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How Much Physical Gold is Held by SPDR Gold Trust ETF?

Commodities / Gold and Silver 2011 Sep 02, 2011 - 11:59 AM GMT

By: Eric_McWhinnie


Precious metals (NYSE:DBP) investors have enjoyed the past decade as gold (NYSE:GLD) and silver (NYSE:SLV) outperform just about everything in the market. They are starting to capture interest across the mainstream media as investors seek out strong returns in a slowing and troubled economy. The investment world met the increasing demand for gold and silver by creating ETFs. In fact, one of the most popular ETFs in the world is the SPDR Gold Trust (NYSE:GLD). The only subject that rivals the popularity of precious metals is a good old fashion gold or silver conspiracy theory. A recent gold special by CNBC set out to disprove a popular conspiracy theory about GLD. Unfortunately, CNBC’s special only raises more questions in the precious metals community.

Bob Pisani from CNBC traveled to London and gave viewers a rare up close and personal look at the world’s largest private gold reserve, the vault that holds gold bullion for GLD. Pisani explains, “An estimated 1,200 metric tons worth more than $70 billion, all backing the largest commodity exchange traded product in the world, the SPDR Gold Trust.” Pisani starts the trip by meeting at HSBC (Custodian) Headquarters in London. From there, he travels to the top secret vault by riding in a sealed blacked out vehicle. Once in the vault, viewers are shown crates upon crates of gold bullion bars, each weighing about 400 ounces. The questions start to swirl almost immediately. Pisani shows a close up of a bullion bar to point out the unique serial number that is on each bar, which is traceable by international standards. Curious viewers were able to compare the serial number on the bar Pisani was holding and the current gold bar GLD list made available to the public here. Pisani is holding a Rand Refineries bar with serial number ZJ6752. However, the GLD gold bar list does not contain this particular gold bar.

This raises many questions for investors. For example, is it possible the one bar Pisani picked up for the close up was moved out of the vault? Depending on when the segment was filmed, we can gain a better idea of this possibility. Details in the clip reveal the vault holds an estimated 1,200 tons of gold. With this in mind, theories formed that the clip was likely filmed in the past couple of weeks. The GLD held 1,300 tons in early August, but has since fallen towards 1,200. Furthermore, data from Bloomberg reveals the 30-day average of gold tons held in the GLD to be 1,262. Thus, there is little decrease in the amount of tons held in the GLD. This begs the question, where did the gold bar go? The GLD prospectus states that gold held in the trust is not loaned, leased, or traded under any circumstances.

Hot Investing Insights: Why Did Gold and Silver Pullback?

Turns out, the gold bar Pisani picked up actually belongs to ETF Securities. ETF Securities is a provider of Exchange Traded Commodities, Exchange Traded Currencies, and 3rd generation Exchange Traded Funds. The management pioneered the development of ETCs, with the world’s first listing of an ETC. The gold bar ZJ6752 can be found here under MSL Gold. HSBC (NYSE:HBC) holds gold for other funds and it appears that no one checked to make sure Pisani was holding a GLD gold bar. Although the mistake seems simple, it does not dampen conspiracy theories to have Pisani showing viewers a gold bar that belongs to ETF Securities while trying to promote the physical gold bullion of GLD.

Investors looking to hold precious metals in their portfolio may want to consider gold plays such as AngloGold (NYSE:AU), Newmont Mining (NYSE:NEM), or Market Vectors Jr Gold Miners ETF (NYSE:GDXJ). Hot silver plays include First Majestic Silver (NYSE:AG),Endeavour Silver (AMEX:EXK), and Global X Silver Miners ETF (NYSE:SIL).

For more analysis on our support levels and ranges for gold and silver, consider a free 14-day trial to our acclaimed Gold & Silver Investment Newsletter.

Disclosure: Long AGQ.

By Eric_McWhinnie

Wall St. Cheat Sheet : Only days after the S&P 500 crashed to the depths of hell at 666, the Hoffman brothers launched Wall St. Cheat Sheet: one of the fastest growing financial media sites on the web. Like a samurai, our mission is to cut through the bull and bear shit with extraordinary insights, a fresh voice, and razor-sharp wit. We provide the highest quality education and information for active investors, financial professionals, and entrepreneurs.

© 2011 Copyright Eric McWhinnie - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


03 Sep 11, 07:46
cnbc embarassment

well that's a good piece of investigative work...

what an embarrasment for cnbc...i wonder if they'll follow up on that or just pretend it never happened.

05 Sep 11, 15:21
Physical gold vs. gold ETFs

You want physical precious metals in your personal custody. By "custody" I don't necessarily mean in your hot little hands or under the mattress at home, but someplace known only to you where you can grab it within hours if - or rather *when* the SHTF.

I would never buy into an ETF. The scope for funny games and the temptation to indulge in them is just too great for many of the people charged with the trust of looking after those bars. Too many possible scams AND counterparty risk thrown in for good measure. You take a hell of a risk going down the ETF route, all for the illusion of better security, versatility and convenience. Hold the real thing or forget PMs altogether; that's my advice.

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