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Precious Metals
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GLD some words of caution by KazooThe entire text below was posted by Kazoo on the ^IXIC board (thanks Kazoo), Piney is PinewoodsBear another poster on IV. This is one of the most succinct and informative posts I have come across regarding the possible downside in buying GLD. Cyprus ..may... give some glitter to gold. As most (Piney) know, I am a goldbug. There's something you should know if you plan to use GLD for gold exposure. Some of you may know it, but many don't. GLD It IS a trade vehicle. It is NOT ..gold.. It is, in fact a guaranteed erosion of whatever gold was in it on the day you bought it. It's in their prospectus. Anyone thinking they have covered their long term gold holdings by holding GLD is simply misinformed. CEF is actual gold and silver. Both. (Fortunately or unfortunately) But GLD is simply a number. That's all it is. When (not if) people find the necessity to actually HAVE some gold, GLD will be possibly be sold mercilessly. Until that day (whenever it is) go right ahead. Be my guest as long as you are informed. From the GLD prospectus: (as of 7/10/08) The Trust may not have adequate sources of recovery if its gold is lost, damaged, stolen or destroyed and recovery may be limited, even in the event of fraud, to the market value of the gold at the time the fraud is discovered. and Because neither the Trustee nor the Custodian oversees or monitors the activities of subcustodians who may temporarily hold the Trust's gold until transported to the Custodian's London vault, failure by the subcustodians to exercise due care in the safekeeping of the Trust's gold could result in a loss to the Trust. and Gold held in the Trust's unallocated gold account and any Authorized Participant's unallocated gold account will not be segregated from the Custodian's assets. If the Custodian becomes insolvent, its assets may not be adequate to satisfy a claim by the Trust or any Authorized Participant. In addition, in the event of the Custodian's insolvency, there may be a delay and costs incurred in identifying the bullion held in the Trust's allocated gold account. and.... BEST OF ALL: The sale of gold by the Trust to pay expenses will reduce the amount of gold represented by each Share on an ongoing basis irrespective of whether the trading price of the Shares rises or falls in response to changes in the price of gold. unless this is better: When the seven year fee reduction period terminates or expires, the estimated ordinary expenses payable by the Trust may increase, thus reducing the NAV of the Trust more rapidly and adversely affecting an investment in the Shares. So...there ya go. Buy it if ya want it. |
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