jessescrossroadscafe.blogspot.com / By JESSE / August 8, 2013, 5:24 PM
I spent some time rereading the prospectus and some recent filings of the SPDR Gold ETF today.
A reader had asked me a question this morning about a statement I made yesterday about the squeeze on physical bullion and how it may intensify if gold rallies. I said that GLD has to start adding back some of the bullion it has disgorged at some point, and many of those 400 oz. bars may likely have headed east, not to return.
The reader said, ‘why can’t GLD just refuse to add the gold back?’
It is not the management of GLD’s decision to make. I had to go back and read the prospectus and some recent filings to remind myself why.
GLD essentially acts as a trustee, with very light obligations and therefore a small management fee. It is primarily an organizer for the bullion banks and other brokers, who as ‘Authorized Participants’ make the decision to increase or decrease the amount of gold held in the GLD ETF and the number of unit shares outstanding.