Benalcazar

Where Does the Gold ETF Get Its Gold?

BrunoT,

That's probably because they do so much business that it doesnt pay to spend the time answering these questions.

For a good dissection of GLD take a look James Turk's analysis here (note that as founder of GoldMoney he has his own agenda):

goldprice.org/james-tu...
www.financialsense.com...

5 Reasons to Save the Greenback

Its the gold standard st#@$d. All this Keneysian talk of trade deficits, fiscal deficits, consumer demand and 1930's style government spending in relation to the purchasing power of the dollar is bunk. Gold is telling us that the dollar is weak, which people seem to know, but then they complain about oil and the arabs' reluctance to open their spigots. The reason is that they dont want to get even less of our ever-devaluing dollars for their oil. If the dollar's purchasing power is declining, they must demand more dollars for their oil, just as they did in the 1970's. This is why oil has always tracked the price of gold and why OPEC can say with a straight face that there is NO shortage of oil but rather an abundance of dollars.

Inflation and deflation are purely monetary phenomena. A surefire way to "save" the dollar is for the Fed to mop up excess liquidity (by for example selling from their portfolio via open market operations) until the gold price declines to a more acceptable level, OR the risk to economic activity needs to decline so that at the margin the demand for dollars increases. The latter today means essentially reduced tensions in the Middle East and lower taxation and regulation barriers in the US in order to increase incentive to risk and demand for liquidity. Central bank intervention, government spending a la Bill Gross, and other merely cosmetic solutions will not work for the simple reason that you cannot change the terms of trade by devaluing (or revaluing) the currency. This is why OPEC wants more for their oil and why the baker around the corner now wants more for his bagels. This is common sense. But its not acceptable theory in polite company today because otherwise many a comentating economist would have to find something else to hang his PhD on and speculators would see their FX profits curtailed by this "barbarous metal." Meanwhile, the Fed will face rising inflation numbers as $1000 gold filters up through the economy (bagels now, cars later) while their rate cuts have no effect either on the actual surplus of liquidity or the geo-political risks to economic activity. This is called stagflation, and I would load up on those TIPS, even at these rates.