New Shares Of Gold Fund IAU Suspended

Discussion of the Gold portion of the Permanent Portfolio

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Drewskers
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New Shares Of Gold Fund IAU Suspended

Post by Drewskers » Fri Mar 04, 2016 3:03 pm

iShares announced today it has suspended creations in the iShares Gold Trust because strong demand in the fund had led to "temporary exhaustion of IAU shares."

http://www.etf.com/sections/features-an ... -suspended

Morningstar gives real time premium/discount on their site and a short time ago IAU was trading at a 1% premium, while GLD was trading at a slight discount.

http://www.morningstar.com/etfs/arcx/iau/quote.html

http://www.morningstar.com/etfs/arcx/gld/quote.html
Last edited by Drewskers on Fri Mar 04, 2016 3:19 pm, edited 1 time in total.
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Re: New Shares Of Gold Fund IAU Suspended

Post by dualstow » Fri Mar 04, 2016 3:08 pm

Phew, new shares suspended. I guess that's a good or neutral thing.
At first, I just saw the "suspended" and got nervous.
For the most part, IAU will continue to trade as normal on stock exchanges. However, with the creation process temporarily suspended, there is the possibility it could develop a premium to its net asset value--something investors should keep an eye on.
Last edited by dualstow on Fri Mar 04, 2016 3:10 pm, edited 1 time in total.
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Re: New Shares Of Gold Fund IAU Suspended

Post by Drewskers » Fri Mar 04, 2016 3:22 pm

dualstow wrote: Phew, new shares suspended. I guess that's a good or neutral thing.
At first, I just saw the "suspended" and got nervous.
Sorry, I've modified the subject to improve accuracy and reduce risk of heart attack!
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Re: New Shares Of Gold Fund IAU Suspended

Post by dualstow » Fri Mar 04, 2016 3:28 pm

Hah, not your fault. I blame Sumit Roy.  ;)
I appreciate your posting this news!
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Re: New Shares Of Gold Fund IAU Suspended

Post by Reub » Fri Mar 04, 2016 4:25 pm

Too much demand and not enough supply is never a bad thing if you're already an owner.
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Re: New Shares Of Gold Fund IAU Suspended

Post by Xan » Fri Mar 04, 2016 11:19 pm

Does this mean we should all sell IAU and buy (at least temporarily) GLD?
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Re: New Shares Of Gold Fund IAU Suspended

Post by dualstow » Sat Mar 05, 2016 4:24 pm

Wall St Journal says
BlackRock wasn’t able to issue new shares to meet the demand because it failed to file the appropriate Securities and Exchange Commission paperwork, the firm said.

The breakdown could prevent the fund from accurately reflecting the value of gold, interrupting a key process that lets investors arbitrage any difference between the quoted price of the ETF and the value of the underlying assets.
Edit: sorry, this is the proper link: http://www.wsj.com/articles/blackrock-s ... 1457107864

Below is the link I originally erroneously added. It's about Mark Cuban buying call options on GLD.
http://www.wsj.com/articles/a-big-bet-o ... 1456396207
Last edited by dualstow on Sat Mar 05, 2016 4:27 pm, edited 1 time in total.
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Re: New Shares Of Gold Fund IAU Suspended

Post by Drewskers » Sat Mar 05, 2016 6:20 pm

Xan wrote: Does this mean we should all sell IAU and buy (at least temporarily) GLD?
You could do that provided you can actually sell your IAU shares. You might find that hard going now that the word is out. I actually discovered this pricing discrepancy because I was implementing a DCA purchase into IAU and I noticed that trading in IAU was very thin - several minutes between trades and only small blocks. That made me suspicious so I checked GLD, which was trading quite briskly. That's when I discovered the premium to NAV in IAU. So while there were some IAU buyers, I guess they were small retail buyers unaware of the pricing discrepancy (while savvy sellers were lined up on the SELL side).

I used to religiously check price vs. NAV when I bought or sold and ETF, but lately got sloppy and was skipping that. Lucky I noticed the strange trading activity this time. I ended up with GLD at a .2% discount instead of IAU at a 1% premium. From now I one I will be routinely checking NAV before any ETF trade!
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Re: New Shares Of Gold Fund IAU Suspended

Post by Reub » Sun Mar 06, 2016 1:44 pm

Is this anything to be concerned about? What about for GLD and PHYS holders?
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Re: New Shares Of Gold Fund IAU Suspended

Post by Drewskers » Sun Mar 06, 2016 10:12 pm

Reub wrote: Is this anything to be concerned about? What about for GLD and PHYS holders?
The article I linked to at the top of this thread fully answers the question of whether it is a problem or not, specifically with respect to IAU and GLD. Read the article, it's short and concise!

As for PHYS, it's an apples and oranges comparison. PHYS is not an ETF, and is constructed so that purchasers always pay a premium for their gold exposure.

PHYS: Not A Gold ETF, And A BAD Deal
http://www.etf.com/sections/blog/7345-p ... nopaging=1
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Re: New Shares Of Gold Fund IAU Suspended

Post by Desert » Mon Mar 07, 2016 1:43 pm

Here's a bit more information on IAU:
Friday was one of those days where understanding ETF structure can be the difference between yawning over a press release or worrying that the sky is falling.

Here was the official notice from Blackrock about the iShares Gold Trust (IAU):

“iShares Delaware Trust Sponsor LLC, in its capacity as the sponsor of iShares Gold Trust (IAU), has temporarily suspended the creation of new shares of IAU until additional shares are registered with the Securities and Exchange Commission (SEC).”

What happened after that press release hit the newswire at 9:30 a.m. ET is pretty predictable. Reporters started calling around trying to understand if it was a big deal, and gold bugs used it as an opportunity to point out that, somehow, Gold ETFs were deceiving the public. This commenter on the Wall Street Journal website was typical:

“No one 'forgot' to register for new shares,(sic) there just simply is not the physical gold available to buy to match demand for those ETF shares. But, to admit this fact to the public would be to cause a run on physical gold …”

To explain how misguided this conjecture is, let’s dig into what actually happened (and, by the way, first thing Monday morning March 7, the fund was back open for creations.)
http://www.factset.com/insight/2016/03/ ... t3ZOdCqLSi
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Re: New Shares Of Gold Fund IAU Suspended

Post by dualstow » Mon Mar 07, 2016 2:10 pm

Drewskers wrote: PHYS: Not A Gold ETF, And A BAD Deal
http://www.etf.com/sections/blog/7345-p ... nopaging=1
Damn. Maybe I'll unload my PHYS (formerly GTU) if it ever hits breakeven.
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