Thai Guru's Gold und Silber ... (Informationen und Vermutungen)

Gold ETF approaches 4 mln shares traded

By John Spence, CBS MarketWatch.com
Last Update: 12:26 PM ET Nov. 18, 2004

BOSTON (CBS.MW) - By lunchtime on its first day of trading, StreetTracks Gold Shares (GLD: news, chart, profile) traded over 3.7 million shares, well over the 2.3 million underwritten shares that were priced in the initial public offering.

After a long wait and much anticipation, the first exchange-traded fund that invests directly in gold bullion began trading on the New York Stock Exchange Thursday.

"This one is going to go gangbusters," said Jim Wiandt, editor of IndexUniverse.com.

"It opens up a new asset class to investors," he added. "And arguably, this could completely tilt the gold market and have macro-economic consequences."

The World Gold Council is the fund's sponsor and Boston-based State Street is the marketing agent.

Blocks of 100,000 shares are redeemable into gold bullion, and shares should be priced at about 10 percent of the price of a troy ounce of gold.

Earlier this week gold reached a 16-year high and some observers are calling for it to hit $450 before the end of the year. The new gold ETF could open a floodgate of new cash into gold as it will make investing in bullion easier for investors and many analysts said anticipation of the gold ETF was pushing gold higher before the launch.

"The introduction of the StreetTracks Gold ETF represents a major step forward for the ETF industry and investors by allowing individuals and small institutions an easy and cost-efficient vehicle to invest in gold as an asset class," said Jim Pacetti, head of consulting firm ETF International. "Previously, one had to use either the physical gold with the associated storage and insurance costs and wide spreads or use derivatives."

The World Gold Council first filed the prospectus with the SEC in May 2003 and managed to beat ETF giant Barclays Global Investors to the punch by being first to market.

BGI has filed a gold ETF with the SEC to be called iShares COMEX Gold Trust, which is slated to list on the American Stock Exchange.

Together, these products could gather $2 billion in assets in the next six months, Pacetti believes.

"There is certainly retail demand, but one interesting aspect of this story is that many institutional players had before been restricted from either holding gold directly or holding futures on gold," added Wiandt.

Both ETFs are designed to reflect the price of gold owned by the trust, less the expenses of the trust's operations.

The funds will pay their fees by selling off small amounts of gold bullion. In other words, the fractional amount of physical gold represented by each share will decrease over the life of the trust.

Gold, like artwork, is classified as a collectible by the IRS and is therefore taxed at a higher 28 percent capital-gains rate in the United States after being held for more than one year.

According to filings, both ETFs will be structured as grantor investment trusts rather than registered investment companies, and expenses will be priced identically at 0.4 percent of assets. The Bank of New York will be the trustee for both ETFs.

Elsewhere, gold ETFs have already been listed in England, Australia, and South Africa.

In midday trading, shares of the gold ETF were down 0.7 percent to $44.12.

John Spence is a reporter for CBS MarketWatch in Boston.

-END-

Treasury Secretary Snow is losing all credibility with his inane comments:

Asia News
Markets see Snow comments as green light to sell dollar

LONDON : Far from reversing the dollar's slide, comments from US Treasury Secretary John Snow have been taken by markets as a sign that Washington welcomes a weaker currency, to the alarm of eurozone officials as the euro hit new highs.

Snow's repeated insistence on a tour of Europe this week that the US "strong dollar" policy remains intact has been received with increasing disbelief by dealers, who chased the euro to a new record high of 1.3074 dollars……

For the full story:

Click here: Channelnewsasia.com

-END-

Silver guru and GATA friend David Morgan just came out with:

Silver and China Special Report

http://www.lemetropolecafe.com/img2004/china-davidmorgan.pdf

Some precious metals thoughts from Germany:

Dear bill,
since I first went to my local bank to buy 2 kilograms of silver and 50 grams gold (end of '01) a lot has changed.

When I tried to get my first silver, the bullion dealer at my local bank was surprised, why I didn't take gold instead. Reason: on silver buying in Germany we have to pay additionally 16% VAT, on gold none. It took about 10 days to complete that order.

Nowadays it's totally different. I get gold and silver within 2 days (only last order took 4 days). They had some difficulties with getting the silver bullion.

I am usually there every other month to do some bullion buying. Last time I had some small talk with the bullion dealer at the bank. I am by far not the only one in our town (population about 26,000) who buys silver by the kilograms.
Gold/silver bullion and coin buying has - according to him - nearly tripled within the last 12 month.

One of the leading bullion dealers here in Germany, 'pro aurum', wrote last week in their customer informations, that volume on gold and silver bullion sales were that strong that they couldn't complete orders as timely as they usually try to do.

-*-*-*-

Unfortunately, Bill, here comes my portion of salt into the GATA-point-of-view-soup:
Through Reginald Howe, Frank Vereroso, James Turk, Mike Bolser and others we have some good knowledge of who sold when, BUT: Who bought it all?

We know:
- India is increasingly buying over the years,
- Japan has and had its seasonally buying,
- China is increasingly taking some,
- Turkey is frequently buying,
- Surely, from the Middle-East comes buying again and again,
- Russia is - at least holding the bigger part of it's production for itself
- as the newest one, Argentina is on the buyers side,
- on Europe/US I can get no numbers (except from GFMS, but I have
some doubt on that numbers)

When I add all together, I get - over the thumb - at least a difference of about 1000 tons/year of gold, leaving with unknown destinations.

So we have - somehow - a situation where we know by far more about the sellers than about the 'real' buyers.

To me that sounds like from Sun Tsu or the classic chinese strategies 'Make noise in the east, but attack in the west'.

The Reason is: When somebody tries to get a mayor portion of all gold - he too, is interested in low prices, (until he got what he wants) so he is very possible an active part of the suppression gang.

Without a knowledge on the buyers - witch should match the knowledge on the sellers, GATA (and it's supporters) are still somehow vulnerable.

Best Regards

Klaus D. Brakebusch
Frankfurt, Germany

Klaus,
Nice input. Good stuff and thanks. However, disagree totally with your conclusion. It is those buyers who are loading up on gold, which if anything will bag the West, not bury us gold longs.

Heads-up on the DEC option front:

Bill,
Just checked the open interest in the Dec gold call options at the Nymex web site.
I was surprised to see the numerous options that will probably expire worthless.
If gold closes above $440, open interest will increase by almost 25,000 contracts (see table below).
If there is a price spike above $500, open interest will increase by more than 63,000 contracts.
What a delta surge that would be!
And these are the tip of the iceberg compared to OTC options.
All the best,
Raymond

[Blockierte Grafik: http://www.lemetropolecafe.com/img2004/Midas1118.gif]

Catherine Austin Fitts, former Managing Director of the highly regarded investment house Dillon Read, is re-entering the investment business. It is with great pleasure I post this note from Catherine:

Bill:
With the key litigation milestones behind us as of August 2004, I am proceeding to build Solari, Inc. Here is the description I promised.

Initially, our fee business is composed of two types of clients whose primary interest is accessing traditional business and investment advice integrated with an understanding of the political "dark side" of our government and markets:

Investors:

I am providing investment strategy advice for high net worth individuals and am in discussion with private firms which manage assets for them. So far, clients want advice on the full spectrum of personal and professional risk issues a family is managing these days.

Entrepreneurs:

I am providing risk management advice for entrepreneurs who are dealing with a variety of fraud, corruption or dirty tricks as well as related litigation.

In addition, we are developing a prototype for the starter kits for Solari Investor Circles, investment clubs that focus on local and alternative investment -- of which precious metals will be an important category. The starter kits will be launched as a beta "freeware" through the web in January. The goal of the Circles is to help teach small investors how to profit from shifting their time and money away from the "political economy" back to the "real economy." We are accepting donations through our website to support the freeware access. Based on grassroots networking efforts over the last three years to determine the optimal design for this product, we believe that there are approximately 500-1,000 early adapters ready to prototype Solari Investor Circles as soon as the beta starter kits are available.

Once the Solari Investor Circles starter kits are launched we will proceed with a first round of financing to capitalize Solari, Inc. Our business goal is to create a venture firm that will attract local and global investors into returning profitably to the "real" economy.

Solari - Who We Are
http://www.solari.com/about/index.htm

Catherine

The gold shares continue to act terribly. More and more investors seem to be selling ahead of the "expected" collapse. The XAU lost 2.03 to 108.31 and the HUI gave up 5.26 to 239.87. Once again HUI 240 could not hold. Many of the shares are trading as if gold just broke down below $400 per ounce. How strange!

Gold remains THE historic investment opportunity of a lifetime. The general investing public does not even have it on its radar screen yet. What an opportunity to pick up some of these beaten-down shares.

GATA BE IN IT TO WIN IT!

MIDAS

Last evening from Mahendra:

Dear Members,
I mentioned a few important points in my this week's newsletter and I would like review them again.

GOLD

From my newsletter:

1. This week as well as next week will be a turning point for gold, as it will start rising against all other major currencies of the world.

2. There will be an interesting fight between the price range of $433 to $444. I am expecting gold to break $444 on Tuesday and will move up quite fast so hold your position till Tuesday. If gold is showing some sign of weakness on Wednesday than you should sell at least fifty percent of your position FOR SHORT TERM but buy it back on Friday.

My latest view after watching Tuesday and Wednesday's trend:

I was expecting gold to cross $444 on Tuesday but it happened on Wednesday and also it didn't show a weak sign so it a clear indication that now gold doesn't want to move down even when the weak planetary combination are taking place. Hold your position but don't add new position on Thursday and Friday. One can partly book profit around my foremost predicted target $448. I see a small drop for a few hours in the next 48 hours but don't do a mistake to short it because bull run in gold is not yet over.

All my members must remember my advice - Don't short GOLD because this year target is not yet fulfilled.

SILVER

Tuesday and Wednesday silver prices remain stable without much movement, any downward trend in gold might effect silver for the few hours.

CURRENCIES

From tomorrow I see a diminutive correction in all major currencies against dollar, so book partly profit but don't short all major currencies against USD because still bull-run is not over.

STOCK MARKET

Stock market went up more then 100 points and closed 60 point up. I spent last two days in detail astrological study on stock market and here is my final verdict - Stock market can remain positive till next Tuesday but than after no power on earth can help to market to rise. From now and next Tuesday is I don't see rising but it will remain volatile. SO ONE CAN HOLD SHORT POSITION IN MARKET.

COFFEE

From my newsletter - It is rising and will rise for few more months. On Wednesday and Thursday coffee prices will remain weak but one can buy before Thursday closing.

First target of $98 is not very far.

On Monday when trading started nobody ever though that COFFEE would sky rocket by $11 in three hours without any news, but it happened!. My first target of $98 was very close but still has not fulfilled. I am still waiting for it to happen soon. On can even buy at this price.

GRAINS

From my newsletter - In the month of May/June 2004 I recommended to sell the previously held positions and to go short in grains, we all witnessed that how fast they collapsed. Now they are all in my buying list and specially CORN is my favourite.

All the grains are pad-locked in the wave of nature (astrology is nature).

Final Note:

I am charging high fee for my newsletter, so it becomes my duty to guide on each important stage.

Enjoy the week, I will be watching and guiding you time to time.

Thank you for your support and faith in my work.

I will forward you again small alert tomorrow.

Thanks & God Bless
Mahendra 17 Nov 20.40pm
http://www.mahendraprophecy.com/

Bill's faith, All credit goes to him because he and 321gold introduce me to metal community in 2001. Today Bill's comment on my work on http://www.lemetropolecafe.com/

"My man Mahendra the seer did it again. He is amazing. He called for $444 gold the middle of last week by yesterday. Got it today. His long-standing call for $448 gold is still on. Once again he blows away the analysis of the Goldman Sachs and Barclays of the world. Their gold market analysis is pitiful. Neither have credibility. Both have been consistently wrong for 3 years".

Once again I am putting here this week newsletter to review. I still believe that astrology has a unique role to play in the most unpredictable world financial market.

Dear Members,

This week my editor is on a holiday, so you will find this newsletter in broken English but I am sure that I will be able to convey a message to all my members. If you don't understand something, please don't hesitate to send me an email.

Finally gold closed at a 16 year high on Friday, the currencies have gained strongly against the USD as I had predicted in 2001, that valuation of the US Dollar would have a big question mark. Coffee and Grain found a strong ground and oil remained in a uncertain direction but the stock market is going in the opposite way of what I saw. Here is my prediction for this week in a simple language.

Prediction from 15 November to 19 November

GOLD

During the last week gold performed according to the wave of nature. During this week I am expecting some volatility in gold prices on Wednesday or Thursday because of some sudden unfavourable news for gold will come out, but gold will absorb all the negative hits and will stand firm. I am expecting that this week gold can go down to a maximum of $433 level and will form a strong bottom there, so it is very clear that gold won't trade below $433.

This week as well as next week will be a turning point for gold, as it will start rising against all other major currencies of the world. I was waiting for this to happen since a long time and I am excited that soon it will happen. Euro, Pound, Yen and Franc will start losing their value against gold very fast so be careful not to sell gold if US Dollar is getting stronger against the other currencies.

Whenever I spoke with the media in the past, I always said that "Gold would rule this century" and even today I am saying the same thing but adding a little more here "This month is for gold".

There will be an Interesting fight between the price range of $433 to $444. I am expecting gold to break $444 on Tuesday and will move up quite fast so hold your position till Tuesday. If gold is showing some sign of weakness on Wednesday than you should sell at least fifty percent of your position FOR SHORT TERM but buy it back on Friday.

Metal stocks will give a strong performance.

WARNING - Don't short gold and silver thinking that they are sitting on high prices.

I will send a alert news on Wednesday.

SILVER

My favourite of 2004 is still waiting to show its power and real value, in fact I see a big competition coming between gold and silver prices, I also see silver will win this battle. During this week silver prices will move between $7.48 to 7.98.

Strong warning - Don't short silver. Buy long term silver options and silver stocks. CDE is my favourite stock.

PALLADIUM/PLATINUM/COPPER

During this week Palladium and Platinum will move up in direction, copper will come down for 48 hours during the middle of the week but it will rise again on Friday.

Buy palladium and platinum on Monday and hold the position in it for the whole week. Sell copper on Tuesday and buy it back on Friday.

PAL is my favourite stock and for short term you can watch SWC.

CURRENCIES

US dollar will try to bounce back from its current low but this move will be artificial, so don't think that Dollar has come out from weakness. Strength in USD should be taken as an opportunity to sell because it will fall again quite fast. I also see many buyers of USD will be in problem.

Will Saturn be able to fulfil my dream price of Japanese Yen to reach 80 (predicted when it was 135 and now is at 105.50), Euro 1.38 (predicted when it was 0.83 and now at 1.29) and Pound 2.10 (predicted when it was 1.38 and now it is 1.855)?

A favourable news for dollar will come during this week but it won't help US dollar much and after a small rebound it will collapse again.

I will update again on Wednesday or Thursday.

OIL

This week will be very interesting for oil because I see a sudden rise in oil prices from Thursday. One can buy for short term on Thursday. As you all know that my astrological calculation favoured oil since last two years and my predicted price target of $55 was fulfilled last month (It doesn't mean that in future it won't rise again).

The least it can touch is $43.80 and the most it can go up is to $53 again.

STOCK MARKET

I have been wrong on stock market prediction since last three weeks. I am doing detailed study on short term movement of the stock market because in the past fifteen years I have been 98% accurate on its long term movement. I see this Wednesday it should start falling. I will write more on stock market on Wednesday after it closes.

COFFEE

It is rising and will rise for few more months. On Wednesday and Thursday coffee prices will remain weak but one can buy before Thursday closing.

First target of $98 is not very far.

COTTON

Monday and Tuesday cotton prices will remain to the up side but the middle of the week they will fall. Those who are thinking of investing for two months can start adding position from Friday.

GRAINS

In the month of May/June 2004 I recommended to sell the previously held positions and to go short in grains, we all witnessed that how fast they collapsed. Now they are all in my buying list and specially CORN looks to be the favourite.

During this week you will receive a few news alerts (predictions) from me. I want you to perform well during this year.

Thanks & GOD Bless

Mahendra 14 Nov

Was raucht der Mahendra schon zum Frühstück..........es muss ein gnadenloses Zeug sein.

Am Dienstag wenn es fällt die Hälfte,dann am freitag falls es steigt wieder einsteigen.......jojo da ist alles wieder drin und der Vogel hatte irgendwie doch wieder recht.

Soll ich mal wieder übersetzen oder ein klitzekleines summary gefällig??????

Mit den besten grüssen eines in ehren ergrauten Goldbugs

haben wir den Wochenschluss vom 22. Juli 1988 - 442.70 geknackt.

Weitere Ziele:

17.JUN.1988 450,25
10.JUN.1988 457,60
03.JUN.1988 464,70
22.JAN.1988 470,20
15.JAN.1988 480,30
09.JAN.1988 483,90
11.DEC.1987 493,50
04.DEC.1987 496,25
--- ab hier wird's auch der letzte kapieren:
18.FEB.1983 503,50

(Werte: London PM Fix /Kitco)
Germoney

Also wenn ich mir den Langfristchart http://www.indexcharts.de/xaueur.png (Gold in DM/EUR) anschaue und den aktuellen Dollarkurs in Betracht ziehe, bin ich kurzfristig eher skeptisch für den Goldpreis in EUR. Der Widerstand ist einfach zu groß und der Dollar ist reif für eine kleine Rallye.
Wie gesagt, kurzfristig sollte man über eine kleine Shortposition nachdenken, vielleicht ein ABN MINI-SHORT (das darf man ja jetzt hier posten, ohne vom Guru verteufelt zu werden )

Grüße

extrel

Hallo, Extrel,
habe Gold in Euro via
http://stockcharts.com/def/servlet/SC.web?c=$GOLD:$XEU,uu[w,a]dallynay[de][pb50!b200!f][iUo14!La12,26,9]&pref=G

auch immer im Auge. Ich habe aber einige Hoffnung, dass wir bis Mitte Januar die 3.55 Grenze überschreiten. Solange habe ich Geduld zu warten.

Und wenn man mal das Verhältnis auf längere Sicht anschaut:
http://stockcharts.com/def/servlet/SC.web?c=$GOLD:$XEU,uu[w,a]wallynay[pb50!b200!f][iUo14!La12,26,9]&pref=G
wird es eigentlich Zeit für den nächsten Schritt. (3.40 -3.60 er Zone)

Ausserdem, überverkauft sieht Gold noch nicht aus, es sieht mehr danach aus, als hätten wir eine 'running correction' (wie es kürzlich hier oder in einem anderen Forum stand.

Germoney

Gold ist gesten von ca 422$ auf 446 gestiegen.

wiso konnte Silber nicht auch davon profitieren?

# pascal105,

Stimmt nich ganz Kurs 17.11.04 PM Fixing 443.45$
am 18.11-2004 PM Fixing 442,00$
am 19.11.2004 PM Fixing 445,60$

gruß hpoth

Das möchte ich euch nicht vorenthalten !!

Nach der letzten Sitzung,ist heute abend Greenspan mit schweren inneren Verbrennungen in ein Frankfurter Krankenhaus eingeliefert worden.

Ein Banker war ihm in den A.... gekrochen,und hatte dabei vergessen vorher die Zigarre aus zu machen

gepostet im WO Board von jeffry 2

Nuff said
Richard Russell
Dow Theory Letters
November 22, 2004

Extracted from the Nov 19th, 2004 edition of Richard's Remarks

Ah the irony -- yesterday Fed chief Alan Greenspan warned about a lower dollar and he warned about the budget deficits. Here's the man who has created more paper than all the preceding Fed chiefs in history going back to 1913 when the Fed came into being. And now the "Maestro" is warning about a declining dollar! What did he think would happen if he kept grinding out dollars by the trillions? Did he think the more dollars he created, the stronger the dollar would become?

In a most interesting front page article in today's Wall Street Journal, Greenspan is discussed in detail. Writes the Journal, "Mr Greenspan has a complicated way of reconciling his job with his economic theories. In an ideal world, he believes there would be a gold standard and no central bank."

Yeah, I know that's what Greenspan really believes. So how does he justify his job and the whole Federal Reserve system? Seriously, he must say to himself, "It's a fraudulent system, but it's all we have, so I'll work with it, and maybe work it to death." Sad, really sad.

But Ego always seems to win. When Volcker quit the Fed in '87, they asked the humble Mr. Volcker what he liked best about the job of Fed head. Said Volcker, "I liked everybody calling me 'Mr. Chairman'."

Nobody receives more bows and toadying then the Fed Chairman. Congressmen and Senators scrape before you, Presidents seat their wives next to you, you have airplanes and limos at your disposal, special tennis courts, fancy dining facilities, trips anywhere you like. It's the single best job in Washington, and nobody audits the Fed and nobody questions your authority or how much you spend. No wonder Greenspan loves the job. Who wouldn't?

A full page article in today's Financial Times headlines it this way -- "Speculators have very little downside risk -- they are going to continue selling the dollar."

Russell Comment -- C'mon, there's always risk in this business, I don't care what you do. Actually, the Bush Administration likes the declining dollar. The real risk is not a slowly declining dollar, the real risk is a dollar collapse.

Question -- Will the declining dollar help the US trade deficit? Probably not, because the Chinese have pegged their currency to the dollar -- thus, the renminbi will decline with the dollar. It's Europe who will be hurt by the declining dollar, and probably Japan, and, of course, Japan has been buying dollars by the carload. Also, Americans themselves will be hurt by the declining dollar, since the fading dollar will drive up the cost of everything sold in Wal-Mart and every other massive mart.

But wait -- all is not lost. Finally, finally the common man has a way of protecting himself to some extent against the predation of the Fed and the wildly-spending US government. The protection I'm referring to is the new easy access to gold via the ETF that began trading on the NYSE yesterday. Gold finally being distributed to the victims of inflation and tax confiscation, the common man. To me, that settles one fear -- the fear of another government confiscation of gold.

With Americans now free to buy gold coins or gold ETFs, it would be unthinkable and probably impossible for the government to confiscate gold again. Furthermore, the more widely gold (even in ETF form) is distributed, the more politically impossible it becomes for the US government to institute another confiscation.

Why is gold rising now? One reason -- George Bush is a spending machine, and the market has taken note of this. Since Bush's re-election, gold has risen near 6 percent.

Nuff said.

more follows for subscribers . . .

Richard Russell
Dow Theory Letters
© Copyright 2004 Dow Theory Letters, Inc.

Richard Russell began publishing Dow Theory

Gold und Silbermarkt-Update von Clive Maund:

http://www.gold-eagle.com/editorials_04/maund112004.html

Bei beiden wird ein weiterer deutlicher Anstieg angenommen, u.a. bei Silber bis zu einem Preis von 8,4 Dollar (kurzfristig).

By: James Turk, The Freemarket Gold & Money Report

Letter No. 355

November 22nd, 2004

Copyright © 2004 by The Freemarket Gold & Money Report. All rights reserved

This past Thursday trading began on the NYSE for what is being called a ‘gold ETF’. Here’s how CBSMarketWatch described it just before the launch: “The first exchange-traded fund investing in gold bullion will begin trading on the New York Stock Exchange on Thursday, said sources familiar with the situation. Called StreetTracks Gold Shares, the ETF will trade under the symbol ‘GLD’ with the World Gold Council as the sponsor.” After the launch Reuters reported: “The ETF…offers investors the ability to access the gold bullion market, with each share representing one-tenth of an ounce of gold.” [Emphasis added]

From these and other news reports it would appear that anyone buying this new ETF is buying gold bullion. But a different picture emerges from a careful reading of GLD’s prospectus and accompanying advertising material.

By way of background, I have been following very closely the development of the gold ETF because I wanted to see if it would have a high level of governance over its bullion assets that was comparable to what my colleagues and I have achieved in GoldMoney. A product launched by the World Gold Council could have some competitive impact. Additionally, GoldMoney is exploring the possibility of creating its own ETF using goldgrams as the underlying asset.

Last year after analyzing the WGC’s proposed ETF, I concluded that its custodial controls were inadequate. In December 2003 I wrote: “The risks of the WGC’s funds appear too great. Until more questions are answered and/or the fund's structure is changed to eliminate its loose custodial controls, I do not recommend that these funds be purchased.” To understand this conclusion, I recommend reading that article in full.

Shortly after my article appeared, representatives of the WGC contacted me and threatened me with a lawsuit, unless I retracted the article. Needless to say, I was shocked, because I knew my work to be accurate, based as it was on publicly available information (i.e., the draft prospectus of the proposed US fund and the actual prospectus for similar funds in London and Australia). Also, it was clear from my article that I was focusing upon the importance of owning physical gold bullion, rather than just paper promises to deliver gold. Given that the stated mission of the WGC is to encourage ownership of physical gold bullion and to educate consumers about gold, why were they menacing me? But the threat of litigation does cause one to focus their mind, so I hired a top NYC attorney specializing in SEC law, just in case the WGC followed through on its threats.

Fortunately, they didn’t. I assume that the WGC in the end recognized my work to be accurate, and that they didn’t have a case. My attorney came to the same conclusion. What’s more, he advised that the WGC was interfering with the work of an analyst, which is something the SEC seriously frowns upon. Remember the hot water Donald Trump got into when he intervened to have a brokerage firm analyst fired after writing a negative story on Trump’s casinos?

Anyway, because of discussions with my attorney and some additional study, I learned a lot about SEC procedures. And one of the foremost requirements established by the SEC is that mutual funds must have absolute control over their assets.

In other words, this requirement exists to make sure that retail investors purchasing shares in a mutual fund are in effect buying the assets the fund is supposed to own, and not just some promise to deliver those assets. I understand that this safeguard is required because of past instances in which certain funds never really owned the assets they purported to own, and collapsed with losses to the fund’s shareholders. Thus, by enforcing this requirement, the SEC is doing its job of protecting the ‘little guy’. The conclusion of my December 2003 article was that the WGC’s proposed ETF did not meet this requirement, which I took to be the reason the SEC had not registered at that time the WGC’s proposed fund despite the many months it had been under review.

Given GLD’s recent launch, I was therefore interested to learn from its prospectus how GLD had been changed to provide the necessary assurances of integrity that the fund’s gold bullion assets really exist. More specifically, I was interested to learn how the WGC had improved the custodial controls so that GLD met the same standard that the SEC applies to other mutual funds. The answer came quickly. It didn’t.

Even before starting the prospectus, I downloaded the 2-page fact sheet from http://www.streettracksgoldshares.com, and there on the first line was an eye-opener laying out the essential nature of GLD: “Objective: Designed to track the price of gold”.

Its objective is not to provide investors with the opportunity to own gold bullion by investing in the shares of an ETF. Rather, GLD is designed to track the price of gold. That objective is no different than what is accomplished by a gold futures contract or any of the dozens of numerous gold derivatives available these days. More to the point, futures and derivatives are sold even if the seller does not own the underlying gold bullion needed to deliver on its obligation. They are in practice fractional reserve systems, which allow liabilities for gold to far exceed the quantity of gold owned by the seller of that liability.

Notwithstanding the numerous news accounts that described GLD as a means of investing in gold bullion, GLD cannot be accused of false advertising. Based just on their 2-page fact sheet, the WGC has by its own description created a security which has been designed to bet on the price of gold, not to enable investors to own physical gold bullion. My subsequent reading of the prospectus confirmed this conclusion because on the face of it, the weaknesses I identified in my December 2003 article have not been corrected. GLD has the same loose custodial controls described in the early draft prospectus.

To explain this point, the London bullion market operates on a ‘trust-me’ basis. Rather than move gold bars around when they are bought and sold – which is a costly process – the various participants accept the word of their counter-party that the bar they just bought really exists, and that it is safely stored in the counterparty’s vault or the vault of another market participant.

Thus, for example, when GLD adds a gold bar, there is no assurance that the gold bar really exists unless it is in the vault of the custodian, HSBC. But the prospectus discloses that HSBC uses subcustodians and even sub-subcustodians, and what’s worse, “the Custodian is not liable for the acts or omissions of its subcustodians”. In other words, if the subcustodian does not have the gold, GLD “Shareholders cannot be assured that the Trustee will be able to recover damages from subcustodians...for any losses relating to the safekeeping of gold by such subcustodian”. This means that “Because neither the Trustee nor the Custodian oversees or monitors the activities of subcustodians who may hold the Trust's gold, failure by the subcustodians to exercise due care in the safekeeping of the Trust's gold could result in a loss to the Trust.” To be blunt, these disclosures mean that there is no certainty that the gold supposedly owned by GLD really exists. After all, if there was complete certainty that the gold did exist, the objective of GLD would be to provide investors with the opportunity to own gold bullion by investing in shares of an ETF, rather than its stated objective to just track the price of gold.

To explain this gold storage risk in greater detail, it is necessary to describe how the London bullion market functions. There are several vaults in London used by the various market participants, but I want to draw attention to only one – the vault owned and operated by the Bank of England. The BoE plays a central role in the operation of the London bullion market, as its vault is actively used as a clearing agent. In other words, the various bullion banks keep storage accounts with the BoE, and here’s an example of how the clearing process works.

Say, Morgan Bank buys a gold bar from HSBC. Rather than incurring the cost of shipping the bar from HSBC’s vault to Morgan’s, HSBC says that Morgan can have one of HSBC’s bars held on account with the BoE. The BoE makes a bookkeeping entry (‘clearing’ HSBC’s obligation to Morgan), while enabling HSBC and Morgan to save the expense of shipping the bar between different vaults. Morgan now owns the gold bar in the BoE vault that was previously owned by HSBC. The BoE is reputed to store more gold than any other participant in the London bullion market, and here is where the problem arises.

The BoE does not allow the gold in its vault to be audited. In fact, there is no way of substantiating that the gold stored there is not owned by multiple parties, or for that matter, that the gold supposedly stored there even exists. Like the gold reportedly stored in Ft Knox, there is no verification of its existence by independent (i.e., non-government) auditors.

In reality is surprisingly not acknowledged by the GLD prospectus, which states: “The Trust’s independent auditors may…visit the Custodian’s premises in connection with their audit of the financial statements of the Trust.” In what appears to be a glaring omission, the prospectus fails to disclose the important risk that the independent auditors will not visit the vaults of the subcustodians and sub-subcustodians, and more to the point, that the BoE does not allow auditors into its vault, even though the prospectus allows for the possibility that all of the fund’s gold may be stored in the BoE.

Hence, by accepting the loose custodial controls of GLD, the SEC has thrown caution to the wind. It has inexplicably accepted for registration a fund that does not meet the same custodial standards required of other retail-oriented mutual funds. The question is why? For what reason has the SEC established this dangerous precedent with these nebulous custodial arrangements that could be exploited in GLD or in the future by unscrupulous operators who mimic the custodial structure, but have no intention of delivering the underlying assets to the fund? And after sitting on the WGC’s filing for 18 months, why was GLD finally registered and launched this week?

Readers who are familiar with http://www.GATA.org and its research will no doubt recognize the subtle coincidence of surprising occurrences. For those not familiar with its work, GATA is an informal association of analysts (I am a card-carrying GATA member and proud of it) who contend that the gold price is being managed by central banks. For several years GATA’s analysts have been providing ongoing evidence to support this conclusion.

For example, in an article published last week, John Brimelow states: “It was interesting to find in Paul Volker’s memoirs the following comments about the aftermath of the successful American effort in 1973 to force a 10% currency revaluation on Europe and a 20% revaluation on Japan: ‘The key was the yen currency of Japan, which had an enormous trade surplus. Appreciating the yen 10% against gold, and devaluing the dollar 10% against gold would mean that the yen would have appreciated by 20% against the dollar. European currencies would remain stable against gold and appreciate 10% against the dollar. On the condition that Japan agreed to revalue the yen, the European countries agreed to the realignment of exchange rates and the U.S. announced that the dollar would be devalued by 10%. By switching the yen to a floating exchange rate, the Japanese currency appreciated, and a sufficient realignment in exchange rates was realized. Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake. Through March, the price of gold rose rapidly, and that knocked the psychological props out from under the dollar.’ One can infer that the mistake of allowing gold an unrestrained voice at times of policy shifts was subsequently guarded against.” In other words, the gold price is being thwarted by active central bank intervention, so that central banks do not repeat the 1973 experience described by Mr. Volcker – or more broadly, today as in 1973, gold and the dollar are competitors, and gold is being managed to make the dollar look better than it really is.

Therefore, is it just coincidence that British exchequer Gordon Brown was recently trotted out again as the gold price was climbing to raise that old canard about the IMF selling some gold? When his statement had no effect and the gold price continued to rise, it was clear that gold’s price managers needed stronger medicine.

So on Friday the Banque de France said it would dishoard 500 tonnes of gold over the next five years, a conspicuously timed announcement given the quiet accompanying the 2nd Washington Agreement on Gold after the IMF meeting in early October. As John Brimelow astutely remarked: “Experienced observers of the gold market will have been amused to see the French gold sale announcement, sustaining the long tradition of this type of thing happening during interesting phases of gold price activity.” But in contrast to past anti-gold announcements by central banks, recent jawboning has had little visible effect in talking down the gold price, which continues to rise.

Thus, jawboning by central banks is no longer enough. And given the ongoing decline in hedging by gold miners, the central banks need new tools in their attempts to suppress the gold price. One of these tools is apparently now being delivered by GLD. Because of its loose custodial controls and the opaque cloak thrown over vaulting at the Bank of England, GLD can deflect demand for physical gold into the paper market. Mineweb.com neatly explained this outcome in a recent article, the title of which makes clear the essential nature of a new security launched in South Africa with WGC support, “Paper gold for Johannesburg”.

People who might have otherwise bought physical gold coins or bars, but wanted the same thing with more convenience, could be misled into thinking that they are buying physical gold by investing in the shares of GLD. But given GLD’s loose custodial controls, there is no certainty that the investor is actually buying gold bullion in the form of an exchange-traded security. They may instead only be buying paper (i.e., a promise to deliver physical metal, rather than the metal itself) because there is no possibility by independent auditing or other means to substantiate that the gold supposedly owned by GLD and stored in the BoE and other vaults (other than HSBC’s vault) really exists. This mechanism thus provides the central banks managing gold’s price with a tool to divert into paper promises the money coming from investors who otherwise think they are buying physical metal, thereby enabling these central banks to relieve the upward pressure we have been seeing on the gold price. Therefore, if you are intending to buy physical gold bullion, do not buy GLD.

I would like to thank the many members of the GATA army who supplied information and ideas for this article, particularly Ron Lutka. But I would like to call on the army for another task. A lot of important questions need to be answered.

We need to find out why the SEC registered GLD. What’s more, why did it happen just as gold’s price managers are starting to lose control of the gold market and need new tools to bolster their efforts to keep a lid on the gold price?

The SEC has broken with precedent. Like the bucket-shops of the 1920’s that allowed investors to bet on price changes without owning the underlying security, GLD enables investors to bet on the price of gold, without GLD being required to meet the same custodial standards required of other retail-oriented mutual funds. Why? Did central banks force the SEC to register the WGC’s fund? Did the SEC cave-in under central bank pressure, even though GLD’s loose custodial controls conflict with longstanding SEC requirements and establish a dangerous precedent? Why did the SEC register GLD in a week when anti-gold jawboning by central banks wasn’t working, making clear they need new tools to keep a lid on the gold price? And why doesn’t the prospectus disclose the big risk that there are serious restrictions on auditing the gold supposedly owned by the fund?

The SEC needs to be called ‘on the carpet’. And I call on the GATA army to do it.

In conclusion, as gold climbs higher, the nefarious scheme to manage its price comes closer to collapsing. When it does, many ill-fated and uninformed investors will come to understand that the promises they hold to deliver gold to them aren’t worth the paper they are printed on. Don’t fall for that trap. Don’t take risks with your bedrock asset – gold. Demand physical bullion. Don’t take paper.

-- Posted Sunday, November 21 2004

Contact James Turk: jamesturk@goldmoney.com

Previous Articles by James Turk

Damit dürften wohl jetzt sehr berechtigte Zweifel bzgl. der ETF vorhanden sein. So wie es aussieht doch keine physische Ware im Hintergrund, sondern anscheinend wieder mal nur eine gigantische Nebelkerze, die die SEC mitträgt. Ich bleibe weiterhin dabei und werde nicht in ETF investieren.

Silbertaler,

zwischendurch mal wieder Dank für Deine Postngs !

Hatten heute abend schon die gleiche Diskussion,mit konradi im WO-Board,da viel mir wieder ein,denn ich hatte mal eine Einladung,war erst im lezten September.

Es gibt eine Interessengemeinschaft für eine Anlage in physisches Gold,es ist eine Gemeinschaft um den Guru der Bremer Landesbank Folker Hellmeyer,und zwar ist diese Interessengemeinschaft in Walsrode ansässig,da kannst Du Mitglied werden,und in physisches Gold investieren.Mittlerweile haben die über 6 tonnen Gold im Tresor der Sparkasse in Schwarmstedt gelagert,das Du dort jederzeit besichtigen kannst,Du kannst es Dir auch ausliefern lassen.Einmal im Jahr gibt es auch ein Treffen,an dem Anlageprofis (Edelmetalle) Vorträge halten,mit grossem Buffet und Tanz.Vielleicht weiss ja jemand mehr darüber,Spancer müsste eigentlich gut Bescheid wissen.

Grüsse

Kalle