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Old 11-04-2011, 07:37 PM   #1
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Gold ETF's - IAU etc

I am new here. Thank you for providing this resource.

I travel quite often as a result it is very difficult for me to hold physical gold. I have been researching other options. All have some pros and cons. ETF's seem appealing for their liquidity and ease of use. I have read that this GLD has higher fees and also potentially shadier custody holdings etc. The iShares IAU seems appealing for lower fees and says owns physical gold.

Any thoughts on these? I searched around the forums and could not find a discussion of this, so I apologize if this is a duplicate. i am leaning toward the IAU. Also any tax issues associated with these would be helpful.

Like many i have watched the Kyle Bass videos and read his letters. He seems to think when everything breaks down you want to own physical gold because there is more paper claims than physical gold. Main issue is I am not in the position to own a major physical position in gold for saftey reasons etc.

Do you think the IAU would protect against this scenario since it owns physical gold vs. futures contracts etc.

I guess you still carry the counterparty risk with Blackrock though.

Thank you very much.
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Old 11-04-2011, 08:02 PM   #2
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Originally Posted by escobar View Post:
I am new here. Thank you for providing this resource.
Glad to have you here.

Originally Posted by escobar View Post:
I have read that this GLD has higher fees and also potentially shadier custody holdings etc.
Everything I have read about GLD screams bad idea. Harvey Organ calls it fraudulent and GATA claim it's involved in price manipulation of gold futures.

Jeff Nielson recently posted a lengthy warning that requires attention if you own or are thinking about buying GLD:

http://www.bullionbullscanada.com/in...ary&Itemid=131

Originally Posted by escobar View Post:
... I searched around the forums and could not find a discussion of this, so I apologize if this is a duplicate.
No apologies necessary here. This place is relaxed and informal. If the same question gets asked more than once, it will get answered more than once.

Originally Posted by escobar View Post:
... you want to own physical gold ... Do you think the IAU would protect against this scenario ...
I buy physical bullion, so I can't give you a considered (personal) opinion on ETFs, but I have read many good things about Eric Sprott's gold fund (PHYS). Harvey Organ also speaks well of the Central Fund of Canada (CEF). I have not investigated nor heard about IAU. HTH!
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Old 11-05-2011, 12:10 AM   #3
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@ escobar

Welcome to our friendly community. Myself, I do not trust the ETFs and similar because if push comes to shove, someone else will wind up with the gold.

Keep thinking about how you might be able to hide/protect physical gold. Be creative. Put in the frozen spaghetti sauce there in the freezer. Hide it in the HVAC ducts there in your apartment. Put some in a safety deposit box at the bank (which of course has its own risks). Hollow out a book, I sent 2 oz of gold to a family member via mail that way...

Evidently you have a life that keeps you on the road (and hence subject to TSA, mugging, whatever). But, even hobos on the road have ways of hiding valuables "in plain sight" (in a MacDonalds drink cup).

Keep thinking... There is a probably SOME way you could protect any physical gold you acquire.
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Old 11-05-2011, 08:21 AM   #4
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Thank you very much for the responses. very helpful. I read that article about GLD. Yes sounds very shady and opaque. I wonder if IAU has the same issues. I read some short prospectus on IAU and it specifically says they only own physical gold and do not lend it out.

Thank you for the recommendations on the 2 other funds. I presume they have higher fees, but perhaps worth the piece of mind.

Another concern i have with owning a substantial amount at 'home' are natural disaster risks. Earthquakes, floods, hurricanes, mudslides etc. Depending where you live could be serious concerns.

I wonder why Paulson has such a huge stake in GLD with all these known issues with GLD. He runs a huge fund and has enormous resources. I am curious what his response would be?

Also are the taxes from selling physical gold typically the same as selling and etf of gold?

Thanks
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Old 11-05-2011, 10:13 AM   #5
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Quote :
Another concern i have with owning a substantial amount at 'home' are natural disaster risks. Earthquakes, floods, hurricanes, mudslides etc. Depending where you live could be serious concerns.
Hurricanes are easy since you know at least a few days ahead of time that one is coming. Take the PMs with you when you evacuate.

The others are a bit harder, having a good safe can at least keep them from being destroyed and lost in the rubble.

Quote :
I wonder why Paulson has such a huge stake in GLD with all these known issues with GLD. He runs a huge fund and has enormous resources. I am curious what his response would be?
Paulson is an insider and he will know just the right time to get out.
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Old 11-05-2011, 01:28 PM   #6
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@ escobar again

I believe that selling physical gold (assuming at a $ profit) is subject to the grotesque "Collectables Capital Gain Tax" which is a crappy 28% on the gain.

My advice? Never sell it! Give it away when the time comes............
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Old 11-05-2011, 08:15 PM   #7
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Thank you for the responses. I have done some more research. I skimmed through the IAU prospectus. Appears does have similar dilution issue as related to GLD also. They have to constantly sell a small amount of gold to fund the expenses. So the basket of gold each share represents constantly falls. Really annoying. There must be some structural reason its set up this way. Also there seems to be concerns that there could be many sub or sub-sub custodial arrangement and when the music stops there is not enough gold accounted for all the claims.

I know there are some closed end versions like Sprott which probably do not have this dilution feature. But the problem is they also trade at premiums to NAV. So I guess you either pay up front or you bleed it away.

My concern is I try to safeguard so much and end up missing a huge move over the next few yrs because I was worried about some oddities in these ETF's which may never materially effect people.

I guess the best way is to have physical gold in a private vault someplace. However that is very illiquid and would take time to move in and out of. I think there will be massive volatility in the future and at the end of the day we want to make real returns. At some pt a stock trading at 50% of book because of a major sell off may provide a better real return vs gold. At that pt I would want to shift some assets but would be difficult getting access to those funds on a vault quickly.

Knowing all this I find it perplexing that a massive fund Like Paulson would buy such a huge stake in GLD. From what I understand he has a lot of his own money in the fund. Why he doesn't just pay to have the physical gold stored in some vault is strange.
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Old 11-06-2011, 06:15 AM   #8
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Originally Posted by escobar View Post:
...
Knowing all this I find it perplexing that a massive fund Like Paulson would buy such a huge stake in GLD. ...
Sometimes, the "smartest men in the room" (Enron, MF Global, et. al.) do really stupid things.
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Old 11-06-2011, 03:35 PM   #9
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@ escobar

IMO there are several substantial risks in paper shares of gold (and silver). You have already mentioned some above, here are several others to consider If the US dollar collapses those funds just like the stock market could potentially go to zero. You mentioned holding to for several years the decoupling of the paper gold and silver markets could happen before that if the fraud is exposed of how many oz's of gold and silver are traded vs what they have in their vaults. My research has told me they trade in 100x mulitples, so only one percent of what is traded in some of these funds they actually have physical possession of. Not to mention like you said the manipulation is outrageous. Since you say you move and travel a lot an option would be depository's that you can keep your physical bullion in. There are a lot of them around the country but there is a small fee for storage but you store it there and pick it up, during there business hours. But if Govt confiscation happens again then those depository's could be seized as well as the vaults of the bullion banks. So self storage is the best option. Be creative, make a compartment in the bottom of a couch, or keep it in a safe in the attic, pry up a floor board, put a false bottom in your dresser, etc. The average burglar stays in a home for apx 6 minutes, if you can avoid them finding it in that time frame you are probably in the clear. Those sheeple just want your TV, electronics, jewelery and cash, so if you can hide it somewhere they aren't worried about then you're good.
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Old 11-07-2011, 06:48 AM   #10
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The ETFs are not good for much except perhaps as a cheap day trading vehicle. Given that most of the members here (myself included) seem to be primarily the protect-and-prosper camp, and a bit less the casino-trading camp, we'll mostly be steering you clear of them.


A friend of mine was recently surprised to find his share trading platform acquired by another company and the website 'redesigned' in such a way as to disappear a few of his holdings. He's still trying to find out what happened to them, and still can't trade them (they were Canadian listings, and therefore 'international' to his portfolio in EU).

I suggested to him that in the current climate, the chances of his individual stocks going to zero were actually far smaller than the chances of them getting generally lost or custodially evaporated by middlemen, and to get hold of certificates if and while he still could.

There are lots of reasons to avoid ETFs but I thought this one had unusual interest value of its own.
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Old 11-15-2011, 07:28 AM   #11
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Originally Posted by escobar View Post:
...
Knowing all this I find it perplexing that a massive fund Like Paulson would buy such a huge stake in GLD. ...
Quote :
...
Paulson & Co., the hedge fund founded by billionaire John Paulson, cut its stake in the SPDR Gold Trust to 20.3 million shares in the third quarter from 31.5 million as of June 30. The firm remained the largest holder.
...
http://www.zerohedge.com/news/paulso...t-gold-bearish

Paulson may not own any GLD as of this moment. Looks like he started selling back in June.
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Old 11-15-2011, 08:20 AM   #12
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Paulson needs to get out of the sector or at the very least split up his funds. Having to sell your GLD because of margin calls from your other positions is poor management. I've had my own "dumb ass" moments but nothing that substantial.
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Old 11-15-2011, 08:22 AM   #13
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I largely agree with h4rdware here. My own strategy re PMs is to have the core holdings in phyzz - hidden "on site" since I have quite the site to hide things on, but also to trade around them using both of the ETFs. I keep a trailing stop under those. My theory, and that's all it is, of course, is that insider selling if/when its revealed that one of them is fake will trip my stops before the news gets to the general public and I'll at least not lose much. Since my own trading strategy has me out just about half the time, I'm exposed to risk only about half a buy and holder of these, assuming any bad news has random timing.

Everybody and their brother seems to be into trying to manipulate the price of gold, and the etfs. I'm not sure how successful this is long term, looking back at some small GLD holdings I bought a couple hears back, that is, unless they're manipulating the price UP.

At any rate, if this is indeed going on - why would not that .001% type (Paulson, Soros) be on the inside of that, and using the ETF's as part of a vehicle to do it - either for the manipulation itself, or to garner any inside information on others playing in that game? Just thinking like an intelligence analyst here - I don't have any information everyone else doesn't have.

I trade both the ETFs. This is just a personal thing. Back in '08 or a little after, I'd been trading in and out of GLD, and had set my stops to leave me with just a few shares when they tripped. Since then, those shares show up as the highest gain percent in my portfolios (I have more than one account), so I didn't want to ruin that - gives me a little smile every morning when the machine boots up. So now I trade IAU instead to be able to trade gold and keep that pretty line in each account at the top.

Meanwhile, when a stop trips and I'm out - I take some of the profits from that trade and buy more phyzz...it's working for me as a system.

A very simple trade strategy for GLD is to look at a year gold chart with a 50 day SMA on it. Here's one I like:
http://quotes.ino.com/chart/index.ht...t=&a=&w=&v=d12 (this is free and updates well)

1YrGold.jpg

Every time gold crosses the 50 day going up, get long. Set a trailing stop at that point, a few percent (on the tight side works best for me). When it trips, you're out. Now, the hard part - you wait till it crosses that line again before getting long again (for trades, stacking is another issue).
You'll see that this past year, you got long around middle of Feb, tripped out (you hope) in about May, then got long again in July, tripped out again near the end of August (right after the first big peak), then got long again around the end of Oct or beginning of Nov - might have been whipsawed there a little. This is hard for a human to do - it was sooo tempting to buy between those twin peaks, even I fell for it. But you can see that not only did this get more profit per time in trade (%/day) than just holding, but you were out a lot. That's safer, and that money could have been in other trades while waiting, still making money, perhaps quicker than if just in GLD or IAU. (or whatever form of paper gold).

Any of those trip-outs could have been due to insider selling preparing for the revelation that the paper was actually bad - but you'd have been out anyway, as they say "laughing all the way to the bank" to buy more phyzz if that's your inclination. It might be heresy, but perhaps while I'm out of gold, I'm in something else that goes up when gold goes down - either an inverse ETF, or perhaps a dollar ETF (or anything else that trips my trigger).

Last edited by DCFusor; 11-15-2011 at 08:31 AM. Reason: Add chart
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Old 11-15-2011, 08:29 AM   #14
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DCF...

Your system is similar to that of breakpoint trades. They use an 8 day moving average.
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Old 11-15-2011, 08:36 AM   #15
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Sure. This is for slower swing trades, and works well enough for beginners and people who sweat the commissions because they're trading smaller amounts. I'd have to analyze the 8 day (and use a different chart tool set) to see what's really better, but you have to assume a trade-size/commission ratio and so on to do that very well.

Not everyone can sit here all day everyday from before open to after close and watch like I do. Further, there's the question as to what to be in when out of this one, which takes ongoing homework to answer well - might be too labor intensive for most. Not a trader who lives for this, of course.

Me, I'd be tempted to even cheat my own system right now and sell before my stops trip, as it looks like GLD is "rounding over a top", but with the news it'd probably be a dumb move. I betcha we get some nasty news that makes it zoom, even though the chart isn't saying that just now.
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Old 03-26-2012, 06:52 AM   #16
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Bump...

Reggie Middleton interviewed some cats from Gold Bullion International discussing their physical bullion product and how it differs from Sprott's Physical Gold Trust and GLD:

http://www.boombustblog.com/blog/ite...vestment-funds

In this last video in the series, at roughly 4:50, they discuss problems with GLD:

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