How exchange-traded fund GLD lets you pretend to own gold

Submitted by cpowell on Thu, 2011-09-01 01:04. Section: Daily Dispatches

9:21p ET Wednesday, August 31, 2011

Dear Friend of GATA and Gold:

Doug Hornig of Casey Research yesterday did a pretty good job of confirming the old doubts about the major gold exchange-traded fund, the SPDR Gold Trust's GLD, whose operations long have been questioned by GATA, most expertly by our consultant, GoldMoney founder and Free Gold Money Report publisher James Turk:

http://www.fgmr.com/fractional-reserve-aspects-of-gold-etfs.html

http://www.fgmr.com/where-is-the-etfs-gold.html

And by our former board member, Catherine Austin Fitts, and her lawyer, Carolyn Betts:

http://www.gata.org/node/8600

Having recently had extensive conversations with the trust's officials, Hornig writes:

"Beyond the basics, we don't know much. You will not be allowed to see the vault, whether or not you are a GLD shareholder and no matter how many shares you own. In fact, a high trust official in New York told me that even he isn't allowed inside there. ...

"Now theoretically it is true that you can convert your GLD shares to physical gold and take delivery of it. But practically, you can't. For one thing, you have to be approved to do so (generally meaning you're either a broker or a market maker), and then you have to redeem a minimum of 100,000 shares. And even if you meet those qualifications, buried in the firm's prospectus -- a very tough read, by the way, but you can get a copy at their website if you want to try your luck -- is a provision stating that they have the option of redeeming such shares in cash equivalent rather than bullion."

If GLD's gold was just sitting around doing nothing but backing the shares issued against it, why the need for the escape clause of cash settlement?

Thus it becomes even easier to imagine that the fabled gnomes of Zurich have nothing on the gnomes of GLD, as they scurry about an HSBC gold vault somewhere, a vault secret even from GLD's supposed managers, plugging GLD-designated gold bars (there are supposed to be nearly 1,300 tonnes of them) into the ever-growing number of holes in the Western fractional reserve gold banking system, a system in which, as CPM Group Managing Director Jeff Christian told the U.S. Commodity Futures Trading Commission at a hearing in Washington a year and a half ago, dozens of claims may be sold to any particular gold bar. Christian had candidly explained this fractional-reserve system in detail in an essay published 10 years earlier:

http://www.gata.org/files/CPMGroup-BullionBankingExplained.pdf

This is the primary mechanism of the Western financial system's gold price suppression scheme, the creation of so much imaginary gold, and its acceptance by deluded investors, as to prevent gold from signalling inflation and indeed from even keeping up with official measures of inflation, which themselves are horribly suppressed.

Hornig's conclusion about GLD is terribly polite and subtle: "None of this is to disparage GLD. For ordinary investors, the ETF represents a way to (indirectly) participate in gold 'ownership' without the hassle of actually taking physical delivery and finding a suitable place to vault your metal. Plus, there are no storage fees, bid/ask spreads, threats of theft, or dealer markups to worry about."

Yes, there are no hassles at all in pretending to own gold. And why should you have to pay anything for pretending when someone else thinks he owns your gold? Lethim pay.

Hornig's report on GLD is headlined "Tracking Gold" and follows a preface by Casey Research Senior Analyst Vedran Vuk. You can find it at the Casey Research Internet site here:

http://www.caseyresearch.com/cdd/behind-scenes-gld

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.