Tuesday, November 9, 2010

Is GLD Overdue To Buy Two Hundred Tons Of Actual Gold?


Lots of articles in the press about gold today.

First, gold prices continue to surge, closing above $1,400 yesterday and trending higher this morning. There may be several reasons, but the headlines that World Bank President Zoellick is suggesting a partial return to the gold standard doubtlessly helped.

Then there was the comment from an official from the Chinese central bank named Li suggesting that it is "absurd" that the dollar is still the world's reserve currency. The Chinese are not thrilled with the U.S., to say the least.

The blog Zero Hedge had an interesting post yesterday about the gold exchange-traded fund (ticker: GLD), which has been widely used by smaller investors to invest in gold.

The tricky thing about GLD is that is supposed to actually own the physical metal. However, apparently it does its buying in spurts, rather than continuously, which is what most exchange-traded funds do.

Here's an excerpt from Zero Hedge:

One of the completely unmentioned side effects of the recent surge in gold prices, has been the fact that one of the biggest holders of gold, the GLD ETF (presumably physical, even though it is kept in the cellars of HSBC in London, one of the two banks recently charged with a RICO suit for precious metal price manipulation) which as of close today held 1,294 tonnes, has not really bought any gold in over 5 months...

The bottom line is that GLD is now long overdue to replenish its actual gold holdings, net of redemptions. Assuming that GLD will increase its holdings in line with prior accumulations, when gold price surged, the ETF may soon be due to buy about 200 tonnes of gold. Should that happen, GLD will further increase its distance to 6th sovereign holder of gold, China, which as of September 2010 held "just" 1,040 tonnes.


Is GLD Overdue To Buy Two Hundred Tons Of Actual Gold?