Billionaires Trust GLD, Why Can’t You?

If GLD was a sports team, it would undoubtedly be the New York Yankees; everybody loves to hate this ultra-popular fund. Though it is the second largest ETF in the world, investors still have quite a beef with GLD. The blogosphere is especially vehement in their opposition to this gold product, as many claim it to be a complete sham. Some feel the fund holds no gold at all, while others think that the amount of gold in GLD’s London vault has been grossly overstated [for more gold investing analysis subscribe to our free newsletter].

All of this speculation has led to a significant backlash against this ETF, though it has not struggled in any way, shape, or form. No amount of negative commentary or speculation can chip away at its near $70 billion in total assets and a trading volume that tops 7.5 million shares per day. But even still, it seems that every time we write an article involving GLD, some blogger or anonymous comment has to call out GLD as a phony. Though Commodity HQ would agree that buying GLD for the long term is a big mistake, we have our own reasons for our distaste for the fund.

The Billionaire Pact

While a number of average investors seem to have it in for this fund, there a number of big name players that have gone above and beyond the point of simply trusting GLD. Two of the biggest names to tout this ETF as of late have been George Soros and John Paulson.

Soros recently made a massive allocation to this ETF. The last time he reported what was in his portfolio, Mr. Soros held 319,550 shares of the fund, or about $52 million worth at the time of the release. Now, it has been reported that his GLD stake has jumped to a total of 884,400 shares, worth roughly $137.3 million, as the billionaire nearly tripled his original investment.

As for John Paulson, he has also made a significant bet on this product. Paulson increased his GLD stake by 26% to hold 21.8 million shares of the world’s second largest ETF. That means that Paulson has approximately 44% of his company’s assets in this singular fund; a big bet that could be a make or break investment depending on the future of gold [see also Which Gold ETF Is Right For You? GLD vs. IAU vs. SGOL].

Where’s The Beef?

So if these big name investors are able to wholly trust this product with so much of their assets, why can’t you? And the standard “they are fools”, or “it’s all a big conspiracy” won’t be a sufficient excuse. These are some of the most intelligent and wealthiest investors on the face of this earth, and the fact that they separately have bet big on this product says something about its worth. People probably thought Soros was crazy when he shorted the pound, but the multi-billion dollar payout seems to suggest otherwise. And we have very high doubts that a man would put 44% of his company at risk if he thought the investment vehicle was anything but 100% trustworthy.

Since its inception in 2004, GLD has provided investors with some eye-popping returns, jumping by 260% without a single shred of tangible evidence that it is a sham. The fund, while still maintained in a number of long-term portfolios, has also become a vital speculative instrument for active traders everywhere.

We can certainly understand those who simply prefer to hold physical gold themselves, as it does offer a degree of comfort that GLD simply cannot match. But we are also very aware that the trust issues with GLD will not evaporate overnight, and will likely persist for as long as the fund does. So how about it, do you trust GLD? Let us know how you feel in the comments below!

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Disclosure: No positions at time of writing.

This entry was posted in Actionable Ideas, Asset Allocation, Commodity ETFs, Gold, Precious Metals and tagged . Bookmark the permalink.

Commodity HQ is not an investment advisor, and any content published by Commodity HQ does not constitute individual investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities or investment assets. Read the full disclaimer here.

4 Responses to “Billionaires Trust GLD, Why Can’t You?”

  1. [...] As Fed Chairman Bernanke makes an appearance later today, our radar will be focused on the State Street SPDR Gold Trust (GLD, A). Gold prices could be in for a volatile trading day depending on how investors react to the latest commentary from Bernanke, most of which are expecting will indicate that the Fed is holding off from more stimulus measures until deemed absolutely necessary [see also Billionaires Trust GLD, Why Can't You?]. [...]

  2. [...] Equity markets have been drifting sideways with a downward bias as low trading volume remains a dominant theme while anticipation ahead of today’s speech at Jackson Hole has also played a key part in keeping a lid on investors’ confidence. Despite the rather uneventful trading activity on Wall Street, investors have digested a number of encouraging releases this week, including a slight pop in housing prices, pending home sales, as well as a solid GDP revision. On the product development front, activity has also been quiet and below we highlight the most recent SEC proposals [see also Billionaires Trust GLD, Why Can't You?]. [...]

  3. [...]  2. Billionaires Trust GLD, Why Can’t You? at Commodity HQ: [...]

  4. [...] whether or not SPDR Gold Trust (NYSEARCA:GLD) is a fraud, but given some of the high profile billionaires who are currently invested and its massive asset base, it seems that markets are perfectly comfortable using this [...]

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