Gyroscopic Investing

article http://www.indexuniverse.com/sections/b ... ht-be.html

Crigger seems to think GLD has decent auditing of its physical gold bars.  OTOH since PHYS is a closed end fund, buyers pay an unreasonable ~15% on PHYS to the NAV of the actual gold spot price.

What are you gurus take on the existing gold ETFs available on the USian markets?

Basically, if a USian is going to use/buy gold ETF, which ETF would you recommend & why? It seems like the default take would be to choose GLD, unless there is a compelling reason otherwise.

Here are the gold ETFs I'm aware of (data on 2010-may-27: seekingalpha.com for expense ratio [ER] & avg bid ask ratios [BA]; finance.yahoo.com for 3 month avg vol [Vol])

GLD (0.40% ER, 0.01% BA, 17,404,700 vol) - SPDR Gold Trust ETF
IAU (0.40% ER, 0.02% BA, 252,868 vol ~1.8% of GLD) - iShares COMEX Gold Trust ETF
SGOL (0.39% ER, 0.03% BA, 118,006 vol ~0.8% of GLD) - ETFS Physical Swiss Gold Trust ETF
GTU (NA for ER & BA, 58,186 vol ~0.4% of GLD) - Central Gold Trust (gold physically held in Canada)
PHYS (NA for ER & BA, 1,009,840 vol ~7.0% of GLD) - Sprott Physical Gold Trust

I won't touch GLD with loopholes in the prospectus so large you can drive a truck through.  The author in the link only mentions redemptions, not the legalese that states that you are SOL in the event of fraud. 

Yep.  No thanks.  Like most things, it's perfectly fine until it's not.

I think GTU is the best you can get right now in the ETF world.  I've split with SGOL just because it's another layer of geographic diversification, fwiw.

if agree on not using GLD, for multiple reasons.  i also have also ruled out CEF, as it also holds silver.  regards GTU, i'm concerned about underperformance over the most recent 2 year period. this seems to center around an event in early 2009.  don't know what caused this.


i'm looking to hold a portion of gold in my roth ira, including for rebalancing purposes.

looking for guidance on what fund/etf would be suitable.  this could be 20% of the gold allocation

You may want to look into a certificate from the Perth Mint.  If you're worried about the gold ETF's, this may a little bit safer.

nomamesbuey wrote: IAU (0.40% ER, 0.02% BA, 252,868 vol ~1.8% of GLD) - iShares COMEX Gold Trust ETF

I've got IAU's expense ratio as 0.25% according to this link.  This makes it the fund with the most attractive expense ratio.

For my paper gold, I personally split evenly between IAU (expense ratio) and SGOL (geographic diversification).  Overall, though, I think that one's exposure to a gold ETF is best kept very limited.  Harry Browne was right when he described gold as "nobody else's paper promise to you".  I think that the promises that these ETFs are selling are extremely believable but the best situation is to have the fewest pieces of paper between you and your gold as possible.

If a person's uncomfortable with physical gold, though, ETFs represent a great way to still be able to participate in the Permanent Portfolio.

For me, the ETFs serve a very important role: they allow you to easily hold gold in a retirement account for a potential tax-free "sell" if gold cracks a rebalance band.  The ridiculous 28% tax on gains in "collectibles" is (to me) worth a little bit of effort to defer.  This was MediumTex's idea on how to do so.

I'm posting this here in the Gold thread. The conversation began @ http://gyroscopicinvesting.com/forum/in ... opic=243.0 (Re: ETFs vs. index funds)

However, because of the excessive risks (in my view) of using a JPMorgan product (GLD, IAU) as part of the PP, I am posting my comments here so the concerns gain max visibility.


to start, quoting MT:
"To your criticism of GLD, what do you make of it trading in lockstep with IAU?  Do you think both ETFs are identically fraudulent, and thus the market values them the same in relation to gold?  I've always thought that if either fund was not legitimate, the market would know (one way or another) and one fund would get a premium compared to the other.  So far, this hasn't happened.

With that said, bullion is obviously superior to any ETF, but I think a little ETF gold isn't a bad move (especially in an IRA), all things considered.

To anyone's knowledge, has any ETF ever failed because it didn't actually hold the assets it claimed to in its audited financial statements?"


My reply:
Thank you for asking. I will list some of my concerns about the ETF GLD. Aside from the possible risk of GLD being an ETF (potential problems with ETFs are referenced above & in the article linked), I have many concerns which revolve around the operator, JPMorgan.

-appears to have close relationship with the Fed / US Government. As such, they have a vested interest in keeping down metal prices in order to maintain some credibility of Fed Res Notes
-GATA & others have been attempting to prove their activity to short metals. In fact, this link is a study unto itself (I've only skimmed it)
http://www.gata.org/node/8388

-popular resistance campaign against JPM (look up Max Keiser, admittedly a provocateur). Its probably just coincidence, but shortly after Keiser launched his “Crash JPMorgan”? campaign, silver price took off (end of last summer)
-is JPM selling metals short, like Goldman was selling short real estate paper? (does JPM offer any disclosure to its activities which relate to the metals?) for instance, see this troubling article https://marketforceanalysis.com/article ... 40611.html
-if JPM goes the way of Bear Stearns, who has first claim on that bullion?
-JPM is in trouble http://www.moneyandmarkets.com/fdic-903 ... do-2-41274

Regards IAU, guess who the custodian is? If you guessed JPM, you would be correct!
http://us.ishares.com/content/stream.js ... cation/pdf

I would contrast the JPM offering with something like Sprott (PHYS). I have a percentage, for re-balancing & speculation purposes in my Roth IRA. Although I haven't investigated it as fully as I may wish to in the future, I am reasonably confident that the metal is there, in unencumbered form. I am not aware of any reason to be concerned that Sprott has an conflicts of interest. In fact, increasing metal prices seem to be a cornerstone of his business model. I like the geographic diversification, not only of the metal itself, but also that the operation is outside the USA. Also, unitholders have the option to redeem shares in bullion, unlike GLD shareholders.

http://www.sprottphysicalgoldtrust.com/ ... fault.aspx


For those of more knowledgeable, is the fact that Sprott is a closed-end fund an advantage over an ETF?


To wrap up, I guess I could be charged as being a gold bug. I have spent countless hours following the metals. I have yet to come across anything negative about Sprott. There are just too many troubling concerns w/ JPM for me to want to touch them with a 10 ft pole.

If anyone knows of any negatives about Sprott, please let me know. My due diligence of Sprott is not very thorough.


I hope this justifies why I feel that it is a dis-service to all investors who come across this site to see any shelter given to GLD. In fact, I'm going to post this in the gold thread so that it gets the attention I feel it deserves. I welcome all replies.

I just re-read the Crigger article. I must say that I'm unimpressed by it. Two reasons come immediately to mind:
1. dismissing people with another view by name-calling (conspiracy theorist) does not make a serious reply
2. Her major concern with PHYS is the premium over NAV...its now closer to 2% (yes, the article is a year old)

KevD,

thanks for sharing...Sprott's claims about tightness of silver seem to be validated by many other promoters of precious metals