the most commonly heard "theories" about how the world's most
popular gold investment product - the SPDR Gold Shares ETF (NYSEArca:GLD) - is
defrauding investors is that the trust can't possibly contain the gold they
say they have because there is no evidence of any transfers of this size on
any gold market.
logical conclusion, of course, is that the ETF is a sham.
All it takes is a simple phone call to completely debunk this
"theory", something that, to my knowledge, no one has bothered to
do until about an hour ago when I picked up the phone and began dialing after
quickly locating the contact page at the GLD website.
Anyone wanting to cast doubt on the quantity and/or quality of the bullion
backing the gold ETF should start looking at HSBC (Hong Kong
and Shanghai Banking Corporation) instead of the Comex or any other gold
market because that's where the gold transfers occur.
In quite a pleasant conversation with Natalie Dempster, Head of Investment in
North America for the World Gold Council, it was learned that most of the
purchases made by "authorized participants" on behalf of the trust
result in gold being transferred from "unallocated" accounts to
"allocated" accounts for the trust at HSBC in London.
Since these are internal transactions, records are not made public.
That's why no one can "see" where the gold is coming from.
As noted on many occasions before, it is my firm belief
that if you really want to "own" gold, you
should buy the stuff in physical form and then put it somewhere safe. Anything
short of that - whatever you buy and from whomever you buy it - is a distant
second to this option if your aim is to ensure that the stuff is really there.
Now, I have no idea whether HSBC is doing what they say they're doing or
whether they are another Bernie Madoff outfit, filling out all the proper
paperwork and putting smiles on their customers' faces until the day
eventually comes when they are revealed to be another massive fraud.
Maybe someone should call HSBC and ask them for these records.
But, to simply say that the ETF can't have the gold they say they have
because no one can see these transactions on any market, yet no one bothered
to pick up the phone to ask the people who run the fund just why that might
be .... well, that's about the sloppiest bit of logic and the worst financial
writing I've come across lately.
[Note: For those of you haven't already seen it, there is a highly
informative and recently expanded list of Frequently Asked Questions at the
Tim Iacono is the
founder of Iacono Research which provides market commentary and investment
advisory services specializing in macroeconomic analysis and commodity based
investing. He also writes the popular blog The Mess That Greenspan Made.