Gyroscopic Investing

Is there any noted contango and pre-rolling in the gold etfs?

http://articles.moneycentral.msn.com/In ... tment.aspx

Not that I am aware of and the price action of the PM ETFs doesn't suggest any.

I need to read the prospectuses again, but my understand is that the major gold ETFs hold physical bullion and are not dealing in futures contracts so they should not be affected by this.

Best way to store gold is with as few people between you and the commodity as possible. Either by yourself in secure storage, or segregated storage in a bank or other facility that deals with the metal.  Commodity funds are not the same asset and should be avoided.

As time passes I am liking the PP even more. I think holding the 4 assets and then re-balancing through the bands is in my opinion what gives the PP its strength. Having the gold portion in an ETF makes it liquid and re balance-able. While holding the physical form does seem interesting, don't you think it defeats the re balancing of the folio? This is of course in addition to the issues associated with finding a secure and viable way to store it.

This "contango" thing, however, scares the heck out of me and if it does apply-of course we need look at the prospectus- to GLD/iAU might defeat the whole thing. Any thoughts?

Holding some GLD and IAU makes sense due to the taxes on gold.  But since you probably won't have to re-balance often anyway, I wouldn't use an ETF for more than 15% or so of your gold portion.

another article from our favorite doom and gloomer, but it only mentions commodities, not gold specificly.

http://www.marketwatch.com/story/commod ... genumber=1

and another article that does mention gold in the last paragraph:


http://seekingalpha.com/article/193433- ... f-contango

and other that says DB shares are based on future contracts:

http://www.thestreet.com/story/10330652 ... tango.html

and yet another from ft times showing how to profit from gld contango:

http://ftalphaville.ft.com/blog/2010/07 ... -strategy/

I guess here's the bottom line, choose your etf wisely:

http://etfdb.com/2010/how-contango-impacts-etfs/
Gold
While futures markets for energy commodities often receive the most attention and are subject to the most thorough analysis, contango can have an impact on any commodity, and has historically been a component of total returns to precious metals exchange-traded products.
There are a handful of gold exchange-traded products out there that come in two main forms. Physically-backed gold ETFs, including the SPDR Gold Trust (GLD), iShares COMEX Gold Trust (IAU), and ETFS Physical Swiss Gold Shares (SGOL) buy and store gold bullion in secure vaults. Futures-based gold products, including the PowerShares DB Gold Fund (DGL) and UBS E-TRACS CMCI Gold Total Return (UBG), invest in gold futures to track the price of the precious metal.
Historically, these two strategies have shown a strong positive correlation, but some minor disconnects have developed. Since its launch in January 2007, DGL has delivered an average annual return of 19.6%, while GLD has gained 22.2% per year over that period. The gap between these funds is dwarfed by the differences arising in energy commodities, but is nevertheless significant.

Silver
Similar to gold, returns between physically backed silver funds and those that employ a futures-based strategy have been minimal over the last several years. Since its inception, the PowerShares DB Silver Fund (DBS) an average annual return of about 10.1%, while the iShares Silver Trust (SLV) is up 12.3% per annum over that period.