GLD ETF Investors Unable To Get Physical Gold – first reported in September 2013

Respected investment managers, Grant Williams and John Hathaway, told King WorldNews overnight that customers of the GLD ETF are being told that they cannot have their gold. The GLD ETF or ‘SPDR Gold Shares’ is the largest gold ETF in the world. Grant Williams, one of the most highly respected fund managers in Singapore and a perceptive analyst of the gold market said that custodians of the GLD ETF have refused to give people physical gold in exchange for the shares as investors are entitled too.

John Hathaway confirmed that “people have tried to get their gold out of that ETF and you just can’t get it.” Williams warned that the massive and escalating paper claims on physical gold at COMEX warehouses will create an explosion in the price of gold. Paper claims on gold are now at 55 to 1 meaning that there are contracts worth 55 ounces for every one ounce of actual physical gold in the COMEX warehouses. “We’ve seen the gold being drained out of the COMEX almost non-stop this year, certainly since the Bundesbank repatriation request. It hasn’t had any noticeable effect just yet, but it really is a spring that is continually being coiled, and at some point it is going to snap back.  And when it does, with all of these disparate claims on each ounce of gold, there is going to be some fireworks, no doubt about it,”

Williams said. “There are a lot of people that aren’t going to get their gold” said Williams.

Since the creation of the gold ETFs we have continually warned in our market updates and in our gold guides about the unappreciated counterparty risk in these new financial instruments. There has been significant skepticism regarding whether many gold and silver ETFs are backing their ETF holdings ounce for ounce. Much of that skepticism has abated, however there is a potentially equally important issue which should be considered.

Gold ETFs are riskier than most forms of allocated gold ownership. This is due to the very high level of indemnifications in the prospectus and in the terms and conditions of many ETFs. There is also the important fact that you are an unsecured creditor of a large number of banks who are custodians and sub custodians of your bullion holdings. In the event of one of these banks engaging in dodgy accounting, malpractice or becoming insolvent, one would be an unsecured creditor of one or all of the many custodians and sub custodians who are primarily banks. In the event of a Lehman Brothers style systemic crisis, there is the risk that your bullion would be subject to a “bail-in” or could be nationalized by an insolvent sovereign nation.