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Re: Buying GTU now?

Posted: Fri Oct 31, 2014 2:05 pm
by Pet Hog
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.

Re: Buying GTU now?

Posted: Fri Oct 31, 2014 3:44 pm
by Reub
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. :)

Re: Buying GTU now?

Posted: Fri Oct 31, 2014 8:26 pm
by Libertarian666
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?

Re: Buying GTU now?

Posted: Fri Oct 31, 2014 11:21 pm
by market timer
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?

Re: Buying GTU now?

Posted: Fri Oct 31, 2014 11:56 pm
by rickb
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.

Re: Buying GTU now?

Posted: Sat Nov 01, 2014 8:22 am
by barrett
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.

Re: Buying GTU now?

Posted: Sat Nov 01, 2014 8:28 am
by Reub
GTU accurately tracks the price of gold, except like now, when it is 9% LOWER. Some call that a discount.

Re: Buying GTU now?

Posted: Sat Nov 01, 2014 8:36 am
by barrett
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?

Re: Buying GTU now?

Posted: Sat Nov 01, 2014 9:58 am
by Reub
I would just rather own something that more accurately tracks the price of gold, for better or for worse.

Re: Buying GTU now?

Posted: Sat Nov 01, 2014 10:33 am
by pugchief
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

Re: Buying GTU now?

Posted: Sat Nov 01, 2014 10:38 am
by barrett
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?

Re: Buying GTU now?

Posted: Sat Nov 01, 2014 10:52 am
by pugchief
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.

Re: Buying GTU now?

Posted: Sat Nov 01, 2014 11:16 am
by rickb
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 pugchief 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]

Re: Buying GTU now?

Posted: Sat Nov 01, 2014 12:47 pm
by barrett
Thank you pugchief & 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.

Re: Buying GTU now?

Posted: Sat Nov 01, 2014 1:31 pm
by goodasgold
Thanks to pugchief 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.

Re: Buying GTU now?

Posted: Sat Nov 01, 2014 1:47 pm
by pugchief
goodasgold wrote: Thanks to pugchief 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.
Exactly. And since presumably you would be buying GTU when gold is low and selling when gold is high, the premium/discount should in theory work to your advantage.

Re: Buying GTU now?

Posted: Sat Nov 01, 2014 2:11 pm
by Dindin
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  :-\

Re: Buying GTU now?

Posted: Sat Nov 01, 2014 3:03 pm
by pugchief
Dindin wrote: 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  :-\
The expense ratio is inclusive of the management fee. Total cost is 0.35% per year plus any commissions to your broker incurred when you buy or sell.

Re: Buying GTU now?

Posted: Sun Nov 02, 2014 1:43 am
by Dindin
Thank you  :)

Re: Buying GTU now?

Posted: Sun Nov 02, 2014 2:06 pm
by Ad Orientem
At the risk of beating a dead horse, GTU is a closed ended fund. This means it DOES NOT TRACK the price of gold. It can, and regularly does trade at either a discount or premium relative to the price of gold. This makes it a poor choice for the gold component in a PP. However it can be a very good choice for speculating in Gold. I have to admit that a near 10% discount is damned tempting, especially if you can afford to hang until gold reverses course.

Re: Buying GTU now?

Posted: Wed Nov 05, 2014 9:27 am
by Libertarian666
market timer wrote:
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?
I'm about 50% gold and no miners; I consider the latter a different asset class that I'm not interested in. As for how I'm holding up, personally I'm fine and even my wife isn't freaking out (yet). I am rethinking my retirement strategy though...

Re: Buying GTU now?

Posted: Wed Nov 05, 2014 10:25 am
by buddtholomew
The question is how is KShartle doing?

Re: Buying GTU now?

Posted: Wed Nov 05, 2014 10:37 am
by barrett
The K-Man is the Indiana Jones of investing. He's probably enjoying the current nuttiness. Plus he likes stocks a lot which have done pretty well recently.

Re: Buying GTU now?

Posted: Wed Nov 05, 2014 11:06 am
by goodasgold
Ad Orientem wrote: ...GTU is a closed ended fund. This means it DOES NOT TRACK the price of gold.... I have to admit that a near 10% discount is damned tempting, especially if you can afford to hang until gold reverses course.
That's the whole point of a closed end fund, to buy low and sell high. I just bought some GTU, with more later. By owning just a portion my yellow stuff in GTU, when GTU is at a discount I can sell some physical or from an ETF if need be.

But won't it be lovely when GTU rebounds, as it must some day (preferably when I am still alive), and sells at a premium? As the gospel song goes, then it will be: "OH HAPPY DAY!!"

Re: Buying GTU now?

Posted: Wed Nov 05, 2014 3:58 pm
by Reub
buddtholomew wrote: The question is how is KShartle doing?
Is it true that he has been banned from these forums? If so, why?