Buying GTU now?

Discussion of the Gold portion of the Permanent Portfolio

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Pet Hog
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Re: Buying GTU now?

Post by Pet Hog » Fri Oct 31, 2014 2:05 pm

Update:  The premium on GTU right now is -9.3%.  That's the lowest I have seen in the last 18 months or so, during which time it has hovered mostly around -5%, but reaching, as mentioned above, -1% at one time.  I'm going to wait until I breach my 15% band, but this discount sure is tempting me to rebalance into gold right now.
Last edited by Pet Hog on Fri Oct 31, 2014 6:06 pm, edited 1 time in total.
Reub
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Re: Buying GTU now?

Post by Reub » Fri Oct 31, 2014 3:44 pm

I just sold my remaining shares of GTU and bought GLD instead,  locking in a loss. So now is probably the perfect time to buy. :)
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technovelist
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Re: Buying GTU now?

Post by technovelist » Fri Oct 31, 2014 8:26 pm

Reub wrote: I just sold my remaining shares of GTU and bought GLD instead,  locking in a loss. So now is probably the perfect time to buy. :)
If I had any spare cash to buy gold, I would definitely be buying GTU. Why not get a bargain?
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Re: Buying GTU now?

Post by market timer » Fri Oct 31, 2014 11:21 pm

technovelist wrote:
Reub wrote: I just sold my remaining shares of GTU and bought GLD instead,  locking in a loss. So now is probably the perfect time to buy. :)
If I had any spare cash to buy gold, I would definitely be buying GTU. Why not get a bargain?
Aren't you like 75% gold and gold miners? How are you holding up during this selloff?
rickb
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Re: Buying GTU now?

Post by rickb » Fri Oct 31, 2014 11:56 pm

Reub wrote: I just sold my remaining shares of GTU and bought GLD instead,  locking in a loss. So now is probably the perfect time to buy. :)
Why on earth would you sell GTU and buy GLD now?  Are you imagining GTU is a scam and GLD isn't?

Just curious what the rationale is.

I would think at it's current discount, now would be a pretty opportune time to sell GLD and buy GTU.  You end up with (a paper claim on) almost 10% more gold - assuming both GLD and GTU actually own as much gold as they say they do.  And, frankly, I find GTU's claim much more believable than GLD's.
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Re: Buying GTU now?

Post by barrett » Sat Nov 01, 2014 8:22 am

Totally ignorant about GTU and I don't know what the heck you guys are talking about when you say that GTU is "trading at a discount." Does this ETF really not track the price of gold closely? If so, why hold it? Thanks.
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Re: Buying GTU now?

Post by Reub » Sat Nov 01, 2014 8:28 am

GTU accurately tracks the price of gold, except like now, when it is 9% LOWER. Some call that a discount.
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Re: Buying GTU now?

Post by barrett » Sat Nov 01, 2014 8:36 am

Thanks for posting, Reub. Didn't know if anyone would be on the forum on a Saturday morning. From the few GTU posts I have read, it sounds like folks are trying to exploit this price differential but that they are the ones really being exploited. Or is that too harsh an analysis?
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Re: Buying GTU now?

Post by Reub » Sat Nov 01, 2014 9:58 am

I would just rather own something that more accurately tracks the price of gold, for better or for worse.
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pugchief
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Re: Buying GTU now?

Post by pugchief » Sat Nov 01, 2014 10:33 am

Reub wrote: I would just rather own something that more accurately tracks the price of gold, for better or for worse.
That is a valid position to take, however as rickb pointed out, it probably would have made more sense to take that position when it was trading at a premium.  :P
Last edited by pugchief on Sat Nov 01, 2014 10:35 am, edited 1 time in total.
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barrett
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Re: Buying GTU now?

Post by barrett » Sat Nov 01, 2014 10:38 am

Reub wrote: I would just rather own something that more accurately tracks the price of gold, for better or for worse.
Does IAU fit that description?
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Re: Buying GTU now?

Post by pugchief » Sat Nov 01, 2014 10:52 am

barrett wrote: Thanks for posting, Reub. Didn't know if anyone would be on the forum on a Saturday morning. From the few GTU posts I have read, it sounds like folks are trying to exploit this price differential but that they are the ones really being exploited. Or is that too harsh an analysis?
barrett wrote:
Reub wrote: I would just rather own something that more accurately tracks the price of gold, for better or for worse.
Does IAU fit that description?
GLD, IAU and SGOL are open-end ETFs. By that structure, shares are created and destroyed as necessary, along with some arbitrage, to keep the NAV very close to the actual cost of the gold held in trust. GTU is a closed-end ETF, which by definition has a fixed number of shares issued and then trades like a stock, whose value is determined by the collective wisdom of all of the people trading it on any given day. As such, when gold is in favor, GTU will trade at a premium due to the higher demand. When gold is out of favor, like it is now, the lower demand causes the shares to trade at a discount to NAV. There is no exploitation here. You can take advantage of the premium/discount if you wish by swapping GLD or IAU for GTU when GTU is at a discount, and then doing the reverse when it is at a premium.

Also, because of the way the trusts are structured, many here feel that GTU is less risky [more scam-proof?] than the open-ended ETFs. Of course, physical gold eliminates all of those issues while creating others instead [storage, insurance, high transaction costs, etc]. Choose your poison. There is no one size fits all answer for gold. Each PPer must weight the risk/benefit of each scenario and choose what works best for them.
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