There’s more glitter than gold in gold exchange-traded funds, one prominent gold hedge fund has claimed.
Hinde Capital took aim at gold ETFs and State Street’s SPDR Gold Trust (GLD) in particular, in a recent paper. The London-based firm wrote that central banks’ practice of lending gold to commercial banks leads to a lot of double-counting in the global markets, and that ETFs are one of the biggest culprits on that score.
“We see it as highly likely that encumbered gold or leased gold could be in ETF products,” CEO Ben Davies wrote. “If we were a major ETF holder, we would demand delivery of our physical bullion before all other investors demanded theirs from either ETFs or the OTC market.”
Of course, Hinde isn’t a major gold ETF holder, because, as Davies wrote, gold and other precious metal ETFs “should not be owned by serious professional investors,” the Financial Times reports.
Davies also called State Street’s management of the SPDR Gold Trust—by far the largest gold ETF—into question, noting that the fund’s custodian, HSBC, is a substantial shorter of gold. State Street brushed off the criticism.