I have read remarks that GLD does not actually own enough gold to back up the stocks sold. They partially have futures in gold to cover what they don't actually own. Can anyone comment on this. Also, Seabridge (SA) is supposed to be a mining company but I've read a report they own the potential on mine fields but are not doing actually mining.Any comments on these subjects
did you ever get an answer to this question? if so do you mind sharing..........thx.
FUND SUMMARY The investment seeks to strive to reflect the performance of the price of gold bullion, less the Trust's expenses. The Trust holds gold, and is expected to issue baskets in exchange for deposits of gold, and to distribute gold in connection with redemption of baskets. The gold held by the trust will only be sold on an as-needed basis to pay trust expenses, in the event the Trust terminates and liquidates its assets, or as otherwise required by law or regulation. The Trust is not managed like an active investment vehicle, and it's not registered as an investment company under the Investment Company Act of 1940.
http://seekingalpha.com/article/131648-how-the-gold-game-cou...“It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.” - Warren BuffettAfter muting CNBC for years, I turned it on by accident yesterday and learned something very interesting. The gold ETF (GLD) is the 6th largest holder of gold in the world - the whole world, even ahead of China. When investors buy GLD they have to go out and buy gold to drive up the prices. This raises a little question - who will be buying this gold from GLD when investors will decide to sell it?Gold is one of those weird assets where nobody knows what it is really worth. You cannot run discounted cash flow analysis to value it - it has no cash flows. It is an asset where perception and reality are deeply intertwined.Investors buying the gold ETF (GLD) are influencing the price of gold which is fair for the most part as otherwise they’d be buying the real thing. Though of course the ease of buying GLD creates a slightly higher artificial demand, but still it is fair game. A violent sell-off in GLD will drive the prices of gold down dramatically unless a real buyer steps in (like another government sick of owning the US debt for instance) and the gold price could get cut in half overnight.Suddenly, perception of not being a store of value will create a reality of gold not being a store of value. The gold game will be over.
“It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.” - Warren Buffett-------------This sounds brilliant until you ask: These people watching from Mars? What kind of economic system do they have? Aside from the industrial uses for gold (which are legion), gold is an investment in value/worth-storage. Hundreds, perhaps thousands of times a day, some five billion people must come to an agreement about the cost of a cheeseburger, 50" HDTV, a basket of wheat, a tanker of oil, or some other trifle. We need a base. We've needed a base for the last several thousand years. It's in our nature. I can't speak for Martians, but I'm sure they have their own quirks.For a while, that base was salt. Rome began as a salt trading station. Way early on, Roman soldiers were paid with salt. Our word "salary" stems from salt. But salt wasn't the most convenient method for storing value. And not every nation wanted to be paid with it. Plus, the Romans learned how to produce salt cheaply, so, you know, inflation. The gold-to-salt ratio today is Zimbabwaen.Inter-connected civilizations need, in fact, DEMAND, something to be the base. The base must be something tangible, something that I can carry, show, maybe cut a piece from and give to you for the cheeseburger you're vending. For the time being, you'll accept instead a few pieces of green paper with "Federal Reserve Note" printed across the top. However, there's a good chance that in the not too distant future, you'll wants lots more of that paper. Or some other kind of paper. Or maybe even a small piece of gold. At that point, some of my gold comes out of the ground, is converted via methods detailed elsewhere to whatever you'll accept, and exchanged for your cheeseburger.True, the gold has done nothing. It's not supposed to do anything. Gold is a hedge against the blend of individual human folly, the "wisdom" of masses, and idiocy of governments holding it all together. More people wanting a piece of that hedge? I'd be shocked if the price didn't go up. The demand itself isn't artificial, although people may not know what they're getting into. But I must wonder how significant an influence new buyers of GLD are on the actual price of gold, when compared to the billion or ten the Treasury is dumping into the system.And for the price of gold to be cut in half overnight, it would have to start spewing from Vesuvius. Or maybe every gold owner, everywhere, at the same time, takes the blue pill and wakes up from the dream. I don't see either happening. The gold game will not end until something replaces gold. Maybe those brilliant, yet smug, Martians have discovered something. Sad that they don't share their ideas.
I often tell this story: In 1971 you could buy a half acre undeveloped oceanfront lot on NC 12 in Southern Shores (Kitty Hawk, NC) for $30,000. At that time the price of gold was $38 the ounce. Today the same oceanfront lot would fetch $1.5 million and the price of gold is verging on $950. The difference is inflation and it will continue to increase especially now with the deficits growing so profoundly. If you have 38 years to wait I can hardly imagine what the same lot and ounce of gold will cost.
Actually gold isn't what it looks like on the surface.When they debased gold in the 70's it jumped to $300.00/ounce (it's real value then) Since then it has only tripled in values vs. the larger increase in "value" from 30,000 to 1.5 million or 50X cost. With inflation gold probably isn't worth a dime more than you would have paid for it in 1975.CB
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