KWN [rumor]: GLD refuses to deliver gold

[pmbug]

GLD defaulting on obligation to deliver gold?

...
The mechanism of the way the ETF works means that unless you own it in significant quantities, you don’t have anything like a claim on the real underlying asset. And there are even stories about plenty of people who have actually tried to take significant amounts of ETF shares and exchange them for the physical metal, and been told that they can’t have it (the gold).
...
Eric King: “What you just said, Grant, is astonishing because the GLD ETF is set up so that you can exchange shares for (physical) gold, and you are saying that people (or entities) have been turned down.”

Williams: “Yes ... The minimum basket of shares you need now is roughly $14 million worth, and I’ve certainly heard stories of people who have taken that kind of size redemption requests to the custodians and been told that they can’t have the gold.”

http://kingworldnews.com/kingworldn...F_Tells_Customers_You_Cant_Have_The_Gold.html

Eric King: “John, I know you have seen today’s interview with Grant Williams, but I don’t think people around the world understand what’s happening with GLD. People have tried to get their gold out of that ETF and you just can’t get it.”

Hathaway: “That’s right. If you are, say, Goldman Sachs or JP Morgan, or one of the big bullion dealers, you can exchange shares for gold. And it’s just an arbitrage game for the dealers.

But if you are not within that system, and you have 100,000 shares of GLD, it’s like pulling teeth trying to get physical gold out of that ETF....

http://kingworldnews.com/kingworldn...ir_Gold_Out_Of_GLD_As_Inventories_Plunge.html

 

[rblong2us]

This kind of discussion was doing the rounds a long time ago and it was never proven
that anyone was obliged to take cash.
The conclusion seemed to be that King World News were 'talking their book'.

Does this latest rumor have anything behind it ?

Do Chen was going to try and see if he could get ze gold but was put off by complexity.

 

[Jay]

I remember when Do was gonna do that... and a pox be upon thee as I was about to post that article!

 

[ancona]

I recall reading something here about this very subject. In fact, I seem to recall that they changed their rules to give themselves the right to force cash settlement if it was deemed to be in the interests of the ETF to do so. Maybe Bug can remember where that thread is/was.

 

[pmbug]

Jeff Nielson wrote a warning about a rule change that took place a while ago, but it wasn't about settlement rules:

http://www.pmbug.com/forum/f2/gold-etfs-iau-etc-130/#post484

Last I knew, GLD was supposedly still required to deliver to folks holding 100,000 shares:

http://www.pmbug.com/forum/f2/where-did-gld-gold-go-2375/#post21697

Although the GLD might not have the full inventory it claims:

http://www.pmbug.com/forum/f4/[video]-managing-director-gld-owns-physical-miners-700/

so if the above is true, GLD would logically have to default at some point as redemptions of their inventory continue.