deuxsous

Commodity ETFs as Proxies for Private Money

Actually, in my own personal and humble opinion only, GLD, and some other US precious metals funds, is an extremely poor way to get gold exposure. I have excerpted below from the distributor's website and from their prospectus various snippets of information about GLD.

You can only redeem shares for gold if you are an Authorized Participant, which essentially means if you are a bank a brokerage. As of today's information at the website you would need to own $9,102,967.33 in GLD shares and pay a $2000 fee and be an AP in order to redeem GLD shares in gold.

The taxation of GLD capital gains, if any, is quite onerous under US Federal taxes: 28% regardless of time held or dollar value of the gain. (see below)There are also some restrictions on US tax-deferred retirement funds holding GLD. (see below)

All of these same taxation issues would also apply to CEF plus the addition of some Canadian issues.

I do not own either or these securities. I prefer to own actual gold or to own it in paper form in etf's which hold unleveraged gold futures contracts which are taxed much more favorably for US investors and have none of the potential difficulties for tax-deferred US retirement plans. DB has some of such funds. I do not own any of those funds although I may do so in future.

As always, one should read *and understand* the prospectus before buying anything.