The Many Dangers Of Owning GLD And SLV ETFs

May 28, 2020 10:22 PM ETGLD, SLV102 Comments
Robert Kientz profile picture
Robert Kientz


  • ETFs are not protected under the same financial regulations as other investments such as mutual funds.
  • ETFs are tracking vehicles which "borrow" assets from someone else and sell exposure to them, causing potential for legal ownership battles when an ETF participant goes insolvent.
  • Specifically for GLD and SLV, the metals are often leased from central banks or similar entities. Two major detrimental effects of this model for investors are discussed in the interview.

A few weeks ago, Nick Barisheff, CEO of BMG Group, and I had a conversation on the major assets classes for 2020. The conversation covered real estate, stocks, bonds, and precious metals.

Nick mentioned he was doing a new research piece on the dangers of owning gold in an ETF such as the GLD, so we decided to touch base with him again to discuss his research.

Most retail investors will probably purchase GLD for gold, and SLV for silver, instead of buying real physical metal. These precious metals ETFs are supposed proxies for the gold and silver price, and offer traders exposure to the metal price without the burdens of securing metals.

However, as Nick points out, owning GLD and SLV ETFs are fraught with risks that most investors are unaware of, and may be adversely affecting the spot prices of the metals in the markets due to overcounting of metals supply.

Some of the main points that Nick goes into detail include:

General Points About ETF Ownership Risks

ETFs are not covered under the same regulations as Investment Company structures such as mutual funds; therefore, they offer less legal protection to investors.

ETF is a "tracking vehicle"; however, there is no ownership of the assets such as gold or silver.

The assets are borrowed into the ETF, and are not purchased with outright title. In a case of insolvency, the ETF share participant has no claim to the borrowed assets and therefore no asset of tangible value.

Brokers make their money from the commission on the sale on an interest-free loan of assets.

Specifically for GLD and SLV

Specifically for precious metal ETFs GLD and SLV, the assets are borrowed/leased from the central banks and not purchased with clear title for ETF shareholders.

There is no transfer of

This article was written by

Robert Kientz profile picture
Author of DropShadow and founder of Gold Silver Pros @ have been analyzing the precious metals markets for over 10 years, and have built relationships with many experts in the field which include miners, geologists, and analysts. My site is dedicated to providing you professional research on the precious metals market.I have spent over 20 years working in the technology sector as both an IT and information security professional. I have a Masters degree in Information Assurance & Security, a Bachelors in Business with an MIS concentration, and an Associates in Applied Sciences in Unix Administration and Cisco Networking. I began my investing career over 16 years ago while completing several investment advisory exams - Series 3, 6, 63, and 7 covering the commodities, insurance, and stock markets. After watching the 2008 recession calamity, I began deep research into the economy and markets where I found solace in the writings of Austrian economists whose theories accurately predict and analyze the issues surrounding currencies and financial crises. I then wrote a book, based upon my own extensive research, entitled Dropshadow: The Truth About the Economy, which is available on Amazon.Shortly after writing the book, I began writing for Seeking Alpha and other online outlets on economic and financial topics and issues. I have focused my market research writings on Seeking Alpha since 2018.In 2018, based upon my deep research into the precious metals, I launched my personal newsletter service for investors @ where I provide precious metals investors with research updates and insider intelligence in order to help them better invest in those markets.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I own physical gold and silver (no ETFs).

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