Buying GTU now?

Discussion of the Gold portion of the Permanent Portfolio

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fishdrzig
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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?
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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.
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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.
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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? 
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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.
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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.
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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.
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Re: Buying GTU now?

Post by pugchief » Thu Jul 24, 2014 1:28 pm

buddtholomew wrote:
dragoncar wrote:
buddtholomew wrote: 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.
IMHO, if you are using ETFs to hold your gold, IRA/401k is a better place, so as to avoid accounting headaches of extra forms, fractional shares for expenses, and the 28% collectibles tax. YMMV.
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Re: Buying GTU now?

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

Down even more today...
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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??
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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.
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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.
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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.
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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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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?
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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?
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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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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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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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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 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]
Last edited by rickb on Sat Nov 01, 2014 1:33 pm, edited 1 time in total.
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