Buying GTU now?

Discussion of the Gold portion of the Permanent Portfolio

Moderator: Global Moderator

fishdrzig
Associate Member
Associate Member
Posts: 46
Joined: Sun Nov 17, 2013 10:25 am

Buying GTU now?

Post by fishdrzig » Sun Jul 20, 2014 8:11 am

Discount premium now is -2.28 according to Morningstar - - does this indicate a good time to buy?
User avatar
Pointedstick
Executive Member
Executive Member
Posts: 8864
Joined: Tue Apr 17, 2012 9:21 pm
Contact:

Re: Buying GTU now?

Post by Pointedstick » Sun Jul 20, 2014 8:26 am

It's been as low as -5% recently. That's when I bought. I plan to swap mine out for a different ETF once the discount becomes a 5% premium.
Human behavior is economic behavior. The particulars may vary, but competition for limited resources remains a constant.
- CEO Nwabudike Morgan
User avatar
Cortopassi
Executive Member
Executive Member
Posts: 3338
Joined: Mon Feb 24, 2014 2:28 pm
Location: https://www.jwst.nasa.gov/content/webbL ... sWebb.html

Re: Buying GTU now?

Post by Cortopassi » Tue Jul 22, 2014 8:28 am

I played this game a few times, swapping between GTU and GLD or PHYS and GLD playing the premium differential but then on the last attempt before moving to the PP, GTU has been sitting at -4 to -5% for so long, it just seemed to not be worth it.

I suppose it could be a good strategy to make a % here and there, but since going to the PP my gold holdings are only physical and the whole point was for me not to deal with day to day monitoring of things like this.
Test of the signature line
dragoncar
Executive Member
Executive Member
Posts: 1111
Joined: Wed Aug 10, 2011 7:23 pm

Re: Buying GTU now?

Post by dragoncar » Wed Jul 23, 2014 11:40 am

GTU premium/discount is dropping like a stone.  Hopefully you didn't just buy GTU!  Anyways, what's going on here?  Can we use the GTU premium to predict Gold price movements? 
User avatar
buddtholomew
Executive Member
Executive Member
Posts: 2464
Joined: Fri May 21, 2010 4:16 pm

Re: Buying GTU now?

Post by buddtholomew » Wed Jul 23, 2014 4:46 pm

dragoncar wrote: GTU premium/discount is dropping like a stone.  Hopefully you didn't just buy GTU!  Anyways, what's going on here?  Can we use the GTU premium to predict Gold price movements?
Dropping like a stone? 1 year AVG discount/premium as of 6-31-2014 is -4.91%

According to their site, current discount as of 7-23-2014 is -5.2%, on the NYSE it is -5.36% (Price/NAV-1)

Do you see something more alarming elsewhere?
Last edited by buddtholomew on Wed Jul 23, 2014 4:50 pm, edited 1 time in total.
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
dragoncar
Executive Member
Executive Member
Posts: 1111
Joined: Wed Aug 10, 2011 7:23 pm

Re: Buying GTU now?

Post by dragoncar » Wed Jul 23, 2014 7:34 pm

buddtholomew wrote:
dragoncar wrote: GTU premium/discount is dropping like a stone.  Hopefully you didn't just buy GTU!  Anyways, what's going on here?  Can we use the GTU premium to predict Gold price movements?
Dropping like a stone? 1 year AVG discount/premium as of 6-31-2014 is -4.91%

According to their site, current discount as of 7-23-2014 is -5.2%, on the NYSE it is -5.36% (Price/NAV-1)

Do you see something more alarming elsewhere?
Well it was -1.11% a month ago and -2.28% a few days ago.  So pretty big movements down.
User avatar
buddtholomew
Executive Member
Executive Member
Posts: 2464
Joined: Fri May 21, 2010 4:16 pm

Re: Buying GTU now?

Post by buddtholomew » Wed Jul 23, 2014 9:13 pm

dragoncar wrote:
buddtholomew wrote:
dragoncar wrote: GTU premium/discount is dropping like a stone.  Hopefully you didn't just buy GTU!  Anyways, what's going on here?  Can we use the GTU premium to predict Gold price movements?
Dropping like a stone? 1 year AVG discount/premium as of 6-31-2014 is -4.91%

According to their site, current discount as of 7-23-2014 is -5.2%, on the NYSE it is -5.36% (Price/NAV-1)

Do you see something more alarming elsewhere?
Well it was -1.11% a month ago and -2.28% a few days ago.  So pretty big movements down.
I see. Decided against GTU to avoid filing an additional tax form.
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
dragoncar
Executive Member
Executive Member
Posts: 1111
Joined: Wed Aug 10, 2011 7:23 pm

Re: Buying GTU now?

Post by dragoncar » Thu Jul 24, 2014 1:57 pm

Down even more today...
fishdrzig
Associate Member
Associate Member
Posts: 46
Joined: Sun Nov 17, 2013 10:25 am

Re: Buying GTU now?

Post by fishdrzig » Fri Jul 25, 2014 6:31 pm

I own some GTU  in a tax advantaged account --do I still need to file special forms??
User avatar
Pointedstick
Executive Member
Executive Member
Posts: 8864
Joined: Tue Apr 17, 2012 9:21 pm
Contact:

Re: Buying GTU now?

Post by Pointedstick » Fri Jul 25, 2014 6:32 pm

fishdrzig wrote: I own some GTU  in a tax advantaged account --do I still need to file special forms??
Nope.
Human behavior is economic behavior. The particulars may vary, but competition for limited resources remains a constant.
- CEO Nwabudike Morgan
User avatar
buddtholomew
Executive Member
Executive Member
Posts: 2464
Joined: Fri May 21, 2010 4:16 pm

Re: Buying GTU now?

Post by buddtholomew » Fri Jul 25, 2014 8:26 pm

Premium narrowed to -4.1%, NAV increase of roughly 1.4% if I calculated today's results accurately.
Last edited by buddtholomew on Fri Jul 25, 2014 9:08 pm, edited 1 time in total.
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
Pet Hog
Executive Member
Executive Member
Posts: 257
Joined: Tue May 28, 2013 4:08 pm

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
Executive Member
Executive Member
Posts: 3158
Joined: Fri Jan 21, 2011 5:44 pm

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. :)
Libertarian666
Executive Member
Executive Member
Posts: 5994
Joined: Wed Dec 31, 1969 6:00 pm

Re: Buying GTU now?

Post by Libertarian666 » 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?
market timer

Re: Buying GTU now?

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

Libertarian666 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
Executive Member
Executive Member
Posts: 762
Joined: Mon Apr 26, 2010 12:12 am

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.
barrett
Executive Member
Executive Member
Posts: 1982
Joined: Sat Jan 04, 2014 2:54 pm

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.
Reub
Executive Member
Executive Member
Posts: 3158
Joined: Fri Jan 21, 2011 5:44 pm

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.
barrett
Executive Member
Executive Member
Posts: 1982
Joined: Sat Jan 04, 2014 2:54 pm

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?
Reub
Executive Member
Executive Member
Posts: 3158
Joined: Fri Jan 21, 2011 5:44 pm

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.
barrett
Executive Member
Executive Member
Posts: 1982
Joined: Sat Jan 04, 2014 2:54 pm

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?
rickb
Executive Member
Executive Member
Posts: 762
Joined: Mon Apr 26, 2010 12:12 am

Re: Buying GTU now?

Post by rickb » Sat Nov 01, 2014 11:16 am

barrett wrote: 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.
[sorry for the repeat of much of what MangoMan just posted]

GTU is a closed end fund, not an ETF.  It has a fixed amount of gold and a fixed number of shares.  It's easy to compute the exact NAV (amount of gold times price of gold divided by number of shares).  The shares trade for whatever anyone is willing to buy/sell them for, so can trade at a discount or premium relative to the NAV.  The fund publishes this data (including the discount/premium) every day on their website at http://www.gold-trust.com/asset_value.htm

The amount of gold actually changes occasionally (coincident with the issue of a new block of shares), but very infrequently.

ETFs basically take this model and add several layers of complexity to it.  They define a ratio of shares to gold (which slowly dwindles due to their fees) and allow their "authorized participants" (big banks) to trade gold for shares (this creates new shares) or shares for gold (this destroys shares) at this ratio whenever they want.  The amount of gold they own and the number of outstanding shares change frequently.  You have to look pretty hard, but you can find these numbers on their websites and I think they're updated daily.  Because shares and gold are fungible, the share price in the market stays pretty close to its NAV.  If it drifts in either direction the authorized participants can make money by buying shares, trading shares for gold, and selling the shares gold on the market, or vice versa.

GLD, IAU, and SGOL are all ETFs.  GTU and PHYS are closed end funds.

The tax treatment is different as well.  The ETFs are treated for tax purposes the same as owning gold.  So you pay the collectibles tax on any profit you make when you sell (just like buying and selling gold coins).  GTU and PHYS are both Canadian, and qualify as "passive foreign investment companies".  If you file the right form every year you own them (8621) you end up paying long term capital gains.

The bottom line is GTU (and PHYS) don't end up tracking the price of gold as closely as the ETFs - but they're arguable safer (far fewer moving parts, so far fewer ways they can break down) and provide better tax treatment.  Also, if you believe in the theory that the major banks (in particular JP Morgan) manipulate the price of gold, the gold in ETFs is available to them to use in this way (JP Morgan is at least an authorized participant, if not the actual custodian for every gold ETF).  The gold in the closed end funds just sits in a vault - nobody can use it for anything.

[Edit: buy shares, trade shares for gold, and then sell the gold]
Last edited by rickb on Sat Nov 01, 2014 1:33 pm, edited 1 time in total.
barrett
Executive Member
Executive Member
Posts: 1982
Joined: Sat Jan 04, 2014 2:54 pm

Re: Buying GTU now?

Post by barrett » Sat Nov 01, 2014 12:47 pm

Thank you MangoMan & rickb. I get it... more or less. Potentially an opportunity to own GTU, and potentially a headache if one doesn't enter and exit at the right time. Thanks for taking the time to fill me in. Much appreciated.
goodasgold
Executive Member
Executive Member
Posts: 387
Joined: Tue Jan 01, 2013 8:19 pm

Re: Buying GTU now?

Post by goodasgold » Sat Nov 01, 2014 1:31 pm

Thanks to MangoMan and rickb for their lucid explanations. The ideal, I think, would be to own a mixture of physical, ETFs and GTU, so you can buy and sell part of your gold at any time at the most opportune price. It would be bad news to own only GTU and then be forced to sell it at the worst time, when the shares are selling at a discount. The opposite is true, of course, when GTU is selling at a lovely premium.
Dindin
Junior Member
Junior Member
Posts: 6
Joined: Thu Dec 12, 2013 3:22 pm

Re: Buying GTU now?

Post by Dindin » Sat Nov 01, 2014 2:11 pm

I'm sorry for my ignorance but I couldn't understand how much it costs to hold GTU...
I know that IAU cost per year is 0.25%
I saw that GTU  has management fees of 0.192% and expanse ratio of .35 %.... So do I pay both..? I don't understand... please help me understand this.

Thanks  :-\
Post Reply