ETF investor turns paper into gold bullion for the first time

Whilst one swallow doesn't make a summer........

Who released this story?

Is Gold a bubble about to burst?

or are the rats disemabarking?

Aah ! Is this about to become the next scam - the Gold ETF plummets even though the price of gold is rising whilst those in the know switch to real gold? I thought that GBS and PHAU were supposedly backed by real gold anyway - is that not the case?.

Yellow and white madness has no explanation of any reasonable nature.

Share are up Gold is up and so are Bonds one of them is going to crack over the next few months.

Place you bets please.

One can only assume that the gold will be kept next to the wind up flashlight, the years supply of unperishable foods, a shotgun and a natty hat made from tin foil.

I don't like being the prophet of doom, but you have to call a spade, a spade.

The banks are not showing confidence in the housing market. Deposits unrealistic for most first time buyers in UK. Property market has already crashed in USA. Further declines inevitable.

No govt austerity measures have as yet been confirmed let alone implemented in UK. so PSBR remains unchanged. The farmers of Euroland have their PIIGS to feed, and our friend Ben across the pond will soon have to buy a bigger abacus. Oh I forgot they're all going to set sail in QE2.

Stockmarkets resilient and showing gains, but why all this excitment? Me thinks some fund managers still believe in Santa Claus.

I am not a big fan of raffles, bingo, or betting shops, likewise I hold a sceptical opinion regarding ETF's If you accept that for every long investor you have the potential for a corresponding short, who is going to come out on top? My money's on the issuer.

For me cash and mining company shares seem the best option.

Ann E, you are right these ETFs or ETCs are backed by the real metal. Each share represents a real lump of metal in a vault. I believe these physically backed ETCs are the only ones for which this redemption facility is available. Destroying shares and handing the metal back to the investor shouldn't change the relationship between the price of the ETF and the price of the metal. In otherwords there should be no significant separation between the price of an ETF share and the price of the metal it represents. This should be the case even if this redemption process is used to empty out the vaults because if there is no metal, there are no shares.

Thanks for that Rob. Of course what you say does beg the question "Why do it at all?" Having been caught out once too often, I am a little nervous and have today sold all my GBS and PHAU and have put the money into CF Ruffer Baker Steel Gold which for some reason seems to have returned 27% in the time that PHAU has taken to return 7%. I will await the blip on my own - always was contrarian!

Here in the USA, a lot of investors believe that the ETF's (GLD and SLV) are frauds. They divert money out of the physical metals and suppress their prices. The required documents required by the SEC are full of holes when it comes to their obligations to actually back the fund with metal.

We have the luxury of buying physical metals in the form of bullion coins via the US Mint. These "eagles" are quite liquid and easy to store. Why would anyone allow a questionable third party like JPM Chase store their wealth in an ETF ?

If bad times do come about, these ETF's will fold quickly and even a room full of lawyers won't be able to recover your money.

Gold and silver have several thousand years of history as money; no government has ever been able to alter their real value; however, they have seized these assets or made it illegal to own if it pleases the "powers that be"....

Be safe,

John B

You used to be able to change paper money into gold until it became plain that the paper issued far exceeded the gold backing. Are EFT,s likely to go this way or is their gold backing absolutely certain. Who knows.............

I am by no means an economist. My field of study is history. I am not aware of any political entity in all of recorded history that has been able to spend its way to prosperity. Our sovereign debt and the leaders who promulgate it are both bankrupt. I am reminded of that memorable movie, "The Wizard of Oz" with the famous line, "pay no attention to that man behind the curtain! I am Oz, the great and powerful!:

Once you could knock on the door of the Bank of England and exchange paper money for the metal, without paying an intermediary a hefty commission.

That was when we were on the gold standard-- the simple principle that defeated inflation throughout the greatest era in our history, when Britain led the world in innovation, prosperity, power and efficient, constitutional government. And when the phrase 'sound as a pound' meant what it said.

Now they are cranking up the presses for the next round of 'quantitative easing'. It might still be worth swapping those allegedly bullion-backed ETFs for the real deal, even at a price. There are times so chaotic and horrible that gold, and the means to defend it, is your last lifeline. In the Third World they know this in their bones. We soft fiat-money fools have forgotten it.

Our rulers have anticipated times of ultimate crisis by ensuring that only the trigger-happy police, armed forces crusading in furrin parts and career criminals carry deadly weapons... while the law-abiding householder gets arraigned for flourishing a carving knife when hooligans invade his property.

Citywire

Some time ago I asked the question about buying gold coin, and having it sent from abroad to your home in the UK, questioning tax implications if any?

Never got a full answer.

More specifically if one were to buy bullion coins from the US Mint, and have it sent here to the UK, i.e. someone resident and domiciled here, what would be the tax position at both ends, UK and USA.

if there were significant costs on both sides, could it be economically and safely stored in the USA.

What would be the tax position on holding gold coin in the USA or UK?

What would be the tax position on sale of these coins in the USA and UK? -by someone resident and domiciled in the UK.

The large ETFs in the US are run by the same crooked bullion banks that have previously been 90% of the shorts on the COMEX. While they initially secure the bullion when shares of the ETF are sold, these banks (JPM, SM, HSBC to name some) "lease" out that gold to other banks, therefore leveaging their physical positions. If you read the fine print of the ETF, it flat out says they may not be able to deliver your physical metals, just like a bank could never deliver is there was a run on its so called "money". The difference is, if the ETF can't deliver, you're screwed.

Not sure how the UK ETFs work,

Ann E, You have sold an ETF which invests in gold and bought a fund which invests in both gold and mining companies that mine precious metals. Since the mining companies have gone up more than gold this fund has gone up more than the ETF. On the down side I think there may be a temporary pull back in the mining companies and probably gold as well, in which case your fund will underperform for a short period. Don't get disheartened and sell though - you'll regret it over the next five years if you do.

On the subject of ETFs, the only one I really trust to have the precious metal and redeem it are the swiss Zurich canton bank ETFs for gold and silver. The downside of these funds is that I've been told you can't hold them in an ISA and they charge more annual commission than the ETFS and i-shares funds. (I own both the Zurich and ETFS silver funds in my ISA and SIPP).

thing is with these gold etf's is that they are priced in US$, gains over past 9 mths have been more or less wiped out by conversion back to pound.

Paul,

The ETFS physical gold fund PHGP is quoted in sterling, you are right it has not gone up overall for the last 5 month period, but 5 months is far too short a holding time for investing anyway - for trading that's another matter.

Thanks mark, please correct me if I'm wrong, but as Gold is priced in US$ even a sterling fund has to convert to get a price? or advise if the sterling fund operates differently? I'm in PHAU which is doller priced.

Gold is priced in all major currencies. I am a bit hazy on the details, but I think that when London was the major market in gold it was quoted in Sterling as standard, but later the US became the major market and since then the price is normally quoted in Dollars. The LBMA website quotes in Sterling, Dollars and Euros. I have invested two Silver ETFs one is the same as your gold fund, the other is in Swiss francs (it is a swiss fund). It really doesn't matter since it's the same value whichever currency it is quoted in.

Ref: Gold Price.

Its a complicated story. There are established practices: i.e. The price is "fixed" (measured against US Dollars) twice per day, in London.

In theory bullion should be bought and sold at the fixed dollar price and transactions in other currencies converted to dollars prior to.

This is where the problem arises, since most currencies "float" (rise and fall against each other) a multiplier effect is immediately introduced.

So you have two forces at work which interact (1) Demand/Supply, (2) Forex exchange rates.

IMO, It is Dollar, Sterling, Euro weakness which has been driving the price of gold higher. However since gold is a scarce commodity, you must ask yourself the question; for how much longer can supply meet demand?

This is the point at which the futures and options markets come into play, whereby traders attempt to cover their positions by trading forward.

This market activity makes complete nonsense of the London Gold Fix because the price is obsolete as soon as it is announced.

You don't have to be Albert Einstein to work out that if major currencies are weakening, and the majority of traders have over-bought, then the price of gold must rise exponentially with an equal and opposite effect on the paper you exchange for it. The banks must act to protect their currencies, so they sell short until the market has stabilised. They can do this legally through ETFs which have already been issued without the holders being aware of it.

just buy sovereigns and you can sell one at a time to gold bullion dealers it's that simple. buying them is just as easy..

Your local bank can buy for you, they don't shout about it because there is'nt any profit in it for them , just ask .It'st that easy. all this shit about paper etc. try it..

DEAD RINGER

Had a walk round the City Centre this morning, and called on RBS, Barclays, HSBC, Yorkshire Bank,Coop, NatWest.

They all said they do no longer buy Gold Sovereigns for their customers.

Suggested coin dealers.

Which bank still does it?