Gyroscopic Investing

Gumby wrote: Just curious, but why did you choose GTU in a Roth IRA? I'm not sure I see the benefit. The Roth already protects you from taxes. GTU has higher expenses than IAU and GTU's premium is all over the place. Seems like a straightforward gold ETF would be a better choice for a tax-free account.

I trust it a bit more than some of the standard ETF's.  They have been around longer and have very high auditing standards, so I am more confident that they have all the gold they purport to have.  

I'm not sure what would happen to a fund like GLD if gold had a parabolic rise followed by a big sell off (wonder if they could really pay).  

Gumby wrote:

foglifter wrote:

Adam1226 wrote:
Do you have to do it if you have GTU in a roth IRA?

I don't think so.

Just curious, but why did you choose GTU in a Roth IRA? I'm not sure I see the benefit. The Roth already protects you from taxes. GTU has higher expenses than IAU and GTU's premium is all over the place. Seems like a straightforward gold ETF would be a better choice for a tax-free account.

So far I use only tax-deferred space for my whole PP and has been only brave enough to keep PRPFX in my taxable. So it just happened. As to GTU's premium - a few weeks ago it was actually selling at a 2% discount. Also, GTU's ER is not that much higher than IAU (and it is lower than GLD). It was 0.63 in 2008, 0.38 in 2009 and I believe it decreased since then.

If the premium is high one could buy IAU or SGOL and switch to GTU when it's sold at discount or close to NAV.

foglifter wrote:As to GTU's premium - a few weeks ago it was actually selling at a 2% discount.

That's only a good thing if you happened to be buying a few weeks ago. I would imagine if you were selling GTU, due to a rebalancing band, you probably wouldn't be too thrilled about that discount.

I only mention it because if you look at GTU against a standard ETF, such as GLD, over the past two years there is a huge discrepancy.



(Full disclosure: I don't own any GLD)

Clearly was due to buying at the wrong time (right after the crisis). And I completely understand that over a longer period of time GTU tends to even out nicely, but lagging the spot price of gold by 28% over two years seems a bit much. I would think that could really screw up your rebalancing bands.

I suppose the lesson is to only buy GTU when it's selling at a discount.

Gumby wrote:

foglifter wrote:As to GTU's premium - a few weeks ago it was actually selling at a 2% discount.

That's only a good thing if you happened to be buying a few weeks ago. I would imagine if you were selling GTU, due to a rebalancing band, you probably wouldn't be too thrilled about that discount.

I only mention it because if you look at GTU against a standard ETF, such as GLD, over the past two years there is a huge discrepancy.

I completely understand that over a longer period of time GTU tends to even out nicely, but lagging the spot price of gold by 28% over two years seems a bit much. I would think that could really screw up your rebalancing bands.

I agree, the discrepancy is significant, I think there are enough investors who perceive GTU as a safer and more tax-efficient gold investment. Otherwise there would be no premium.

Gumby wrote: That's only a good thing if you happened to be buying a few weeks ago. I would imagine if you were selling GTU, due to a rebalancing band, you probably wouldn't be too thrilled about that discount.
I suppose the lesson is to only buy GTU when it's selling at a discount.

Since we tend to buy gold when demand is low and sell when it's high, won't the premium discrepancy tend to work on our favor?

Adam1226 wrote:Since we tend to buy gold when demand is low and sell when it's high, won't the premium discrepancy tend to work on our favor?

There's no way to know. But, I was really referring to first-time buyers — since that's really what this discussion is about. First-time buyers shouldn't be trying to time the assets, so one would have to be careful to make their first GTU purchase at a discount.

For example, one could easily have started their PP exactly two years ago with a first-time purchase of GTU and been in a lackluster situation today (see my previous chart) if you hit a rebalancing band (say, on stocks).

I'll also point out that gold is near an all time high, but GTU's premium is relatively low right now. You'd think it would be selling at a high premium due to the high demand for gold. It's not.



The premium is all over the place. Some people might see this as a great buying opportunity. I see a poor track record in the way arbitrage has been handled. A first-time buyer could get hosed by buying in at the wrong time. Anyone who bought GTU over the past two years is underperforming right now — and this is while gold is in high demand.

I totally get that GTU has a lot going for it. But it seems you need to make your first purchase at a discount to make it worth it. The potential for tax errors, tax penalties, or tax law changes, makes it much less appealing to me — particularly since very few accountants even understand Form 8261.

For the record, I'm not a big fan of any gold fund. I don't think you can really trust any of them to survive a significant crisis.

Gumby wrote:

Adam1226 wrote:Since we tend to buy gold when demand is low and sell when it's high, won't the premium discrepancy tend to work on our favor?

For the record, I'm not a big fan of any gold fund. I don't think you can really trust any of them to survive a significant crisis.

Me neither...I'm kind of new to PP and had some GTU prior to starting.  My goal is rebalance into physical gold eventually...I'd thought of selling and just buying coins with the proceeds, but it seems like a rash decision.

Adam1226 wrote:My goal is rebalance into physical gold eventually...I'd thought of selling and just buying coins with the proceeds, but it seems like a rash decision.

I'm with you. I can't wait to rebalance out my remaining IAU and SGOL, but I'll wait until the appropriate rebalancing opportunities.