QUOTE AND NEWS
SeekingAlpha  Apr 1  Comment 
By Markos Kaminis (Wall St. Greek): My SPDR Gold Trust (GLD) outlook this week is tightly hinged to two key recent developments. First is the ongoing standoff at the Ukraine border, which continues to threaten geopolitical instability and serves...
SeekingAlpha  Mar 27  Comment 
By Markos Kaminis (Wall St. Greek): When the driver for a security move is an investment bank forecast, the move rests on a sort of superficial footing, because a forecast is a derivative of real driving factors. I believe the latest move lower...
SeekingAlpha  Mar 25  Comment 
ByRichard Cox: In previous articles, I have outlined some of the reasons why those that are bullish on gold should be preparing for another fall in the underlying market valuations. This, of course, has been a contrarian view as the SPDR Gold...
SeekingAlpha  Mar 25  Comment 
By Tim Iacono: Forgive me for paying too much attention to the tonnes of gold that are now moving mostly into, rather than out of, the trust for the SPDR Gold Shares ETF (GLD), but this could be a very important story this year. It certainly was...
SeekingAlpha  Mar 20  Comment 
By Markos Kaminis (Wall St. Greek): The SPDR Gold Trust (GLD) got a special lift in March from the geopolitical catalyst of Crimea and the Russian incursion into it. However, the start of this week produced three consecutive down days as it...
SeekingAlpha  Mar 18  Comment 
By Markos Kaminis (Wall St. Greek): Unravel your SPDR Gold Trust (GLD) interests taken on the Ukrainian crisis, as developments have taken tension off and it appears the situation will not escalate further. (click to enlarge) ...
SeekingAlpha  Mar 14  Comment 
By Markos Kaminis (Wall St. Greek): I am officially pounding the table on gold and the SPDR Gold Trust (GLD). I have been recommending gold and the GLD since the start of the year, when I likewise told giddy stock investors on a 2013 high to sell...
SeekingAlpha  Mar 11  Comment 
By Tim Iacono: Yesterday, for the third time in the last 8 weeks, the trust for the SPDR Gold Shares ETF (GLD) added 7.5 tonnes to its holdings. These are the biggest daily inflows the trust has seen since late-2012 and they signal renewed...
SeekingAlpha  Mar 3  Comment 
By Thomas Kee: SPDR Gold Shares (GLD) ETF is up about 13% from its lows in December, but GLD is down from where it was in January 2013 ($160), and down from where it was in January 2012 (closer to $180) as well. The shiny metal was on a tear...
Clusterstock  Mar 3  Comment 
A quick shout out to the yellow metal, which perhaps hasn't gotten the attention it deserves this year. It's already up $22.50/oz today to $1344 in the wake of the Ukraine crisis. And really the whole year has been great. It was right around...




 


The SPDR Gold Trust tracks the performance of the price of gold bullion, less the Trust's expenses. Due to gold's low-to-negative correlations with traditional asset classes as well as with major economic variables, it is a proven asset diversifier. Gold is widely perceived as a safe-haven investment. It holds its value despite large changes in the stock market. However, the acquisition and storage prices of gold bullion make it prohibitively expensive for most people to own any. SPDR Gold Trust solves this problem by accepting deposits of gold bullion and distributing shares in return. The shares are meant to approximate the gold market as closely as possible.

It is important to note that investing in gold does not just include bullion; gold jewelry holds its value just as well--it makes up 25% of worldwide gold supply.[1] The 2007 Credit Crunch led to a loss of consumer confidence as well as an increase in gold demand--investors sought out the investment they felt was safest. This initially caused gold prices to rise. However, the strengthening U.S. dollar has led to a decrease in sales as the stronger dollar has led many to seek out liquidity and sell their assets.

History

SPDR Gold Trust was created in 2004 by the World Gold Council as StreetTracks Gold Trust. Then Chairman of the World Gold Council, Christopher Thompson, wanted to find a way for the average person to be able to invest into gold. He hired James Burton, former CEO of CalPERS (California Public Employees' Retirement System) to research the feasibility of a tradable financial product investing in gold.

Bars of gold were large, heavy and required expensive security to maintain value. Prior to SPDR Gold Trust, the most successful gold product was the South African Krugerrand. The Krugerrand was a gold coin created in the 1967. It came in a variety of troy ounce weights. While buying Krugerrands required less security costs and easier transportation costs, it was still a physical product. Held in great amounts, it faced same problems as gold bars.

In late 2004, SPDR Gold Trust started trading as StreetTracks Gold Trust, Bank of New York was its trustee. State Street Corp. marketed the fund.

Business and Financials

SPDR Gold Trust (started in 2004) is an investment trust. The Trust holds gold and issues SPDR Gold Shares in blocks of 100,000 Shares (Baskets) in exchange for deposits of gold and distributes gold in connection with redemptions of Baskets. The investment objective of the Trust is for the Shares to reflect the performance of the price of gold bullion. Originally, the details of buying, storing and insuring gold have made it difficult for most investors to enter the gold market on their own. SPDR Gold Trust solves this issue by creating securities that follow the gold market.

The Trustee values the gold according to the most recent London PM Fix.[2] The London Fix is a widely-recognized benchmark for gold and silver prices. It is announced twice each day: the AM fix occurs in New York City at 5am (10am in London), and the PM fix occurs in NYC at 10am (3pm in London).[3] Once the gold has been accurately priced, the Trustee then subtracts all accrued but unpaid fees in order to arrive at an Adjusted Net Asset Value (ANAV). The Trustee then uses the ANAV to calculate GLD's fees (to the Trustee, the Sponsor, the Custodian and the Marketing Agent) to arrive at the Net Asset Value (NAV).[4]

Trends and Forces

Many Investors See Gold as a Safe-Haven Investment

As mentioned before, gold tends to retain its value despite movements in the stock market. Therefore, gold serves as insurance against a risky stock market. This has made gold a very attractive investment. The 2007 Credit Crunch made gold even more attractive as investors hurried en masse to the asset they felt was safest.[5] GLD's holdings increased by 26% since Lehman Brothers (LEH) went bankrupt.[6] There is an inverse relationship between the economy and the gold market: the worse the economy becomes, the more money goes into gold as a safeguard against losing more money.

Gold Prices are at two month lows

As of July 2010, gold prices are down more than 5 per cent from their June highs.[7] Some traders buy gold as a hedge against instability in other markets on the belief that the precious metal holds its value better than other assets during economic turmoil.[7] While some speculative investors have liquidated their holdings in gold recently as equities and currency markets stabilized, there is still enough worry about the global financial system to keep support under prices.[7]

Despite gold's recent weakness, analysts estimate gold will remain at about $1200 an ounce as investors wait for decisive direction from other markets before making bets on gold. Large gold funds have slowed their physical purchases, but generally haven't sold them as a wait-and-see mentality continues. Gold prices have also been lifted by a decline in the euro as European banks are subjected to stress tests.[7] Gold has benefited recently from weakness in the euro as investors use gold as a hedge against a loss of purchasing power in the European currency.

SPDR Gold Trust is Not the Only Way to Invest in Gold

There are three main sources of supply in the gold market: sales of gold reserves from major banks, gold that is mined directly from underground, and gold that has been separated from melted-down scrap jewelry. Not only does scrap jewelry form a considerable portion (25%) of gold supply, it is also the fastest to respond to a change in demand. Therefore, scrap gold can act to moderate fluctuations in the gold price by providing additional supply if needed.[8] The supply of scrap usually increases when gold prices rise or economic conditions worsen. Although GLD makes it easier to participate in the gold market by eliminating the need to hold gold bullion, it is still possible for individuals to invest in gold simply by buying jewelry.

Competition

SPDR Gold Trust is the largest gold trust on the market and its main form of competition includes other forms of gold, namely gold bullion, jewelry and electronics. Bullion is very expensive to maintain for individual investors; it is more commonly held by central banks, such as the International Monetary Fund and government banks.[9] Another source of gold is jewelry and electronics. Jewelry is a more accessible route to owning gold; it can either be kept whole or melted down and turned into bullion or sold for cash.[10] Some electronic devices use gold as well, which can be separated from the rest of the device.

Other Gold ETFs

References

  1. World Gold Council-Supply.
  2. GLD 2007 10-K. Item 1, Page 2.
  3. London Gold and Silver Fix.
  4. GLD 2007 10-K. Item 1, Page 2.
  5. "Market turmoil sparks gold rush to specialist funds." Timesonline.com.
  6. "Market turmoil sparks gold rush to specialist funds." Timesonline.com.
  7. 7.0 7.1 7.2 7.3 The Australian: "Gold price snaps two-day losing streak" July 21, 2010
  8. World Gold Council-Supply.
  9. World Gold Council-Supply.
  10. World Gold Council-Supply.
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki