SPDR Gold Trust (ETF) (NYSEMKT:GLD)

CAPS Rating: 2 out of 5

SPDR Gold Trust (the Trust), formerly StreetTRACKS Gold Trust, is an investment trust. The Trust holds gold, and from time to time, issues SPDR Gold Shares (Shares) in Baskets, in exchange for deposits of gold and distributes gold in connection with redemptions of Baskets. A Basket equals a block of 100,000 Shares.

Recs

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Player Avatar intelledgement (44.44) Submitted: 8/19/2010 2:03:49 PM : Outperform Start Price: $116.23 GLD Score: +15.67

BUY SPDR Gold Shares ETF (GLD) & iShares Silver Trust ETF (SLV)

Posted by intelledgement on Fri, 21 May 10

OK, OK…selling these positions back in February was a mistake. Since 10 February, GLD is up 10% and SLV is up 17%. (And they were up as much as 16% and 30%, respectively.)

We had two concerns about holding the precious metals (PMs) in February. The first was that the ascent of Paul Volcker to prominence in the Obama administration signaled a likely move towards austerity in advance of the Congressional elections, which would be deflationary and strengthen the dollar relative to the PMs (and other commodities). The second was that increased systemic risk stemming from the PIIGS sovereign debt issues would engender a flight to safety whereby US treasuries and the dollar would benefit to the detriment of all other asset classes, including PMs.

Well we weren’t smoking anything potent in February—or if we were, it was so potent that we have blacked out the memory—but imagining the Obama administration would embrace austerity probably is a better indication of fiction-writing ability than macro analysis. It may be that government policy—under both Bush and Obama—in response to our structural debt problems has been to fight fire with gasoline, with easy money and easy credit to encourage more private debt and policy changes such as the health insurance reform legislation that creates additional government obligations. We still think the electorate might be in a mood come November to throw out the rascals who are kicking the can down the road and using smoke and mirrors to try to keep the broken system from collapsing, but the government has made their deal with the establishment devil and evidently the “fix” is in.

Our reading on the flight to safety was better, in that U.S. treasuries have increased in value, the dollar has gotten stronger, and commodities from oil to palladium to basic materials have come down in price…but, unlike 2008-09, not the PMs. So we are taking advantage of this current minor retrace to reestablish our positions there, for all the reasons we cited back in 2007 in our original recs for gold and silver.

Previous GLD- and SLV-related posts:

* BUY streetTRACKS Gold Shares (GLD) (2 Jan 07)
http://intelledgement.wordpress.com/2007/01/02/streettracks-gold-shares-gldlong/
* BUY iShares Silver Trust (SLV) (2 Jan 07)
http://intelledgement.wordpress.com/2007/01/02/ishares-silver-trust-slvlong/
* SELL SPDR Gold Shares ETF (GLD) & iShares Silver Trust ETF (SLV) (9 Feb 10)
http://intelledgement.wordpress.com/2010/02/09/sell-spdr-gold-shares-etf-gld-ishares-silver-trust-etf-slv/

Report this Post 2 Replies
Member Avatar fuhero (28.99) Submitted: 10/29/2010 1:46:17 PM
Recs: 1

You will likely have a nice oppty to add to positions if the fed announcement temporarily disappoints on QE2. Funny, it should be dissappointing that QE2 is even in existence, but Americans can;t see the forest through the trees. We want comfort now, and will sell our future to get it. Ridiculous. Anyway, my guess is that Gold and Silver will have short, but meaningful corrections of appx 4 and 6 % respectively at which point one may want to add to positions for the next inevitable leg up in the secular bull.

Actually QE1 never stopped. Banks get money at 0%, take the money and buy treasuries at 30 to1 leverage, make 50 to 90% a year, and the story goes on. Also, the printing presses have not yet stopped. So QE2 is a nonevent in that the dollar is in a seular bear regardless, and commodities long term trend is up.

Member Avatar intelledgement (44.44) Submitted: 1/3/2012 6:21:13 PM
Recs: 0

SELL SPDR Gold Shares (GLD); BUY Sprott Physical Gold Trust (PHYS)

Posted by intelledgement on Fri, 30 Dec 11

Intelledgement’s model portfolio utilizes (mostly) exchange-traded funds to implement a macro-focused investment strategy. Consequently, we periodically review the funds relevant to any particular aspect of our overall strategy—e.g., all the funds that invest in India or agriculture, or short the dollar—to ensure that the particular fund we choose as our investment vehicle is the best choice (or at least a good one). In order to minimize potential liquidity issues, we generally eschew any fund that has less than one billion dollars under management, or trades fewer than one million shares per day on average. We occasionally make exceptions to this practice; for example when we feel strongly about the need to take a certain position and the fund choices to implement it are limited or when a fund with a large enough market cap has lower volume due to a high per-share price.

We have been satisfied investors in the SPDR Gold Shares ETF (GLD) more-or-less since the inception of the Intelledgement Macro Strategy Investment Portfolio at the beginning of 2007. (We sold our gold and silver funds in February of 2010 thinking the dollar would strengthen on flight-to-safety concerns…and got a sharp reminder that trying to outguess the market tactically is very hard to do as the price of both commodities soared. We got back in three months later, having missed a 10% rise in gold and a 17% rise in silver.) Since that time, GLD has reasonably faithfully tracked the price of gold, which has mostly gone up.

We still think gold is a good place to store some value as we explained in our original recommendation for GLD back in 2006:

http://intelledgement.wordpress.com/2007/01/02/streettracks-gold-shares-gldlong/

…So we don’t want to pull any funds out of gold, but what we are doing is making a lateral move: selling the GLD ETF and rolling over all of the proceeds of that sale—our original investment plus the profits—into the Sprott Physical Gold Trust closed-end mutual fund (PHYS):

http://www.sprottphysicalgoldtrust.com/

We are making this move for two reasons. First, being a closed-end mutual fund, the tax treatment for PHYS capital gains is more favorable for US investors: 15% on long-term PHYS gains compared to your ordinary income tax rate—probably 28%—for any GLD gains regardless of how long you have held the investment. Of course, this does not matter if you hold the shares in a retirement account, but for those investors working with a regular brokerage account, it is a material advantage. Secondly, so far—since the inception of the fund in February 2010—the PHYS fund has actually outperformed gold bullion by 2% as compared to the slight underperformance of GLD since its inception (November 2004). This may be a transitory effect, but there are some reasons why the market seems to prefer PHYS to GLD and insofar as that helps the former to outperform the latter, we are willing to let the effect work in our favor.

One of the reasons PHYS is preferred is that some investors consider that GLD is more vulnerable to systemic risk than PHYS. We believe that if the system genuinely collapses, no paper gold holdings are likely to avail one; at that point, you will need silver coins, tobacco, alcohol, and aspirin for purchasing any necessities of life that you cannot provide for yourself. The market also likes PHYS because it is the only fund that enables investors to redeem their shares for physical gold. But this is not a genuinely practical option, as you need to have about $400,000 invested in the fund to afford the tradein for a gold bar—they are not about to incur the hassle and expense of dividing up a bar for you. Anyone who seriously could afford to and wished to acquire that much gold could do so more cheaply buying from a dealer. But again, if the market bids the price of PHYS up relatively higher because of irrational beliefs that it is safer and easy to convert shares to bullion, as PHYS owners we will cheerfully accept all contributions to our share valuation.

Of course, with a marketcap of $2 billion and average trading volume of 1.5 million shares, PHYS exceeds our liquidity requirements (minimums of $1 billion marketcap and one million shares average daily volume). Sprott store all their bullion at the Royal Canadian Mint, who are responsible for auditing and issuing bar lists. Since the 2009 brouhaha over the $15 million of “missing” bullion that turned out not to be missing:

http://www.ctv.ca/CTVNews/Canada/20091124/mint_mystery_091124/

…the mint has tightened up their accounting procedures and now considered one of the safest, if not the safest and most honest storehouses of gold bullion in the world. We also like the fact that—as with GLD—the gold is stored outside the USA, considering what happened in the 30s when the government confiscated everyone’s gold.

Previous gold-related posts:

BUY streetTRACKS Gold Shares (GLD) (2 Jan 07)
http://intelledgement.wordpress.com/2007/01/02/streettracks-gold-shares-gldlong/
SELL SPDR Gold Shares ETF (GLD) & iShares Silver Trust ETF (SLV) (9 Feb 10)
http://intelledgement.wordpress.com/2010/02/09/sell-spdr-gold-shares-etf-gld-ishares-silver-trust-etf-slv/
BUY SPDR Gold Shares ETF (GLD) & iShares Silver Trust ETF (SLV) (21 May 10)
http://intelledgement.wordpress.com/2010/05/21/buy-spdr-gold-shares-etf-gld-ishares-silver-trust-etf-slv/

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