Does The Gold ETF Have Enough Metal In Inventory To Cover Investors?

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January 4, 2010 1:27pm ETF BASIC NEWS NYSE:GLD

scam“Speculators are postulating that members of The London Bullion Market Association (LBMA) have oversold their inventory to investors. Other’s claim that financial instruments called ETF’s, of gold and silver, do not have the metals in inventory to cover


 what has been bought by investors. As the world’s second-largest exchange-traded fund, and sixth-largest holder of gold bullion, the (GLD) gold ETF is considered the most powerful force in the global gold market,” Kishori Krishnan Reports From Gold Investing News.

With reports that the GLD “was created and run by untrustworthy instititions”, Michael Pennington explains: “The gold and silver ETFs were created by such financial giants as JP Morgan and Barclay’s Bank that also serve as custodians and sub-custodians. These are the very firms that have been involved in the process of short selling gold and silver in huge quantities. That they would be involved in creating the ETFs had to be considered as most unlikely unless they had nefarious purposes.”

“Reports later exposed how the Comex could legally use GLD shares from their exchange traded fund to satisfy short futures contracts in need of a buyer. It is not just organizations, but even bullion companies are involved in the gold scandal. Remember the Canadian company Bre-X Minerals Ltd gold mountain? One fine day, it was there, and suddenly, it wasn’t,” Krishnan Reports.

“As if that was not bad enough, there is fresh news that the the UN intends to mint gold and silver coins with their logo. That raises a moot point: Where did the gold come from for the UN to start minting its own coins? For sure, the UN doesn’t have an official budget to buy tonnes of gold on the open market. And to sum it all, the Gold Anti-Trust Action Committee (GATA) is reported to have filed a suit against the US Federal Reserve Board on alleged gold price manipulation,” Krishnan Reports.

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We have listed some options for investing in gold through ETFs below:

LONG:

The investment (GLD) seeks to replicate the performance, net of expenses, of the price of gold bullion. 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 investment (GDX) seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the AMEX Gold Miners index. The fund generally normally invests at least 80% of its total assets in common stocks and American depositary receipts (ADRs) of companies involved in the gold mining industry. The fund is nondiversified.

The Funds (GDXJ) investment objective is to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors Junior Gold Miners Index (the “Junior Gold Miners Index”). For a further description of the Junior Gold Miners Index, see “Junior Gold Miners Index.”

The objective of (SGOL) the newly listed shares is to reflect the performance of the price of Gold bullion, less the Trust’s operating expenses. The Trust is open ended and is designed for investors who want a cost-effective(1) and convenient(2) way to invest in Gold as well as diversify their Gold holdings.

The investment (UGL) will seek to replicate, net of expenses, twice the performance of gold bullion as measured by the U.S. Dollar p.m. fixing price for delivery in London. The fund normally invests assets in financial instruments with economic characteristics twice the return of the index. It may employ leveraged investment techniques in seeking its investment objective.

The investment (DGL) seeks to track the price and yield performance, before fees and expenses, of the Deutsche Bank Liquid Commodity Index – Optimum Yield Gold Excess Return. The index is a rules-based index composed of futures contracts on gold and is intended to reflect the performance of gold.

The investment (DGP) seeks to replicate, net of expenses, twice the daily performance of the Deutsche Bank Liquid Commodity index – Optimum Yield Gold Excess Return. The index is intended to reflect changes in the market value of certain gold futures contracts and is comprised of a single unfunded gold futures contract.

The objective (IAU) of the trust is for the value of its shares to reflect, at any given time, the price of gold owned by the trust at that time, less the trust’s expenses and liabilities. The trust is not actively managed. It receives gold deposited with it in exchange for the creation of baskets of iShares, sells gold as necessary to cover the trust’s liabilities, and delivers gold in exchange for baskets of iShares surrendered to it for redemption. The trust is not an investment company registered under the Investment Company Act of 1940 or a commodity pool for purposes of the Commodity Exchange Act.

SHORT:

The investment (DZZ) seeks to replicate, net of expenses, twice the inverse of the daily performance of the Deutsche Bank Liquid Commodity index – Optimum Yield Gold Excess Return. The index is intended to reflect changes in the market value of certain gold futures contracts and is comprised of a single unfunded gold futures contract.

The investment (GLL) will seek to replicate, net of expenses, twice the inverse daily performance of gold bullion as measured by the U.S. Dollar p.m. fixing price for delivery in London. The fund normally invests assets in financial instruments with economic characteristics inverse to the index. It may employ leveraged investment techniques in seeking its investment objective.

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