periodic independent audit of the physical gold in the Trustee's vaults, and that those reports (or at least the latest one) is linked (or at least it was six months ago) on the GLD website. That said, I doubt the independent auditor checks for tungsten.

One thing you did not mention in the article that I have been considering is this. Assuming for discussion there indeed is 'physical gold' backing each GLD unit, it strikes me it would be easy for the U.S. Government to confiscate the portion of that physical gold that indirectly accrues to U.S. residents (which may well be the majority of it) by confiscating their Trust Units. I haven't been overly concerned about this because of the comparatively small amount that would accrue to the U.S. Government vis a vis its monumental cumulative National Debt. That said, I am curious to know your views on such indirect confiscation as a possibility. A reply to this comment will be greatly appreciated.

If you are interested in reading the e-mail I am sending tomorrow, and you are not an e-mail 'opted-in' Subscriber to www.stockresearchporta..., you will be able to find part of the e-mail and a link to it after 12:00 ET on a website-related blog www.stockresearchporta.... Given your interest in gold, you might consider going to the left navigation of that blog where you will find a link to a 11 part blog-post series I wrote about 18 months ago on 'Gold as an Investment'. If you do that I will be highly curious to learn what you think of my analysis as set out in those 11 posts. In particular, I concluded that physical gold ought be a 'purchasing power hedge' in a deflationary period. It seems to me it is only recently that same conclusion has been articulated by a number of commentators.

For disclosure, I indirectly own GLD Trust Units.  I am about to re-read Mr. Nielson's article and think hard about it.

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